■iiiili' UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW LIBRARY A CONCISE TREATISE ON THE Law of Corporations HAVING CAPITAL STOCK INCLUDING MANUFACTURING CORPORATIONS AND BUSINESS CORPORATIONS, JnsHiance Companies, Guaranty Companies, Banks, Safe Deposit Companies, Trust Companies, Railroad Companies, Flank-Road Companies, Gas-Light Companies, Bridge Companies, Telegraph Companies, Navigation Companies, Building Companies, Elevator Companies, Ferry Companies, Guano Companies, Fark Associations, Stage-Coach Companies, Homestead Companies, Water- Works Companies, Hotel Companies, Fipe-Line Companies, Trannvay Companies, AND THE RIGHTS AND LIABILITIES OF STOCKHOLDERS AND OFFICERS. New York Cases and Statutes. BY CHARLES TAPPAN HAVILAND, 0/ the New York Bar. NEW YORK : DIOSSY AND COMPANY, 231 BROADWAY i8qo. 1 i tbf^-r Copyright, 1890, BY CHAS. T. HAVILAND. 5J7 '^^■r 'i PREFACE. The object of this work is to present, in a concise form, a guide to all the general laws regulating the organization and management of stock corporations in the State of New York. With the passage of the Business Act in 1875, and the act for the formation of safe-deposit companies, passed the same year, it became possible to organize a corporation under the general laws for any purpose except that of transacting the business of trust companies. This omission was sup- plied in 1887 and a corporation may now be formed under the general laws for the purpose of carrying on any lawful business. The Manufacturing Act of 1848 and the Business Act of 1875 are the ones under which a large proportion of all the corporations of this state are organized, and these acts consequently receive a fuller treatment than is given to others. The laws pertaining to banks, insurance companies, railroads, etc., are considered so far as they regulate the or- ganization and management of corporations formed under them as corporations, — the mass of rules and regulations af- fecting such companies simply as transacting the business provided for in the above acts being omitted. By thus limiting the scope of the work, it becomes pos- sible within a moderate compass to consider the whole body of the statute law of this state affecting corporations, as such, and the interpretation which the courts have placed upon such statutes. It will be found, by arranging the sub- jects under topical headings, that the laws may be grouped III iv PREFACE. into comparatively few classes. Thus the Manufacturing Act is the type upon which many of the later acts have been formed, while many of the provisions of the Business Act are contained in others. By this arrangement repetition is avoided and the substance of the different laws is given, in connection with the decisions construing or affecting all statutes of a similar nature. The liabilities of directors and trustees, and the rights and liabilities of stockholders, are subjects of the greatest importance to every one bearing such relations to corpora- tions. These rights and liabilities are almost wholly created by statute, and consequently are but slightly touched upon in works on general corporation law, or in those which treat of the general liabilities of officers and stockholders. The en- deavor has been to give these subjects the consideration their importance entitles them to, and to set forth clearly and concisely the rights and liabilities of stockholders and officers in the corporations of this state, as fixed by the stat- utes and interpreted by the courts. Other subjects, such as the provisions regulating legal actions and proceedings, taxation, and dissolution, are gen- erally governed by the codes and the statutes, and affect all corporations equally, and, therefore, are not generally in- cluded, at any length in works treating of special corpora- tions. While avoiding all needless repetition, the language of the statutes has been followed as closely as possible, and in ad- dition to the statements of the law in the body of the work, the acts for the formation of manufacturing corporations and business corporations, and the franchise tax act are given in full, in the appendices. In the collection of cases no attempt has been made to multiply citations, but rather to select, so far as possible from the latest decisions of the Court of Appeals, those cases which establish or define the principles of the law governing corporations or construing statutory provisions ; and it is PREFACE. V believed that no such case has been omitted. When neces- sary, however, to elucidate or explain principles so estab- lished, and upon questions that have not been passed upon by the Court of Appeals, the decisions of the lower courts have been fully cited. C T. H. New York, June lo, 1890. TABLE OF CONTENTS, CHAPTER I. ORGANIZATION. Article I. Manufacturing Corporations . . PAGE Organized for the following purposes: Manufacturing, Mining, etc 2 Printing and Publishing 2 Real Estate Business 3 Dairy Purposes 2 Church Sheds and Laundry Purposes 3 Slaughtering Animals 3 Towing 3 Coal and Farm Produce 3 Hot Water and Steam 3 Cattle, etc 3 Raising Vessels 3 Collecting and Storing Ice 3 Mineral Water 3 Navigation and Salvage 4 Floating Elevators, etc 4 Skating Rinks 4 Agricultural Purposes 4 Coal and Peat 4 Residences, etc 4 Public Hall 4 Improving Land, etc 5 Transporting Oil, etc 5 Dredging and Dock Building. ... 5 Water for Mining, etc 5 Warehouses and Elevators , 5 Railway Depots 5 News-Agencies 5 Water for Powers, etc 5 Method of Organization 6 VI TABLE OF CONTENTS. vii Article II. PACE Business Corporations. 8 Article III. Insurance and Guarantee Companies . Subdivision i. Marine-Insurance Companies I2 Subdivision 2. Fire and Inland Navigation and Transportation Insur- ance Companies 14 Subdivision 3. Life, Health, and Casualty Insurance, Guarantee and Indemnity Companies 15 Subdivision 4. Title-Guarantee Companies 18 Subdivisions. Credit, Guarantee, and Indemnity Companies 20 Article IV. Banking, Safe Deposit, and Trust Companies. Subdivision i. Banks 21 Subdivision 2. Safe Deposit Companies 23 Subdivision 3. Trust Companies 24 Article V. Railroad and Construction Companies. Subdivision i . Domestic Railroads 29 Subdivision 2. Foreign Railroads 31 Article VI. Miscellaneous Corporations. Plank-Road and Turnpike Companies 34 Gas-Light Companies 34 Bridge Companies .... 34 Telegraph Companies. 35 Navigation Companies 36 Building and Elevator Companies 36 Ferry Companies 37 Inland Navigation Companies 37 Guano Companies 3S Skating Parks and Sporting Grounds 38 Stage-Coach Companies 39 Driving Park and Agricultural Associations 39 Homestead Corporations 40 Water Works Companies 40 Railroad Supply Companies 41 Hotel Companies 42 Pipe-Line Companies 42 Tramway Companies 43 Vlll TABLE OF CONTENTS. Article VII. General Provisions. PAGE Amending Certificate , .. . 44 Filing and Recording Certificate 44 Organization Tax 45 The Corporate Name , 46 Forfeiture for Non-User. , 47 The Choice of Laws under which to Organize 47 CHAPTER II. POWERS AND PRIVILEGES. Article I. General Powers and Pj-ivileges. General Powers 4g In what Corporations to Vest 50 What Other Powers to be Possessed 50 Corporate Name 50 Duration 50 Extending Term of Existence 51 Manufacturing Corporations 51 Business Corporations 51 Banks ., 51 Turnpike and Plank-Road Companies 52 Extending Term of Existence. Generally 52 The Corporate Seal 53 The Right to Hold Real Estate 53 Lands in Other States or Countries 53 Adjacent Lands 54 The Right to Hold Stock of Other Companies 54 Manufacturing Companies 54 Insurance and Guarantee Companies 55 Railroads 55 Pipe Line Companies. ... 55 Stock of Foreign Corporations 56 The Right to Appoint Officers 56 By-Laws 57 Who Authorized to Make By-Laws 58 What the By-Laws must Provide 58 How Amended 5g Certain By-Laws to be Published 60 Article II. Incidental Powers and Privileges. Special Provisions Regulating Mortgages 61 Manufacturing Corporations 61 TABLE QF CONTENTS. IX PAGE Business Corporations 63 Building Companies 63 Gas-light Companies 64 Railroads ^4 Mortgages to Secure Future Advances 65 The Assent of the Stockholders 65 Filing Assent where Real Estate is out of the State 67 Failure to File Assent 67 Article III. Special Powers and Privileges. Consolidation of Corporations 68 Manufacturing Corporations 6S Consolidation of Insurance Companies 71 Consolidation of Banks. 72 Consolidation of Railroads. 74 Consolidation of Telegraph Companies 76 Rights of Creditors on Consolidation 76 Reorganization 77 Reorganizations as " Limited Liability Companies" 77 Reorganization under the Business Act 79 Reorganization after Foreclosure 81 Same. Railroads 83 Reorganization of Plank-road Companies 87 Proceedings for the Sale of Corporate. Real Property 88 Miscellaneous Special Powers and Privileges 90 Changing Place of Busmess. Manufacturing Act 90 Same. Business Corporations 92 Same. Banks 92 Change of Name 93 Same. Banks 95 Same Insurance Companies. 96 Changing Number of Directors. Manufacturing Corporations 96 Same. Business Act 97 Same. Insurance Con:ipanies 98 Same. Title-Guarantee Companies 98 CHAPTER III. THE CAPITAL STOCK. Stock Issued for Property 100 Under the Manufacturing Act loi Under the Business Act. . loi Title Guaranty Companies 102 Miscellaneous Companies 102 Preferred Stock 102 Change of Preferred for Common Slock 104 Increasing and Decreasing Capital Stock 105 Reducing Capital Stock 105 X TABLE OF CONTENTS. PAGE Increasing Capital Stock io8 Increase and Decrease of Capital Stock : Gas-Light Companies and Navigation Companies no Decreasing Capital Stock of Insurance Companies in May Increase its Capital Stock 112 Increase of Capital Stock by Credit Guaranty Companies 113 Increase or Decrease of Capital Stock by Title Guaranty Companies. . . 114 Reduction of Capital Stock by Banks 114 Reduction of Capital Stock by other Moneyed Corporations 115 May Increase their Capital Stock 115 Increase of Capital Stock by Safe-Deposit Companies ... 117 Increase of Capital Stock by Railroad Companies 117 Increase in Case of Reorganization iiS Increase and Reduction of Capital Stock by Companies Organized to Operate Railroads in Foreign Countries 118 Increase of Capital Stock by Bridge Companies 118 Increasing and Decreasing Capital Stock by Building Companies 119 Increasing and Decreasing Capital Stock by Business Corporations. ... iiq Increasing Capital Stock of Ferry Companies 120 Increase of Capital Skock by Driving- Park Associations 120 Increase of Capital Stock by Pipe-Line Companies 120 Increase of Capital Stock by Stage-Coach Companies 122 Increase of Capital Stock by Telegraph Companies 122 Increase of Capital Stock by Turnpike Companies 122 Increasing and Decreasing Capital Stock by Water-Works Companies.. 122 Stock Certificates and Transfers of Stock 123 Under the Manufacturing Act 124 Same. Business Corporations 125 Title Guaranty Companies .- 127 Railroads 128 Banks 128 Safe Deposit Companies 128 Miscellaneous Corporations 129 CHAPTER IV. THE DUTIES OF OFFICERS AND DIRECTORS. Article I. Acts Required. Reports. 130 Reports of Manufacturing Corporation 130 How Executed 131 Form of Report 132 When Report must be Made , 133 Publishing and Filing 134 Certificate of Payment of Stock 135 Reports of Business Corporations 136 Certificate of Payment of Stock 137 TABLE OF CONTENTS. XI PAGE Reports of Marine Insurance Companies 137 Reports of Fire and Inland Navigation Insurance Companies 138 Reports of Life, Health, and Casualty Insurance Companies 139 Reports of Guaranty Companies 140 Reports of Banks 141 Reports of Safe Deposit Companies 143 Reports of Trust Companies 143 Reports of Railroad Companies 144 Reports of Bridge Companies I44 Reports of Ferry Companies I45 Reports of Guano Companies 146 Reports of Inland Navigation Companies 146 Reports of Skating-Park Associations I47 Reports of Driving-Park, Park, and Agricultural Associations 147 Reports of Pipe-Line Companies. Monthly Statements 147 Same. Annual Reports 148 Reports of Turnpike and Plank-Road Companies 149 Reports of Certain Moneyed Corporations 149 Books Required to be Kept 1 50 Article II, Acts Prohibited. Banking Povyers Prohibited 152 Certain Transfers Prohibited I53 Transfers by Moneyed Corporations 154 CHAPTER V. THE LIABILITIES OF OFFICERS AND DIRECTORS. Liability for Withdrawing Capital, etc 158 The Same. Of Moneyed Corporations 160 The Same. Manufacturing Corporations 161 Construction of the above Statutes 162 Loans to Stockholders Prohibited 163 Liability for Failure to make Annual Report 164 Construction of the Statute 165 Pleadings and Proofs 169 Liability for False Reports under the Manufacturing Act 172 Liability under the Business Act 176 Liability Independently of Statute 178 Liability for Debts in Excess of Capital 178 Liability for Debts Generally iSo Miscellaneous Liabilities and Prohibitions iSi CHAPTER VI. THE RIGHTS OF STOCKHOLDERS. Right to Certificate of Stock 188 Compelling Transfer 190 Right to Dividends 191 Xll TABLE OF CONTENTS. PAGE Right to Examine Books iq2 Rights at Elections 194 The Same. Moneyed Corporations 195 The Same. Business Corporations 198 The Same. Title Guaranty Companies 199 The Same. Safe Deposit Companies 199 The Same. Railroads 199 The Same. Generally 201 CHAPTER VII. THE LIABILITIES OF STOCKHOLDERS. Under the Manufacturing Act 206 Under the Business Act 207 Insurance Companies 210 Banks 210 Safe Deposit Companies 211 Trust Companies 212 Railroads 212 Bridge Companies 213 Building Companies 213 Gas-Light Companies 214 Guano Companies 214 Hotel Companies 215 Navigation Companies 215 Inland Navigation Companies 216 Park Associations 217 Pipe- Line Companies 217 Stage-Coach Companies 217 Telegraph Companies 21S Turnpike Companies , 218 Liability on Unpaid Stock 219 Liability until Capital is Paid in 222 A Stockholder's Defences 226 Liability to Laborers, etc 229 CHAPTER VIII. LEGAL ACTIONS AND PROCEEDINGS. Jurisdiction of the Courts 235 Same. Of the Supreme Court 235 Same. Of Superior City Courts 235 Same. Of Superior Court of Buffalo 237 Same. Of City Court of New York 237 Same. Of County Courts 238 Same. Of City Court of Yonkers 238 Same. Of Courts of Justices and District Courts of New York 23S Same. Of Courts of Inferior Jurisdiction Generally 238 Service of Summons 239 TABLE OF CONTENTS. Xlll I' AGE Same. Justices' Courts 241 Service by Publication 242 Pleadings 243 Verification of Pleadings 245 Cannot Plead Usury 245 Statute of Limitations 246 Preparations for Trial 246 Evidence .... 248 Provisional Remedies, Attachments 250 Injunction 252 Receivers 254 Judgment and Execution 257 CHAPTER IX. TAXATION. Article I. Aliinicipal Taxation. Real Estate 259 Personal Property 260 Statements Required 264 Foreign Corporations 265 Shares of Stock 265 Article II. State Taxation. Companies Subject to the Tax 267 Determining Valuation . . 269 Penalties 270 Construction of the Act 270 Insurance Companies ' 272 Railway, Express, and Telegraph Companies, etc 273 Penalties 275 Fire and Marine Insurance Companies 278 Banks 279 CHAPTER X. DISSOLUTION. Article I. Voluntary Dissolution. Contents of the Petition 282 Proceedings upon Application 284 Transfers Prohibited 287 xiv TABLE OF CONTENTS. Article II. Involuntary Dissolution. ykgv. Action to Procure Dissolution 288 May Grant an Injunction in such an Action 289 May Appoint a Receiver 289 Action for Sequestration of Property of Corporation 291 Officers and Stockholders may be made Parties 292 What the Judgment must Provide 293 Judicial Supervision of Corporations 294 Action to Annul a Corporation 295 General Provisions Applicable to the above Provisions 298 When Injunction may Issue 300 Winding up Corporations Dissolved by the Legislature 301 Article III. Receivers. When a Receiver will be Appointed 303 All Property to Vest in Receiver 304 Attorney-General May Apply for the Removal of a Receiver 306 Receivers in Voluntary Proceedings for Dissolution 306 Receivers Appointed in Proceedings for Involuntary Dissolution 311 Receivers of Life Insurance Companies 312 Receivers of Fire and Inland Navigation Insurance Companies 315 Reports by Receivers 3i6 Compensation of Receivers 3i7 Wages of Operatives Preferred 318 APPENDIX A. THE MANUFACTURING ACT. 321 APPENDIX B. THE BUSINESS ACT. 333 APPENDIX C. THE TAX FRANCHISE ACT 353 APPENDIX D. ) FORMS. 367 APPENDIX E. LA TEST AMENDMENTS OF 1890. 38$ TABLE OF CASES. Abbott V. American Hard Rub- ber Co 253 Adams t/. Mills 169 Agate V. Sands 226 Aikin v. Wasson 230 Allen V. Clarke 167 Alexander v. Caldwell 249, 250 American Insulator Co. v. Bank- ers and Merchants' Tel. Co. . 245 American Grocer v. Grocer Pub- lishing Co 46 American Silk Works z/. Salomon loi Anderson v. Speers 180 Andrews v. Murray 165, 227 Arthur v. Griswold I75 Aspinwall v. Sacchi 226 Attorney-General, In re Appli- cation of 296 Attorney-General v. Bank of Niagara 295 Attorney-General v. Continental Life Ins. Co 31S Attorney-General v. Guardian Mutual Life Ins. Co 234, 304 Bank of Attica -'. Manufactur- ers and Traders' Bank 124 Bank of Keokuk v. Pfeiffer 248 Bank of Montreal v. Fidelity Nat. Bank 252 Barker, Matter of 202 Barnes v. Brown 48, 15S Barnes v. Mobile & N. W. R. R. Co 241 Barry v. Merchants' Exchange Co 100 Bartlett v. Drew 220, 224 Beach -'. Smith 11, 222 Belden v. Meeker 155 Belmont Branch BankV. Hodge, 245 Belmont v. Erie Railway Co 253 Bengston v. Thingvalla Steam- ship Co ■. 244 Bennett v. Leeds Mfg. Co 244 Biglin, Matter of, v. Friendship Assoc 190 Billings V. Robinson 221 Billings V. Trask 164 Black River and Utica R. R. Co. V. Barnard 44 Black River and Utica R. R. Co. V. Clarke 1 1, 222 Blake v. Griswold 100, 165, 171, 174, 176, 227 Blatchford v. Ross 253 Boardman v. Lake Shore & Mich. So. R. Co 76, 192, 246 Bolen V. Crosby 131, 171 Bonnell v. Griswold. . ..132, 134, 165 170, 172, 173, 174, 175. 227 Booth V. Bunce 224 Boyle 7;. Thurber 171 Boughton V. Otis 166 Boynton v. Andrews 100, 227 Boynton v. Hatch 100 Brackett v. Griswold. ..171, 173, 174 Bradley v. Albemarle Fertilizing Co 247 Brinkerhoff t'. Bostvvick 178 Brisbane v. Del., Lack. & W. I R. R. Co 191 British Com. Life Ins. Co. -■. ' Commrs 265 XV XVI TABLE OF CASES. Brookman v. Metcalf 156 Brouwer v. Harbeck 157 Brown v. A. B. C. Fence Co... 3:9 Brown z'. Smith 132 Bruce J/. Piatt 134, 166, 168, 170 Buffalo, etc., R. R. Co. v. Dud- ley 18S, 220, 221 Buffalo, etc., R. R. Co. v. Su- pervisors 260 Buffalo & Allegheny R. R. Co. '<-'■ Cary 45, 220, 221 Buffalo & Jamestown R. R. Co. V. .Gifford 221 Buffalo and State Line R. R. Co. V. Supervisors 260 Burrall v. Bushwick R. R. Co.. 100 Burr V. Wilcox 220, 226 Butler V. Smalley 135, 165, 176 Butterworth v. Kennedy i6r Butterworth v. O'Brien 162, 245 Byrne v. N. Y. Brick and Ce- ment Co 2go Cameron v. Seaman 135, 169 Carpenter v. Black Hawk Gold Mining Co 61,65 Carpenter v. New York & N. H. R. R. Co 253 Chamberlain v. Rochester Seam- less Paper, etc.. Co 281 Chambers v. Lewis. . . .170, 180, 224 Chandler v. Hoag 168 Chapman . Pacific Natl. Bank 234 M.artin -'. Niagara Falls Paper Mfg. Co 65 Mathez v. Neidig 223, 226 Mayor, etc., "'. N. Y. & Staten Island Ferry .- . 252 McBride v. The Farmers' Bank, 233 McClave v. Thompson 179, 180 McComb V. Kellogg 179 McCormickz/. Penn. Cent. R. R. Co 234 McCulloch V. Norwood 303 McHenry v. Jewett 203 McKenna z'. Edmundstone 48 McLean e;. Eastman I55 McMahon v. Macy 166, 225 McMahon, Matter of Appln. of, -'. Palmer 265 McMaster jy. Davidson 22S Medbury v. Rochester Frear Stone Co. . . 289 Mercantile Natl. Bank v. The Mayor 265 Merchants' Bank z/. Bliss... 170, 171 Merchants' Bank of Watertown, Matter of 211 Merchants' Natl. Bank j/. Hall. 249 Merrick v. Van Santvoord 234 Metropolitan Trust Co. v. Tona- wanda V. & C. R. R. Co 318 Meton & Sons ''. Isham Wagon Co 245 Miller v. White 166, 167, 225 Mills V. Stewart 221 Morey ?y. Ford 171 Morgan v. Skiddy 17S Morrison v. Menhaden Co 291 Moss V. Averell 61 Nassau Bank v. Jones 54 Nassau Gas Light Co. v. City of Brooklyn 271 National Tube Works Co. v. Gil- fillan 227 Natl. Shoe & Leather Bank v. Mechanics' Natl. Bank 252 New England Iron Co. v. Gil- bert El. R. Co 2S1 NewYork, Lack. & Westn. R. R. Co, Matter of Petition of. .44, 244 New York Cab Co. v. Mooney, 46 N. Y. Life Ins. Co. v. Universal Life Ins. Co 247 N. Y. & N. H. R. R. Co. v. Schuyler 188, 191 N. Y. & Oswego Midland R. R. Co. V. Van Horn 11, 222 N. Y. State Loan & Trust Co. v. Helmer " 152 Niagara Falls Susp. Bridge Co. V. Bachman 250 North Shore Ferry Co., Matter of 202 Ogden V. Raymond 156, 157 Olcott V. Tioga R. R. Co 246 TABLE OF CASES. XIX Oldtown & Lincoln R. R. Co. v. Veazie 124 Ormsby v. Vermont Copper Min- ing Co 58, 201 Oswego Starch Factory v. Dollo- way 261 Pacific Natl. Bank v. Mi.xter... 252 Palmer v. Pennsylvania Co. . . . 241 Palmer v. Phoeni.x Mutual Life Ins. Co 233 Parker v. Stroud 233 Parrott v. Colby 22S Pattersons. Robinson lyg, 180 Paulding v. The Chrome Steel Co 154 People V. Albany Ins. Co 275 People V. Albany & Vermont R. R. Co 297 People V. American Bell Tel. Co 272, 275 People V. Ballard 295 People V. Batchelor 202 People V. Boston, Hoosac Tun- nel, etc., R. Co 74, 297 People V. Brandon igo People z'. Brooklyn, etc., R.Co., 295 People V, Equitable Trust Co., 267, 274 People V. Fire Assoc, of Phila. . 234 People V. Gold and Stock Tel. Co 275 People V. Home Ins. Co 267 People V. Horn Silver Mining Co., 267, 272, 274 People z/.Hydrostatic Paper Co., 294 People V. Knickerbocker Ice Co. 271 People V. Lowe 295 People c^. National Fire Ins. Co., 275 People -'. North River Sugar Re- fining Co 297 '^People V. N. .Y. Floating Dry- dock Co 271 -*eople V. Parker 190 'eople V. Remington . .230, 318, 319 People V. Seneca Lake Grape and Wine Co 2S6, 289 People V. Spring Valley Hy- draulic Gold Co 274 People V. The Gold and Stock Tel. Co 267, 275 People V. The Mutual Trust Co., 150 People V. Throop 192 People V. Troy House Co 47 People V. Twaddell 202 People V. Williamsburgh Turn- pike, etc., Co 297 People ex rel. v. Albany Medi- cal College 202 People ex rel. v. Asten 263 People ex rel. v. Beach 6, 7, 8 People ex rel. v. Carr 48, 107 People ex rel. v. Cassity 260 People ex rel. v. Coleman.. .261, 264 People ex rel. v. Davenport. . .. 267 People ex rel. v. Forrest 259 People ^;c rf/. Gallatin Natl. Bank z'. Commrs 266 People ex rel. v. Lake Shore & Mich. So. R. R. Co 194 People erx rel. Manhattan Fire Ins. Co. V. Commrs 265 People ex rel. Mertens v. Cook, 46.83 People ex rel. v. McLean 265 People ex rel. Muller v. Asses- sors 260, 264 People ex rel. Mutual Tel. Co. V. Commrs 265 People ex rel. v. Newburgh, etc., Plankroad Co 79 People ex rel. N. Y. Elevated R. R. Co. V. Commrs 260 People ex rel. N. Y. & Harlem R. R. Co. V. Commrs 260 People ex rel. Pacific Mail Steam- ship Co. f. Commrs 264 People ex rel. Panama R. R. Co. V. Commrs 261, 263, 264 People ex rel. Parker Mills v. Commrs 265 People ex rel Schurz ;■. Cook. . . 46 People ex rel. v. Supervisors. . . 259 People ex rel. Tradesmen's Natl. Bank 7\ Commrs 266 People ex rel. Trowbridge v. Commrs.... 265 XX TABLE OF CASES. People ex rel. Twenty-third Street R. R. Co. v. Commrs.. 261, 264 People ex rel. Van Nest v. Commrs 260, 264 People ex rel. Zulia Steam Nav. Co. V. Commrs 264 Perry 7'. Hoadly 221 Petersen v. Chemical Bank 233 Pfohl V. Simpson 222, 224 Phila. & Read. Coal & Iron Co. V. Hotchkiss 169 Phillips V. Therasson • . . . 228 Phoenix Bank v, Donnell 243 Phoenix Warehousing Co. v. Badger 220 Pier V. George 171 Pier <7. Hanmore 132, 133, 173 Pilcher v. Brayton. 231 Plimpton V. Bigelow 252 Pope V. Terre Haute Car & Mfg. Co 233, 240 Potter V. Bank of Ithaca 143 Pratt V. Eaton 153 Pratt V. Munson 85 Pratt V. Short 153 Pringle v. Woolworth 291 Prouty V. Lake Shore & Mich. So. R. R. Co." 76 Pyrolusite Manganese Co., Mat- ter of. . .■ 284 Raisbeck v. Oesterricher 45 Randall 71. Havemeyer 225 Rankine v. Elliott 220 Rathbun v. Northern Cent. Ry. Co 246 Raynor v. Pacific Natl. Bank. . 252 Reed v. Keese 169 Rector, etc., of Trinity Church V. Vanderbilt 170, 171 Reddington v. Mariposa Land & M. Co 241 Richardson v. Abendroth. . .227, 231 Roach ». Duckworth 166, 172 Robinson v. Bank of Attica. . .. 153. 154, 157 Robinson v. Natl. Bank of New Berne igi, 25 Robinson v. Oceanic Steam Nav. Co 234, 239 Rochester Savings Bank v. Av- erell 6, 66, 67 Rodbourn v. Utica, Ithaca & E. R. Co 292 Rorke z/. Thomas. . 162, 166, 167, 171 Rosa V. Butterfield 245 Rutter 57. Kilpatrick 188 Sage, Matter of 192, 194, 234 Sagory v. Dubois 100 Salem Mill Dam Co. v. Ropes.. 124 Solomon v. The American Silk Works ipi Sanborn v. Lefferts. . . .131, 134, 171 Sands v. Hill 288 Santa Eulalia Silver Mining Co., Matter of .' 283 Schenck 7'. Andrews 101,227 Schenactady & S. PI. R. Co. v. Thatcher 221 Shaler & Hall Quarry Co. v. Bliss 168 Sheldon Hat Blocking M. Co. v. Eichemeyer 154 Shellington v. Howland. . . .223, 226 Shorer v. Times Print, and Pub. Co 247 Short V. Medberry 230 Small V. Herkimer Mfg. Co. . . . 221 Smith vt Mayor 260 Sodus Bay, etc. R. R. Co. v. Hamlin 221 South Baptist Society v. Clapp. 53 Southern Life Ins. Co. v. Packer 245 Stephens v. Fox 225 Sterett <'. Denver and Rio Grande R. Co 241 Stevens TA Phoenix Ins. Co.... 234 Stewart v. Bramhall 245 Stokes V. Stickney 171, 173 Story V. Furman 179 Strong V. Smith ... 202 Sturges V. Vanderbilt 303 Supervisors of Niagara v. The People 155 Sutherland v. Olcott 105, 225 Swords V. No.rthern Light Oil Co. 289 TABLE OF CASES. XXI Syracuse Savings Bank v. Syra- cuse C. & N. Y. R. R. Co 304 Talmage z/. Pell 155 Tallmadge ;■. The Fishkill Iron Co 179 Thomas -'. Merchants' Bank... 258 Thorp 7^. WoodhuU iSS Thurston -■. Duffy 227 Torbett v. Eaton 177 Tracy v. First Natl. Bank of Selma 220 Trask v. Peekskill Plow Works 70 Tyng V. Clarke 169 Union Hotel Co. v. Hersee. . . . 221 Union Natl. Bank v. Wheeler.. 245 Union Steamboat Co. v. Buffa- lo 261 U. S. Trust Co. V. N. Y. West Shore & B. R. Co 256, 281, 317, 318 Vail V. Hamilton 66 Vale Allen v. Illinois Cent. R. R. Co 18S Van Amburgh v. Baker 16S Van Cott V. Van Brunt 100, 22S Van Ingen v. Whitman 177 Varnum v. Hart 153 Vatable v. N. Y., Lake Erie & W. R. R. Co 86 Veeder v. Baker 171, 176 Veeder v. Mudgett 136, 225 Verplanck v. Mercantile Ins. Co 2S1 Victory Webb Co. v. Beecher.. 169 Village of Gloversville t'. Howell 4S Wakefield v. Fargo 229, 230 Wakeman v. Dalley 17S Walton :'. Coe 210 Vv^arner v. Beers 155 Waterbury, Iti re 288 Weaver -■. Barden 123, 125 Weeks v. Love 223 Western Transportation Co. v. Sheu 261 Wheeler v. Millar 220, 221, 224, 225, 226 Whitford v. Panama R. R. Co., 233 Whitney Arms Co. v. Barlow. . 131, 132, 133, 165, 166, 169, 170, 172 Whitney v. N. Y. & Atlantic R. R. Co 257 Whittaker v. Masterton. . . .132, 133 Whittlesey v. Frantz 245, 304 Wiles V. Suydam 171, 222 Williams &. Western Union Tel. Co 100 Williamson v. Wadsworth 230 Woerishoffer v. North River Construction Co 252, 290, 306 Wood V. W^ellington 156 Woodruff, etc. Iron Works v. Chittenden 227 NEW YORK REVISED STATUTES CITED. Revised Statutes, part chap, xiii, title " xiii, " " xiii, " " xiii, " " xiii, " " xiii, " " xviii, " " xviii, " " xviii, " " xviii. " " xviii, " " xviii, " " xviii, " " xviii, " " xviii, " " xviii, " " xviii, " " xviii, " " xviii, " " xviii, " " xviii, " Vlll, viii, viii, viii, viii, viii, viii, I, 8 1 259 1, § 3 260 I, §7 265 2, § 6 260 4, § 1 259 4. §2 264 3 49 3, § 1 53.232 3. §3 60 3. §4 152 3. § 5 206 3-§7 47 3,§S 50 4, § 1 151 4, §2 105, 153 4,§3 178 4, §4 153 4. §5 195 4, § 6 60, 194 4, I 7 194 4,g8 195 4, Art. 2, § 42 3" 4, " 3, §§66.71 307 4, " 3- §^72-75 308 4. " 3, §77 30S 4. " 3, ^§78-81. 309 4, " 3, §§ 82-S6 310 4, " 3, §§87-89 311 xxii SESSION LAWS CITED. LAWS I8II, I815, I815, I816, I817, I82I, 1846, 1847, 1848, 1848, IS48, 1848, 1848, 1848, 1848, 1848, 1848, 1848, 1848, 1848, 1848, 1848, 1848, 1848, 1848, . 1848, 1848, 1848, IS48, 1848, 1848, I84S, 1848, 1848, 1848, 1848, T848, 1848, CHAP. 67 2 47 2 202 2 58 2 223 2 14 2 155-. 47 210 34, 122, 149, 151, 219 37 34- 64, no, 135, 162, 165, 176, 214, 259 40 1, 2, 45, 69, 163, 321 40, § 1 3, 53, 321 40, § 2 7, 61, 322 40, §3 322 40, § 4 323 40, § 5 323 40, § 6 125, 323 40, §7 324 40, §8 55, 124, 324 40, §9 324 40, § 10 206, 324 40, § II 136, 325 40, § 12 131,134,164,325 40, § 13 161, 326 40, § 14 loi, 163, 326 40, § 15 172, 326 40, § 16 207, 327 40, § 17 327 40, 8 18 206, 327 40, § 19 327 40, § 20 109, 327 40, § 21 no, 328 40, § 22 no, 329 40, § 23 179, 329 40, § 24 207, 329 40, § 25 151, 320 40, § 26 331 40, § 27 331 259 35- 119- 145. 213 LAWS CHAP. 184S, 265 36, 122, 21S 1849, 250 34 1849, 308. . .12, 13, 14, 55, 138, 210 1850, 140 — 29,30,31,55,64,118, 128, 144, 181, 200, 213 1850, 172 245 1851, 14 3 1851, 122 45 1851, 321 194 1852, 228. . . .36, no, 151, 215, 216 1853, 117 37. 119, 135, 151, 163, 165, 178, 179, 213,214 1S53, 124 36 1853. 135 37, 120, 146, 176 1853, 333 loi, 133, 136, 172, 206, 227 1853, 463 12, 14, 16, 17, 18, 55, 113, 140, 210 1853, 466 12,14,15,55.71,96, 112, 113, 139, 181, 210 1853. 471 36, 218 1853, 502 88 1853, 528 12 1854, 201 193, 332 1854, 232 38,110,147,162,178, 216, 217 1854, 282 31, 200, 213 1854, 369 139 1855. 37 265 1S55. 301 3 1855- 390 219 1S57. 29 8, 51 1857. 444 S3 1857, 456 261 1857, 469 • 55 1857, 546.. 38, 146, 162,176, 214,215 1858, 314 304 185S, 34S 311 1859, 366 12, 14, 17. 139, 140 xxiii XXIV SESSION LAWS CITED. LAWS CHAP, i860, 269 97 IS6I, 92 14 I86I, 149 39. 147, 179.217 IS6I, 170 92, 331 i86t, 326 13 1862, 300 17 1562, 472 193. 332 1563, 63 3 1564, 337 4 1864, 425 13S, 210 1864, 517 62, 91 1864, 582 31 1865, 234 4 1565, 307 4 1865, 328 17. 55 1866, 73 125 1866, 514 139,140 1566, 577 i8r 1866, 780 87 1866, 838 55 1866, 843 140 1867, 12 51 1867, 91 Ill, 112 1867, 574 13 1867, 709 316 1867, 937 52 1867, 960 69 1567, 974 39,65,122,218 1868, 318 55 1868, 779 64 1868, 781 4 1869, 706 . . 67 1S69, 902 313, 314 1369, 917 74, 75 1870, 135 44 1870, 322 93, 94, 95 1870, 568 76 1871, 95 34, 259 1S71. 481 62 1571. 535 5 1871, 608 55 1872, ■ 146 53, 56 1872, 248.... 40, 120, 147, 180, 217 1872, 374 34, 64 1872, 609 40 1872, 611 108 1572, 820 40 S72, S73, 873. 873, 873, 873, 873, 874, 874, 875, 875, 875, S75. 875, 875, 875, 875, 875, 875. 875, 855. 875, 875, 875, 875- 875, 875, 875, 875. 875, 375. 875. S75. 875, 845, S75, 875. 875. 8.75, 875, 875, 875. 875, 875, 875, 875, 875, CHAP. S29 30 151 189, 190 469 81, 82, 83 710 31. 200 737 41 814 41 851 14 143 42, 151, 215 430 84, 85 88 67 113 5 120 no 181 41 208 96, 113 256. 319- 365- 423- 445- 74 122 5 55 36 510 131, 134. 164, 326 606 29 611 1, 45. 48, 333 611, § 1 8, 12, 79.333 611, § 2 12, 53, 333 611, § 3 10, 12, 102, 334 611, § 4 10, 46, 334 611, § 5 10, II, 58, 334 611, §6 59. 335 611, § 7 ". 59. 335 611, § 8 33(> 611, §9 9, 336 611, § 10 II, 57, 98, 337 611, i^ II 126, 33S 611, ^\2 127, 338 611, § 13 63, 339 611, g 14 63, 101, 339 611, § IS 119. 339 611, § 16 151. 193, 340 611, § 17 151, 340 611, § 18 137, 165, 341 611, § 19 162, 342 611, § 20 163, 343 611, § 21 176. 343 611, § 22 179. 343 611, § 23 209, 343 611, § 24 343 611, § 25 209, 344 SESSION LAWS CITED. XXV LAWS CHAP. [875, 611, § 26 199, 344 [875, 611. § 27 199.345 [875, 611, § 28 199, 345 1875, 6ir, § 29 5i> 345 [875, 611, § 30 346 [875, 611, §31 92,346 [875, 611, §32 79. 346 [875. 611, §33 77,348 [875, 611, §34 77, 208, 348 [875, 611, §35 .47, 348 1S75, 611, § 36 349 [S75, 611, §37 137. 209, 350 (875, 611, §38 351 [875, 6ir, § 39 351 [875, 613 24, 117, 129, 143, 199, 212 [876, 135 52 [876, 280 93 1876, 35S ■.... 55 [870, 415 41 [876, 446 .84,85 '877, 158 83 [877, 183 98 1S77, 211 46 1877, 229 315 'S77. 311 249 [878, 98 71, 72 [878, 163 62 [878, 203. ..43, 56, 121, 148, 149.217 [878, 264 48, 105, 106, 107. 112 1S7S, 316 97 [878, 337 13, 14 [878, 394 38 [S79, 161 210 [S79. 253 52 [879, 485 16, 17 [S79. 505 87 1879. 512 34 t88o, 94 • 75 [880, 110 315 1880, 113 83 [880, 155 86, 118 t88o, 168 314 1880, 182 64 [880, 225 105 t88o, 245 306, 311 [880, 267 42 LAWS CHAP. 1880, 427 113 IS8O, 452 14 IS8O, 510 200, 201 1880, 537 317 1880, 542... 266, 267, 26S, 269, 270, 273, 274. 275, 353 1881, 22 45 l88i, 77 123 18S1, 2x3 41 i88r, 311 34 1881, 313 35 18S1, 317 201 18S1, 313 35 1881, 361... 267, 269, 270, 273, 274, 275, 276, 277, 27S,'353 1881, 433 259 i8Sr, 46S 29, 31, 32, 33, 55, 118, 128 1881, 485 29 1881, 560 17 1851, 5S9 5 1581, 650 5 1881, 685 74 1882, 73 34 1852, 151... .268, 270, 276, 361, 363 1882, 156 ...6, 45 1552, 218 14 18S2, 273 5, 55 1882, 290 54 1582, 393 29 1852. 402 153, 155 1582, 409 21, 22, 23, 60, 72, 73, 74, 114, 115, 116, 128, 141, 142, 143, 150, 152, 155, 156, 159. 160, 161, 195, 196, 197, 198, 211, 255, 265, 266, 268, 279, 2S0 1853, 46 31 1883, 102 126,338 1883, 232 323 1883, 238 37, 119 1883. 240 5 18S3, 273 24, 117 18S3, 33S 199 18S3, 361 53. 56 1553, 37S. . .256, 304, 306, 316. 317 1583, 497 34 XXvi SECTIONS OF CODE OF CIVIL PROCEDURE CITED. LAWS 1884, IS84, 1884, 1884, I8S4, 1884, 1 8 84, 18S4, 1885, 1885, 1885,- 1885, 1885, 1885, 1885, 1885. 1885, 1885, 1S86, 18S6, 1886, 1886, 1886, 1886, 1S86, 1886, 1886, 18S6, 1887, 1887, CHAP. 133 ^7- 94 20S 137, 165, 342 223 181 285 305. 306 367 69. 70, 71 3S6 6 397 127 434 153 262 17 327 "I 376 318 422 41 489 203, 205 49S 201 501 268, 270, 276, 277, 361. 363. 364. 365 535 78, 79 538 18, 19, 20, 57, 59, 99, 102, 114, 127, 128, 140, 151, 193, IQ9 540 79. 348 140 120 143 6» 46 266 278 275 317 310 302 394 55 575 "4 611 20, 21, 114, 140 659 260 679 260,272,278,279 284 6, 46 328 255 LAWS CHAP. 1887, 450 53 1887, 517 92, 93 1587, 518 96 1887, 546 24,25,26,27,28, 116, 144, 180, 212 1887, 650 98 18S7, 724 64, 181 1588, 313 3, 322 1888, 394 63, 339 1888, .462 44 1S88, 513 352 1888, 514 29 18S9, 12 280 1889, 57 64 1889, r77 52 1889, 333 16 1889, 353 268, 272, 356 1889, 381 231 1889, 42'2 8 1889, 426 118 1889, 463 277,278, 366 1889, 558 212 1890, 23... 10, II, 57. 98. 334. 338 1890, 98 144 1890, 119 385 1S90, 193 83, 386 1890, 292 389 1890, 38S 231 1 890, 400 390 1S90, 439 390 1890, 506 391 1890, 508 397 SECTIONS OF CODE OF CIVIL PROCED- URE CITED. SECTION 217 235 263 236 264 237 267 237 292 237 315 237 316 237 338 237 SECTION 341 238 393 246 399 246 431 239 432 240 43S '■ 242 439 243 525 245 SECTIONS OF CODE OF CIVIL PROCEDURE CITED. XXvii SECTION 6io 254 636 250 646 250 647 251 648 251 649 • 251 650 251 707 258 791 47 839 = 250 868 248 869 248 872 248 929 '■••■' 249 930 249 931 » 250 960 53 1216 257 1217 257 1370 25S 1775 243 1776 244 1777 244 177S 247 1779 • •• 232 1780 233, 234 1781 295 1782 295 1783 295 1784 ' 258, 291 1785 288 1786 289 1787 253. 289, 291 1788 255, 290, 292 1789 290 1790 292 1791 292 1792 292 1793 293 1794 •, • • • 293 1795 293 1796 293 1797 295 1798 296 1799 297 1800 298 1801 298 1802 253, 298 SECTION 1803 29S 1805 299 1806 253, 299 1807 300 I 808 300 1809 254, 301 ^S^o 255, 303 iSii 301 ^812 301, 304 1813 301 1902 246 1955 i 253 1986 300 2419 282 2420 282 2421 283 2422 283 2423 255, 285 2424 285 2425 286 2426 286 2427 286 2428 287 2429 287 2430 „.. 287 2441 258 2444 258 2463 258 2S65 , ■. . 238 2879 241, 258 2880 242 2S81 242 2882 , 242 3203 238 3204 238 3205 238 3215 238 3226 23^ 3268 24t. 3343 234, 235 3390 88 3391 89 3392 89 3393 90 3394 90 3395 90 3396 90 3397 90 XXVlll SECTIONS OF PENAL CODE CITED. SECTIONS OF CODE OF CRIMINAL PROCEDURE CITED. SECTION 675... I SECTION 232 I 682... 232 SECTIONS OF PENAL CODE CITED. SECTION 590 181, 188 ^91 182 592 183 593 1S3 594 159. 184 595 160, 184 596 1S4 597 184 59S 1S5 599 ^^5 600 1S5 601 185 SECTION 602 186 603 172, 186 604 186 605 186 606 IS6 609 186 610 187 611 187 612 187, 254 613 107 614 187 THE LAW OF CORPORATIONS. CHAPTER I. ORGANIZATION. Art. I. Manufacturing Corporations. Art. II. Business Corporations. Art. III. Insurance and Guarantee Companies. Art. IV. Banking, Safe Deposit and Trust Companies. Art. V. Railroad and Construction Companies. Art. VI. Miscellaneous Corporations. Art. VII. General Provisions. The Constitution of the State of New York provides that corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes, and in cases where, in the judgment of the legis- lature, the object of the corporation cannot be attained under general laws." Under this provision general laws for the organization of corporations for different purposes have, from time to time, been passed, until, in 1875, previous legislation was sup- plemented by a law so broad in its scope' that corporations may now be organized under the general laws for the pur- poses of carrying on any lawful business. A corporation for any given purpose may often be organized under one of several different acts. Thus a corporation for manufacturing purposes may be organized under the law of 1848' or under the Act of 1875 above referred to, and the various considerations of the different ' Article VIII., sec. i. ' Laws of 184S, chap. 40. ' Laws o( 1S75, chap. 611. 2 THE LAW OF CORPORATIONS. liability of stockholders, publicity of corporate transactions, restrictions as to incorporators, etc., will guide the prac- titioner in his selection of the law (where a choice is afforded) under which he will organize. Prior to the adoption of the Constitution of 1846, several acts for the organization of corporations for specific manu- facturing purposes were passed,' but these will not be con- sidered here, as, even if still in force, they are practically obsolete. Article I. Mamifactiirijig Corporations. The Act of 1848, "to authorize the formation of corpo- rations for manufacturing, mining, mechanical or chemical purposes,''* from the time it was passed until 1875 remained the most general law for the formation of corporations in the state, and under it by far the greater number of corpo- rations have been organized. It still continues, on account of the facility it offers for the organization of companies, the liberality of its enactments, and the certainty of its pro- visions arising from forty years of judicial construction, not only one of the most important, but the one that is, perhaps, generally preferred for the organization of those corporations whose purposes admit them to its provisions. Under this act, a corporation may be organized for any one of the following purposes : Manufacturing, Mining, etc. — Carrying on any kind of manu- facturing, mining, mechanical or chemical business. Printing and PubHshing. — The business of printing, publish- ing or selling books, pamphlets or newspapers, or adver- tising the same or other articles. ' Laws of 1811, chap. 67 ; Laws of of 1821, chap. 14. 181 5, chaps. 47 and 202 ; Laws of 1 816, * See App. A {post), where the act chap.58, Laws.of 1817, chap. 223; Laws is given in full. ORGANIZATION. 3 Real Estate Business.— Purchasing, taking, holding and pos- sessing real estate and buildings, and selling, leasing and im- proving the same. Dairy Purposes. — Making butter, cheese, concentrated or condensed milk, or any products of the dairy. Church Sheds and Laundry Purposes. — Erecting buildings for church sheds or laundry purposes, and carrying on of laundry business. Slaughtering Animals. — Slaughtering animals. Towing. — Towing or propelling canal-boats, vessels, rafts, or floats on the canals or navigable rivers of the State of New York by animal or steam power. Coal and Farm Produce. — Buying, storing, selling, or ship- ping coal, merchandise, and farm produce, their operations not to be confined to the county in which their certificates shall be filed. Hot Water and Steam. — Supplying of hot water or hot air or steam for motive power, heating, cooking, or other useful applications in the streets and public and private buildings of any city, village, or town in this state. Cattle, etc. — Buying, breeding, grazing, pasturing, dealing in and selling cattle, sheep, hogs, horses and other live stock in the United States of America, British North America and elsewhere.' By subsequent legislation its provisions have been ex- tended to corporations organized for the following purposes : Raising Vessels. — Constructing and using machines for the raising of vessels or other heavy bodies.'' Collecting and Storing Ice. — Collecting, storing and preserv- ing ice, preparing it for sale, transporting and vending the same.' Mineral Water. — Bottling and selling mineral water drawn from any natural mineral spring.' ' Laws of 1848, chap. 40, § i, as ^ Laws of 1855, chap. 301. amended by Laws of iSSS, chap. 313. ■* Laws of 1S63, chap. 63. 2 Laws of 1851, chap. 14. 4 THE LAW OF CORPORATIONS. Navigation and Salvage — Constructing, owning, and using vessels and machines to be employed for hire in towing ves- sels, carrying freight and passengers, and in aiding, protect- ing and saving vessels and their cargoes, wrecked or in dis- tress, on any of the navigable rivers or lakes in or bordering upon the State of New York, or on the high seas, or in the various arms of the seas and rivers running into the same, with all the rights appertaining by law to private individuals performing services as salvors.' Floating Elevators, etc. — For the purpose of carrying on the business of constructing, maintaining and using stationary and floating elevators or warehouses for all purposes per- taining to or connected with trade or commerce in the sev- eral kinds of grain in the State of New York. Skating Rinks. — Purchasing a suitable lot and erecting thereon a building to be used as a skating rink, and for holding fairs, meetings, exhibitions, and all other lawful entertainments and amusements." Agricultural Purposes. — Propagating, cultivating and devel- oping the different varieties of grape, and the manufacture, of wines and brandies therefrom, and cultivating sugar-cane, cotton, rice, tobacco, indigo, and other products of the earth, preparing the same for market, and for transporting and disposing of the same.' Coal and Peat. — Buying and selling and transporting coal and peat of all kinds." Residences, etc. — Purchasing, acquiring, maintaining, and improving real estate for residences, homesteads and apart- ment houses, to be leased and conducted by the corporation so formed, and occupied by the stockholders thereof and others. Public Hall. — Purchasing, acquiring, maintaining, improv- ing and managing a building or buildings which shall con- ' Laws of 1S64, chap. 337. * Laws of 1865, chap. 234. ^ Laws of 1S64, chap. 337, § 3, as ^ Laws of 1S65, chap. 307. amended by Laws of 1S68, chap. 781. ORGANIZATION. 5 tain a hall for public meetings and entertainments, and apportioning and distrib^ ig the same among the stock- holders and members of such corporation. Improving Land, etc. — Filling in and improving lands.' Transporting Oil, etc. — The storage, Conveyance and trans- portation of petroleum and other oils.^ Dredging and Dock Building.— Constructing and using ma- chines for dredging and filling of land and dock-building, or for the construction and operation of inland wharves and basins, and the purchase, improvement and sale thereof.^ Water for Mining, etc. — Accumulating, storing, conducting, selling, furnishing and supplying water for mining, domestic, manufacturing, municipal and agricultural purposes." Warehouses and Elevators. — Carrying on the business and operations of owning, constructing, maintaining, using and operating warehouses, elevators, docks, wharves and basins.^ Railway Depots. — Purchasing, acquiring, building upon and improving real estate i:)r union railway depots, to be leased and occupied by any railroad company or companies owning, leasing or operating a railroad within this state.* News-Agencies. — Receiving, obtaining, collecting and ac- cumulating items and matters of news, and selling, vending, furnishing and supplying the same.'' Water for Power, etc. — Boring, sinking, digging for, accu- mulating, conducting by underground pipes, conduits and ' Laws of 1871, chap. 535, as may avail itself of the benefit of the amended by Laws of 1881, chap. 589. act by signing and acknowledging a >* Laws of 1S75, chap. 113. certificate stating that it intends to 3 Laws of 1875, chap. 365. avail itself of such act, and filing such * Laws of 1880, chap. 85. Section certificate with the clerk of the county 3 provides that any mining com- where the original certificate was pany previously incorporated may filed and a certified copy in the office conduct this business, provided the of the Secretary of State. By section intention to do so was specified 5, the city of New York is excepted among the objects for which it was from these provisions, formed; and, under section 4, if =• Laws of 1 881, chap. 650. such intention were not specified in ^ Laws of 1882, chap. 273. the certificate, such a corporation ' Laws of 1S83, chap. 240. 6 THE LAW OF CORPORATIONS. reservoirs, and furnishing water to be used for power and fire purposes.' Method of Organization. — Any of the foregoing corporations may be formed by any number of persons not less than three. They must make, sign and acknowledge before some officer competent to take the acknowledgment of deeds, two certificates in writing, in which shall be stated : I. The corporate name. . 2. The objects for which the company shall be formed. 3. The amount of capital stock. 4. The time of its existence, not exceeding fifty years. 5. The number of shares of which the stock shall consist. 6. The number of trustees, and their names, who shall manage the concerns of the company for the first year.' 7. The place or places where the company shall carry on its business. One certificate must be filed and recorded in the office of the clerk of the county in which the principal place of busi- ness of the company is to be located, and the duplicate in the office of the secretary of state.' Before a certificate can be filed and recorded, the fee for filing and for recording must be paid' ; and the tax for or- ganization, of one eighth of one per cent, upon its capital, must be paid to the state treasurer.' When the certificate has been filed and recorded, the persons who have signed and acknowledged the same, and ' Laws of 1884, chap. 386. be reviewed by a writ of mandamus. ' Corporators are the associates People ex rel. Belknap v. Beach, 19 engaged in organizing a company. Hun, 259. When the organization is complete their functions and liabilities cease, and then devolve upon the directors, trustees or stockholders, as may be provided in the act of incorporation. Chase v. Lord, 77 N. Y. I. ^ In case of the refusal of the sec- retary of state, for any reason, to ^ Laws of 1882, chap. 156, g i, provides that the Secretary of State may charge a fee of ten dollars for filing, and fifteen cents per folio for recording, every certificate of incor- poration under the Manufacturing Act. * Laws of 1886, chap. 143, as file the certificate, his decision may amended by Laws of 1S87, chap. 284. ORGANIZATION. 7 their successors, shall be a body politic and corporate, in fact and in name, by the name stated in the certificate, and by that name shall possess all the general powers of cor- porations.' (1) The Corporate Name. — This act contains no restriction as to the name which may be adopted, and, provided that it is not the same as that of any existing corporation in the state, or so nearly resembling it as to be likely to deceive, any name may be chosen. The corporation may be called a company, a corporation, an association, or by the name of a firm, or even by the name of a street and number. (2) The Objects for which it is Formed. — To set forth prop- erly the objects for which the company is formed is of paramount importance, as the certificate constitutes the charter of the company, and its charter is the measure of its powers. What that includes impliedly excludes all others. It is usually preferable, therefore, to set forth its objects in as general terms as possible and bring it within the act ; " and if it is desirable to specify more particularly the definite objects for which it is organized, to follow the general state- ment by words designating such particular object. It will ordinarily be found that the exact words of the statute confer the broadest powers. On the other hand, it is sometimes desirable strictly to limit the corporate powers, and then, of course, the objects will be specifically designated. (3) The Amount of Capital Stock. — This may be of any desired amount. It is subject, however, to a tax or license fee of one eighth of one per cent. (4) The Time of Existence. — This may be for any time not exceeding fifty years. ' Laws of 1S4S, chap. 40, § 2. turing only, or mining only ; but a ^ The objects must be confined to company organized for mining need one of the general purposes men- not confine its business to one metal. tioned in the section ; thus manufac- People v. Beach, 19 Hun, 259. 8 THE LAW OF CORPORATIONS. • (5) The Number of Shares. — There IS no restriction as to the number and par value of the shares. (6) The Number of Trustees, etc. — There may not be less than three nor more than thirteen trustees. A majority of them must be citizens and residents of this state. The trustees named in the certificate manage the con- cerns of the company for the first year, or until their suc- cessors are chosen. (7) The Place or Places where the Company shall carry on its Business. — If the company is formed for the purpose of carry- ing on any portion of its business in any place out of the state, the certificate must so state, and must also state the name of the town and county in which the principal part of its business within the state is to be transacted ; and such town and county will be deemed the principal place of busi- ness of the company.' If the place or places of business outside of the state are set forth with reasonable certainty it is sufificient, even if the town or county be not designated.'' Article II. Business Corporations. Under the act providing for the organization of business corporations, passed in 1875, a corporation may be organized for carrying on any lawful business except banking, insur- ance, the construction and operation of railroads or aiding in the construction thereof, and the business of savings banks, trust companies or corporations intended to derive profit from the loan or use of money, or safe-deposit companies, including the renting of safes in burglar- and fire-proof vaults.^ ' Laws of 1857, chap, 29, § 3. organized under this act for the pur- '' People ex rel. Belknap v. Beach, pose of boring, drilling, digging or 19 Hun, 259. mining tor natural gas, and convey- 3 Laws of 1875, chap. 611, § I. By ing the same in pipes, etc., are au- Laws of 1889, chap. 422, companies thorized to lay pipes in the pubkc ORGANIZATION. 9 The scope of this act is best shown by noting the objects for which corporations have been formed under it.* Thus, not only have corporations been organized under this act for manufacturing and for mining purposes, for buying, sell- ing and dealing in various kinds of personal property and real estate, but also for such purposes as the following: Maintaining a ferry ; transacting a general mercantile and importing business; improving land, building hotels and boarding houses ; publishing books, pamphlets and news- papers ; purchasing bills of exchange, promissory notes and other evidence of indebtedness of nations and corporations, and selling the same ; cultivating a taste for art and build- ing and renting opera houses ; transmitting messages and furnishing service, etc. ; transportation of commercial com- modities ; buying and selling stocks, bonds, mortgages, etc. ; general shipping and forwarding and transportation bus- iness ; establishing telephone lines in foreign countries; soliciting business, making collections and guaranteeing payments to corporations ; running cabs and hacks drawn by horses for the conveyance of passengers ; gathering and distributing news to newspapers ; constructing a canal (in a foreign country) ; erecting and maintaining a light-house (m a foreign country) , mercantile agency ; protecting merchants from bad debts ; running stages and omnibuses; runnmg a line of steamboats ; searching and guaranteeing titles to real estate ; detective business ; agency business ; brokerage ; guaranteeing collection of claims ; guaranteeing endow- ments. The method of organization is quite unlike that of the organization of manufacturing corporations as shown in the last article. There must be three or more corporators, a roads and highways, and to enter 10 the session laws of each year, a upon and acquire land, with or with- statement of the corporations organ- out the owners' consent, for the pur- ized under it. stating their name, pose of conveying natural gas. principal business, etc. Laws of ' The secretary of state is required 1S75, chap. 6ri, ^ 9 by the act to publish, as an appendix lO THE LAW OF CORPORATIONS. majority of whom must be citizens and residents of this state. They must make, sign and acknowledge a certificate which shall set forth : 1. The name of the proposed corporation. 2. The object for which it is formed, including the nature and locahty of its business. 3. The amount and description of the capital stock. 4. The number of shares of which such capital stock shall consist. 5. The location of the principal business office. 6. The duration of the corporation, which, however, can- not exceed fifty years." The certificate, it will be noticed, is similar to that used under the Manufacturing Act; and where the two correspond, what was said in the last article will apply to this. No directors or trustees, however, are named in this certificate ; for whereas, under the Manufacturing Act, the filing and recording one certificate with the county clerk, and the duplicate with the secretary of state, completed the incor- poration of the company, here fihng the certificate with the secretary of state is only preliminary to the organization. The certificate must be filed with the secretary of state, who will thereupon issue a license to the persons making such certificate, empowering them as commissioners to open books for subscriptions to the capital stock." No sub- scription may be received unless, at the time of making it, the subscriber pays ten per cent, of the par value of the stock subscribed for in cash.' The delivery of a check only is not a compliance with the statute, and creates no contract of subscription that can be enforced either by the commissioners or by the subscriber." If, however, a check is delivered, and as a matter of fact is paid, it would prob- ably satisfy the requirements of the statute and the contract 1 Laws of 1S75, chap. 611, § 3. as ^ Id. § 5. amended by Laws of iS90,chap.23,§ I. * Excelsior Grain Binder Co. v. ^ Id. § 4. Stayner, 25 Hun, 91. ORGANIZATION. 1 1 would be complete, even did a short time elapse between the delivery and payment.' When one half of the capital stock has been subscribed, a meeting of the subscribers must be called by the commis- sioners for the purpose of adopting by-laws and electing directors. At least five days before the meeting, a written or printed notice stating the time, place and object of such meeting must be deposited in the post-office, addressed to each subscriber at his last known place of residence.'' At the time and place designated in the notice, the meet- ing should be called to order by one of the commissioners, the license for obtaining subscriptions and the notice of the meeting read, and a chairman and secretary elected. A resolution for the adoption of by-laws should be offered and by-laws adopted. A board of directors, consisting of not less than three nor more than thirteen, should then be elected. Each director, at the time of his election and throughout his term, must be a stockholder in the company to the ex- tent of at least five shares.^ No other restriction is imposed. A complete record of the proceedings of the meeting with a copy of the subscription list, a copy of the by-laws adopted, and the names of the directors chosen, must then be made and verified and filed in the office of the secretary of state, who will thereupon issue to the directors a cer- tificate setting forth that said corporation is fully organized in accordance with the act. The certificate must include a copy of the original certificate, the date and place of sub- scribers meeting, the names of the directors elected, and a statement that all the provisions of this act have been duly observed in the organization of such corporation. Within ten days after the issuing of the certificate, a copy must be filed and recorded in the office of the clerk of the county in which the principal business office of the company is situated.* 1 Black River, etc., R. R. Co. v. '^ Laws of 1S75, chap. 611, § 5. Clarke, 25 N. Y. 208; Beach v. ^ j^j^ jq 35 amended by Laws of Smith, 30 id. 116; A^ Y. 6^ 0. M. 1890, chap. 23, § 2. R. R. Co. V. Van Horn, 57 id. 473. ■• Id. § 7. 12 THE LAW OF CORPORATIONS. Previous to filing the record with the secretary of state and the issue of the certificate by him, his fees and the organiza- tion tax of one eighth of one per cent, on the capital must be paid. When thus organized, the corporation possesses the gen- eral powers of corporations organized under the laws of this state.' Article III. Insurance arid Guarantee Compaiiies. Subdivision 1. Marine Insurance Companies. Any number of persons, not less than thirteen, may organize a company for the purpose of making insurance upon vessels, freights, goods, wares, merchandise, specie, bullion, jewels, profits, commissions, bank-notes, bills of exchange and other evi- dences of debt, bottomry, and respondential interests, and to make all and every insurance appertaining to or connected with marine risks and risks of transportation and navigation.' They must file, in the office of the Superintendent of the Insurance Department, a declaration signed by all the cor- porators, expressing their intention to form such a company. A copy of the charter proposed to be adopted must be com- prised in the declaration. They must also publish a notice of such intention once a week, for at least six weeks, in a public newspaper in the county in which the company is proposed to be located.' The charter, which, before the company commences business, must be approved by the attorney-general,' should set forth : I. The name of the company. » Laws of 1875, chap. 611. § 2. ^ Id. § 3, as modified by Laws of 3 Laws of 1849. chap. 30S, § i, as 1853, chap. 463. §22; chap. 466, §28; modified by Laws of 1853. chap. 463, chap. 528, § i ; and by Laws of 1859, ^ 22; chap. 466, § 28 ; and by chap. chap. 366. 528, § I. * Id- § "• ORGANIZATION. I3 2. The place where the principal office for the transac- tion of its business shall be located. 3. The nature of the business to be undertaken. 4. The mode and manner in which its corporate powers are to be exercised. 5. The mode and manner of electing trustees or directors (a majority of whom shall be citizens of this state), and of filling vacancies. 6. The period for the commencement and termination of its fiscal year.' 7. The amount of capital to be employed in the transac- tion of its business." After having published the notice and filed the declara- tion and charter, the corporators may open the subscrip- tion books to the capital stock of the company ; ' provided, however, that no company shall be organized with a smaller capital than two hundred thousand dollars, to be paid in in cash.* All charters formed or extended under this act are of thirty years' duration, subject, however, to amendment or change by the legislature.^ After the charter has been certified by the attorney- general to the Superintendent of the Insurance Department as in accordance with the requirements of the act and not inconsistent with the constitution or laws of the state, the Superintendent of the Insurance Department will cause an examination to be made to ascertain if an amount equal, at least, to the minimum capital required by the act has been paid in, and a certificate to that effect will be filed in his office, and he will thereupon furnish the corporation a certified copy of the charter and certificate, which, upon ' This IS now generally made De- * Laws of 1849, chap. 308, § 10, as cember 31st to conform with the re- amended by Laws of 1867, chap. 574. quirements of the Insurance Depart- ^ Id. § 4. ment in regard to annual reports. '' Laws uf 1878, chap. 337. See Laws of 1861, chap. 326, ^5 2. * Laws of 1849 chap. 308, § 15. 14 THE LAW OF CORPORATIONS. being filed in the office of the clerk of the county in which the company is to be located, will be the authority to com- mence business and issue policies.' Subdivision 2. Fire and Inland Navigation and Transportation Insurance Companies. — Any number of persons, not less than thirteen, may organize a company for the purpose of mak- ing insurance on dwelling-houses, stores and all kinds of buildings, and upon household furniture and other property, against loss or damage by fire, and the risks of inland navi- gation and transportation.' A declaration similar to that of marine-insurance com- panies' must be filed in the office of the Superintendent of the Insurance Department, and a notice of intention pub- lished for at least two weeks in a public newspaper in the county in which such insurance company is proposed to be located.* No company may be incorporated for the above purposes with a smaller capital than two hundred thousand dollars, to be paid in in cash.' A majority of the directors or trustees must be citizens of the state, and each must be the owner, in his own right, of at least five hundred dollars' worth of the stock of such company at its par value." With these exceptions, what has been said of the charter, etc., of marine-insurance com- panies will apply here. After the examination and approval of the charter by ' Laws of 1849, chap. 308, § 11, as tion and transportion (Laws of 1861, modified by Laws of 1853, chap. 463, chap. g2). Fire-insurance companies § 22, and by Laws of 1859, chap. 366. may insure against loss or damage •^ Laws of 1853, chap. 466, § i. by lightning (Laws of 1880. chap. Any company organized under this 452) and by wind-storms and torna- act for the purpose of insuring against does (Laws of 1882, chap. 218). loss or damage by the risks of inland ^ Ante, p. 12. navigation or transportation may * Laws of 1853, chap. 466, § 3, as make insurance upon vessels, boats, modified by Laws of 1859, chap. 366, cargoes, goods, merchandise, freights and amended by Laws of 1873, chap, and other property against loss and 851, § i. damage by all or any of the risks of ' Laws of 1878, chap. 337. lake, river, canal and inland naviga- * Laws of 1853, chap. 466, § 4. ORGANIZATION. 1 5 the attorney-general, and its certification by him to the Superintendent of the Insurance Department, and the ex- amination by him or his agents, at which examination the corporators or officers of such company shall be required to certify under oath that the capital exhibited is the bona fide property of the company, the certificates shall be filed in the office of the Superintendent of the Insurance Depart- ment, and he will deliver to such company a certified copy of the charter and of such certificates, which, on being filed in the office of the clerk of the county where the company is to be located, shall be their authority to commence busi- ness and issue policies.' Subdivision 3. Life, Health and Casualty Insurance, Guarantee and Indemnity Companies. — Any number of persons, not less than thirteen, may associate and form a company or incor- poration for any of the purposes specified in either of the following departments : First Department. To make insurance upon the lives of persons, and every insurance appertaining thereto or con- nected therewith, and to grant, purchase or dispose of an- nuities and against disablement or death resulting from travelling or general accidents. Second Departnemt. To make any of the following kinds of insurance, and to make such examinations and inspections as are hereinafter provided : first, upon the health of per- sons ; second, against injury, disablement or death of persons resulting from travelling, or general accidents by land or water • third, guaranteeing the fidelity of persons holding places of public or private trust ; fourth, upon the lives of horses, cattle and other live-stock ; fifth, upon plate glass against breakage ; sixth, upon steam-boilers and upon pipes, engines and machinery connected therewith or operated thereby against explosion and accident, and against loss or damage to life or property resulting therefrom, and to make inspections of, and issue certificates of inspection upon, such ' Laws of 1853, chap. 466, § 10. l6 THE LAW OF CORPORATIONS. boilers, pipes, engines and machinery ; seventh, against loss by burglary or theft, or both.' No company organized under this act for the purposes named in the first department is permitted to undertake either of the risks mentioned in the second department ; and no company organized under this act for either of the pur- poses mentioned in the second department may undertake any business mentioned in the first department, nor can any such company organized since the passage of the act under- take or do more than one of the several kinds of insurance mentioned in the second department ; and no company organized under this act may undertake any business or risk except as therein provided. It is provided, however, that nothing contained in this act shall affect the business of any company previously organized under the second depart- ment/ A declaration signed by each of the corporators, setting forth their intentions to form a company for any one of the above purposes, and the department under which the com- pany is intended to be formed, must be filed in the of^ce of the Superintendent of the Insurance Department. The declaration must comprise a copy of the charter they pro- pose to adopt, which shall set forth : 1. The name of the company. 2. The place where it is to be located. 3. The kind of business to be undertaken and the de- partment (as shown above) by which such business is author- ized. 4. The mode and manner in which the corporate powers of the company are to be exercised. 5. The manner of electing trustees or directors and ofificers (a majority of whom must be citizens of the state), the time of such election, and the manner of filling vacancies. ' Laws of 1853, chap. 463, § i, as ^ Id. § 2, as amended by Laws amended by Laws of 1S89, chap. 338. of 1879, chap. 485, § 2. ORGANIZATION'. 17 6. The amount of capital to be employed. 7. Such other particulars as may be necessary to explain and make manifest the objects and purposes of the com- pany and the manner in which it is to be conducted.' After the approval of the declaration and charter by the attorney-general, who will certify the same and deliver it back to the Superintendent of the Insurance Department, a certified copy will be furnished to the corporators,* who shall then publish their intention to form such a company, for six weeks in a paper in the county in which the principal ofifice of the company is to be located, and in such paper in the city of Albany as is designated to publish the notices and advertisements required by the Superintendent of the Insurance Department. When such publication shall be completed the corpora- tors are authorized to open books to receive subscriptions to the capital stock.^ No such company can be organized with a capital of less than one hundred thousand dollars, and no company can commence business until it has deposited with the Superin- tendent of the Insurance Department the sum of one hun- dred thousand dollars in such securities as are required by the act.* Upon depositing the requisite amount of capital, the Superintendent of the Insurance Department will furnish the corporation with a certificate of such deposit, which, with the certified copy of the declaration and charter, when filed in the county clerk's ofifice of the county where such com- pany is to be located, will be the authority to commence business and issue policies.^ ' Laws of 1853, chap. 463, § 3, as 1885, chap. 262. amended by Laws of iSyg, chap. ■* Id. § 6, as amended by Laws of 485, § 3. 1862, chap. 300, ^ 2, as modified by '' Id. § 4, as modified by Laws of Laws of 1865, chap. 328, § 2 ; and as 1859, chap. 366. amended by Laws of 1S81, chap. ^ Id. § 5, as modified by Laws of 560, § I. 1884, chap. 133, and by Laws of * Id. § 7. l8 THE LAW OF CORPORATIONS. Every charter of a company organized for any of the above purposes continues until repealed.' Subdivision 4. Title Guarantee Companies. — A corporation may be organized for the purpose of examining titles to real estate, of procuring and furnishing information in rela- tion thereto, and of guaranteeing or insuring bonds and mortgages, and the owners of real-estate and others inter- ested therein against loss by reason of defective titles and other incumbrances of or upon such real estate.' The corporators, who must be at least five in number and a majority of whom must be citizens of the United States and residents of the county in which the company is pro- posed to be located, must make a certificate, signed and sealed and duly acknowledged by each of the corporators, which shall set forth : 1. The name of the proposed corporation. 2. Their intention of forming a corporation for the pur- pose of examining titles of real estate and guaranteeing and insuring the same, and bonds and mortgages, as expressed above. 3. The amount and description of the capital stock. 4. The location of the principal business office. 5. The duration of the corporation, which however shall not exceed fifty years.' The certificate must be filed in the ofifice of the Superin- tendent of the Insurance Department, and he will thereupon issue a license to the persons making such certificate, em- powering them as commissioners to open books of subscrip- tion to the capital stock of such corporation, at such times and places as they may determine." The commissioners may then proceed to open books for subscription to the capital stock of such corporation ; but no subscription shall be received unless, at the time of making 1 Laws of 1853, chap. 463, § 20. ^ Id. § 3. 2 Laws of 1885, chap. 538, § i. * Id. § 4- ORGANIZATION. 19 it, the subscriber pays ten per cent, of the par value of the stock subscribed for, in cash. When one third of the capital stock has been subscribed, the commissioners must call a meeting of the subscribers, by a notice in writing mailed to each at his last known place of resideijce, at least five days before the time fixed for such meeting, designating therein the place and object of the meeting, for the purpose of adopting by-laws and electing trustees and directors.' The directors may not be less than five nor more than thirteen in number, and each director at his election and throughout his term of office must be a stockholder in the company to the extent of at least five shares.' Within ten days after such subscribers' meeting, the com- missioners must file in the office of the Superintendent of the Insurance Department a verified record of the proceedings, containing a copy of the subscription list, a copy of the by- laws adopted, and the names of the directors chosen, and thereupon the Superintendent will issue to the directors a certificate setting forth that such corporation is fully or- ganized in accordance with the act. The certificate will include a copy of the original certifi- cate, filled by the corporators in the office of the Superinten- dent of the Insurance Department, the date and place of the subscribers' meeting, the names of the directors elected, and a statement that all the provisions of this act have been fully observed in the organization of such corporation. Within ten days after the issuing of this certificate, a copy must be filed in the office of the clerk of the county in which the principal business office of such corporation is situated, and upon such filing the incorporation is com- plete." No such corporation may be organized with a smaller capital than one hundred and fifty thousand dollars, nor with ' Laws of 1885, chap. 538, § 5. * Id. § 7. ' Id. § 9. 20 THE LAW OF CORPORATIONS. a capital exceeding one million dollars ; and the capital must be divided into shares of one hundred dollars each,' Subdivision 5. Credit, Guarantee and Indemnity Companies. — Any number of persons not less than eleven may associate and form an incorporated company for the following pur- poses: To guarantee and indemnify merchants, manufac- turers, traders, and those engaged in business and giving credit, from loss and damage by reason of giving and ex- tending credit to their customers and those dealing with them.' They must file in the ofifice of the Superintendent of the Insurance Department a declaration signed by each of them, expressing their intention of forming a company for the pur- pose of transacting the business of guaranteeing and indem- nifying persons giving credit to those doing business with them from loss by reason thereof, as expressed above. The declaration must also comprise a copy of the charter pro- posed to be adopted.' The charter should set forth : 1. The name of the company. 2. The place where the principal ofifice for the transac- tion of its business shall be located. 3. The nature of the business to be transacted, as set forth above. 4. The mode and manner in which the corporate powers granted are to be exercised. 5. The mode and manner of electing directors and filling vacancies. 6. The periods of commencement and termination of its fiscal year. 7. The amount of capital employed in the transaction of its business. Each director must be an owner in his own right of at ' Laws of 1885, chap. 538, § 10. * Id. § 2. 2 Laws of 1886, chap. 611, § I. ORGANIZATION. 21 least one thousand dollars' worth of stock of such company, at its par value.' No company may be incorporated under this act in the city or county of New York, or in the county of Kings, with a smaller capital than one million dollars, nor in any other county of the state with a smaller capital than five hundred thousand dollars.^ No such company shall commence business until at least twenty-five per cent, of the capital has been paid in, nor until it has deposited with the Superintendent of the Insurance Department the sum of one hundred thousand dollars.' Article IV. Banking, Safe Deposit, and Trust Companies. Subdivision 1. Banks. — Banks of discount and deposit may be organized with a capital of not less than one hundred thou- sand dollars, and in places not exceeding thirty thousand inhabitants with a capital. of not less than fifty thousand dollars; and in places not exceeding six thousand inhabitants, with the approval of the Superintendent of the Banking Department, they may be organized with a capital of not less than twenty-five thousand dollars.^ A certificate must be made, signed, sealed and acknowl- edged by the corporators which shall set forth : 1. The name assumed to distinguish such association, and to be used in its dealings. 2. The place where the operations of discount and deposit of such association are to be carried on, designating the particular city, town or village. 3. The amount of capital stock of such association and the number of shares into which the same shall be divided. 4. The names and places of residence of the shareholders, and the number of shares held by each of them respectively. 1 Laws of 1SS6, chap. 611, § 3. ^ Id. § 11. * Id. § 5. * Laws of 1882, chap. 409, § 29. 22 THE LAW OF CORPORATIONS. 5. The period at which such association shall commence and terminate. The certificate must be recorded in the office of the clerk of the county where any office of such association shall be established, and a copy filed in the office of the Superinten- dent of the Banking Department.' Such association shall have power to carry on the busi- ness of banking by discounting bills, notes and other evi- dences of debt ; by receiving deposits ; by buying and selling gold and silver bullion, foreign coin and bills of exchange, in the manner specified in the articles of association for the purposes authorized by this act ; by loaning money on real and personal security; and by exercising such incidental powers as shall be necessary to carry on such business ; to choose one of their number as president of such association, and to appoint a cashier and such other officers and agents as their business may require, and to remove such president, cashier, officers and agents, at pleasure, and appoint others in their places." Before commencing business, the two principal officers of the company must make an affidavit stating that the whole of the capital stock, or such portion as, by its charter, shall be required to be paid or secured before the commencement of its operations, has actually been paid, or secured to be paid, according to the provisions of its charter.'"' Such affidavit, if made in a city, must be made before the mayor or recorder of the city, and if elsewhere, before the county judge of the county or any justice of the Supreme Court therein, and must be filed in the clerk's office of the city and county, or of the county, in which it is taken.^ ' Laws of 1882, chap. 409. § 30. practice is to file either an original The act does not in terms require a or a certified copy in that office, certificate to be filed in the county '^ Id. ^ 35. clerk's office, although § 31 implies '^ Id. § 192. that this is done ; and the better * Id. § 193. ORGANIZATION. 23 The charter will be void unless such affidavit is made and filed within a year of the time the charter is granted.' Before such a bank is authorized to commence business, the Superintendent of the Banking Department will cause an examination to be made to ascertain whether the requisite amount of capital has been paid in in cash ; and when satis- fied that it has in good faith been subscribed and paid in in cash, he will issue his certificate to that effect, authorizing such bank to commence business.^ The act contains no restriction as to the number or qualifications of the corporators, shareholders or directors ; nor as to the duration of the charter ; ^ nor as to the by-laws that shall be adopted ; nor as to the officers that shall be chosen ; nor as to the amount of capital (except the mini- mum amount) that shall be employed ; nor as to the number and value of the shares. All these are left to the discretion of the members. Subdivision 2. Safe-Deposit Companies. — Any five or more persons may organize a company for the purpose of taking and receiving upon deposit, as bailee, for safe-keeping and storage, jewelry, plate, money, specie, bullion, stocks, bonds, securities, and valuable papers of any kind and other valu- ble personal property, and guaranteeing their safety, upon such terms and for such compensation as may be agreed on by such company and the respective bailors thereof, and to let out vaults and safes and other receptacles for the uses and purposes of such corporation. The corporators must make, sign and acknowledge a certificate which shall set forth : 1. The corporate nam.e. 2. The objects for which the corporation shall be formed. 3. The amount of capital stock. 4. The term of its existence, not to exceed fifty years. ' Laws of 1882, chap, 409, § 194. organized under the general laws ' Id. § 18. may be repealed at any time by the ^ The charter of any corporation legislature. 24 THE LAW OF CORPORATIONS. 5. The number of shares of which the stock shall consist. 6. The number of trustees, and their names, residences, occupations and post-ofifice addresses, who shall manage the concerns of said corporation for the first year. 7. The name of the place in which the operations of the corporation are to be carried on. The certificate must be filed in the ofifice of the clerk of the county in which the business of the corporation is to be carried on, and duplicates in the office of the secretary of state and m the banking department of the state. The capital of such a company shall not exceed one mil- lion dollars nor be less than one hundred thousand dollars, except in cities or villages of less than one hundred thousand inhabitants, in which the capital stock may not be less than ten thousand dollars. No such company is authorized to commence or trans- act business until the whole amount of the capital stock shall have been paid in.' There may not be less than five nor more than thirteen trustees, who shall respectively be stockholders of the com- pany, and a majority of whom shall be citizens of this state.* When the certificates have been filed as above, the in- corporation is complete.' Subdivision 3. Trust Companies. — Any number of persons, not less than thirteen, three fourths of whom are residents of this state, may associate together for the purpose of organizing a trust company." Such persons must sign and seal a certificate which must state : 1. The name of the association. 2. The place where its business is to be transacted. ' Laws of 1875, chap. 613, § i, as 1883, chap. 338. amended by Laws of 1883, chap. 273. ^ Id. § 2. ^ Id. § 3, as amended by Laws of * Laws of 1887, chap. 546, § I. ORGANIZATION. 2$ 3. The amount of capital stock and the number of shares into which the same is to be divided. 4. The name, residence and post-ofifice address of each member of such association. 5. The term of existence of such association, which shall not exceed fifty years. 6. A declaration that each member of such association will accept the responsibilities and faithfully discharge the duties of a trustee in such institution, if elected to act as such, when authorized under the provisions of this act.' A notice of intention to organize such a trust company must be published at least once a week for four weeks in a newspaper to be designated by the Superintendent of the Banking Department, published in the city where such trust company is proposed to be located. This notice must spec- ify the names of the corporators, the name and location of the company as set forth in the organization certificate ; and if there is any trust company or trust companies organ- ized and doing business in such city, a copy of such notice must also be sent to them at least fifteen days before the certificate is filled.^ The certificate must be executed in duplicate and duly acknowledged, and within sixty days thereafter one copy must be filed in the office of the clerk of the county wherein such trust company is proposed to be located, and one copy in the office of the Superintendent of the Banking Depart- ment.' Upon a receipt of such certificate at the office of the Su- perintendent of the Banking Department, if it is duly exe- cuted and accompanied by satisfactory evidence of the proper service and publication of the notice, as above stated, he will indorse the certificate " filed for examination." * He will th-^n ascertain, from the best sources of informa- tion at his command, the general fitness of the persons named 1 Laws of 1887, chap. 546, § 2. ^ Id. § 3. 'Id. §4. •• Id. § 5. I 26 THE LAW OF CORPORATIONS. in such certificate for the discharge of the duties appertain- ing to such a trust, and whether it is such as to command the confidence of the community in which the company is proposed to be located, and also whether the public con- venience and advantage would be promoted by such estab- lishment ; ' and if he shall be satisfied that the organization of such a company will be a public benefit, he must within sixty days after the certificate has been filed by him for examination, issue, under his hand and ofiicial seal, a certificate of authorization to the persons named therein, or to a portion of them, together with such other persons as a majority of them may in writing approve, which will author- ize the persons named therein to become a trust company, as designated in the organization certificate, subject to the provisions of the act under which it is organized. No per- son may be named in such certificate who has not made and acknowledged the declaration contained in the sixth para- graph of the certificate.^ Such certificate of authorization will be transmitted by the Superintendent to the county clerk of the county in which the trust company is to be located, who will file it and attach it to the organization certificate previously filed by him, and the Superintendent will also file a duplicate copy of such certificate in his own ofifice.^ If the Superintendent of the Banking Department shall not be satisfied that the establishment of a trust company, as proposed in any organization certificate filed by him, is expedient and desirable, he must, within sixty days there- after, instead of giving a certificate of authorization as above stated, give notice to the county clerk of the county in which such trust company is proposed to be located, that he re- fuses to issue a certificate of authorization, which notice will be filed by the county clerk with the organization cer- tificate of such company." ' Laws of 18S7, chap. 546, § 7. ^ Id. § 9. 2 Id. § 8. " Id. § 10. The refusal of the Su- ORGANIZATION. 2/ Upon the filing of a certificate of authorization in the county clerk's office, the persons named in such certificate, and their successors, are thereby duly and lawfully con- stituted a body corporate and politic, and vested with all the powers and charged with all the liabilities conferred and imposed by the act.' Before the Superintendent of the Banking Department issues a certificate of authorization, he will cause an exami- nation to be made to ascertain whether the requisite capital has been paid in in cash, and no such association may com- mence business until a certificate of authorization has been granted.^ Before entering on active business the association must file with the Superintendent of the Banking Department a list of its shareholders, giving the name, residence, post- office address and number of shares held by each of them respectively, which list must be verified by the two principal officers of the company.^ The trustees of such company may not be less than thir- teen nor more than twenty-four in number. The persons named in the organization certificate, or such of them, re- spectively, as shall become holders of at least ten shares of the capital stock, shall constitute the first board of trustees, and may add to their number, not exceeding twenty-four, and shall continue in office until others are elected to fill their places. Within six months from the time when such company commences business, the trustees must classify themselves by lot into three classes, as nearly equal as may be, the term of office of the first class to expire on the third Wednesday of January following such classification, and of the other two classes one and two years thereafter, respec- tively. All future elections shall be of a number to fill the perintendent to give the certificate of ' Laws of 1887, chap. 546, § 11. authorization may be reviewed by " Id. § 12. mandamus. ' Id. § 13. 28 THE LAW OF CORPORATIONS. class whose term is about to expire, and shall be elected for three years.' The capital stock of any such company must be at least five hundred thousand dollars, provided, however, that trust companies with a capital of not less than two hundred thousand dollars may be organized in any city the popula- tion of which does not exceed one hundred thousand inhabi- tants. The capital stock must be divided into shares of one hundred dollars each."* All companies organized under this act, in addition to the ordinary powers of corporations organized under the laws of this state, are given power to act as fiscal or transfer . agents of any body politic or corporation ; to receive deposits of trust property ; to act as trustee un- der any mortgage or bond issued by any municipality or corporation, and to accept and execute any other municipal or corporate trusts ; to accept and execute trusts for married women in respect to their separate property, and to act as agents for them in respect to such property ; to act, under the order or appointment of any court of record, as guardian, receiver or trustee of the estate of any minor, and as deposi- tary of any moneys paid into court, and to take, accept and execute all such legal trusts, duties and powers in regard to property as may be granted to it by such courts, or by any person, corporation or body politic ; to invest and deal in stocks, bills of exchange, bonds and mortgages and other securities ; and to act as executor, trustee, or administrator of any deceased person, or as a committee of the estates of lunatics, idiots, persons of unsound mind and habitual drunkards.^ > Laws of 1887, chap. 546, § 14. * Id. § 21. * Id. § 19. ORGANIZATION. 29 Article V. Railroad and Construction Companies. Subdivision 1. Domestic Railroads.' — Any number of persons, not less than twenty-five, may form a company for the pur- pose of constructing, maintaining and operating a railroad for public use in the conveyance of persons and property, or for the purpose of maintaining and operating any unincorpo- rated railroad already constructed for the like public use. For this purpose they must make and sign articles of association, in which shall be stated : 1. The name of the company. 2. The number of years the same is to continue. 3. The places from and to which the road is to be con- structed or maintained and operated. 4. The length of such road, as near as may be, and the name of each county in this state through or into which it is made or intended to be made. 5. The amount of the capital stock of the company. ' An act to authorize the formation of railroad corporations and to regu- late the same. Laws of 1850, chap. 140. Railroads in foreign countries are now governed by Laws of iSSi, chap. 468 (see next subdivision). Laws of 1875, chap. 606, as amend- ed by Laws of 1881, chap. 4S5, Laws of 18S2, chap. 393, and Laws of 1888, chap. 514, provide for the con- struction and operation of steam rail- ways in counties of the state, and the appointment of commissioners for lay- ing out the same. Such commission- ers determine upon the necessity of the railway and locate its route; de- cide upon the plan of construction; determine the time within which it shall be constructed and the maxi- mum rates of fare ; fix the capital stock. the number of shares into which it shall be divided and the percentage to be paid at the time of subscribing; prepare the articles of association and open books for subscription; and when the amount of stock, directed by them, has been subscribed, call a meeting of the subscribers for the purpose of electing such a number of directors for the control and management of the road as the commissioners may determine; and after such election, deliver to the directors a certificate, in duplicate, of such organization; and upon filing such certificate in the office of the secretary of state, and the du- plicate in the county clerk's office where such road is located, the or- ganization of such corporation is com- plete. 30 THE LAW OF CORPORATIONS. which shall not be less than ten thousand dollars for every mile of road constructed or proposed to be constructed. 6. The number of shares of which said capital stock shall consist. 7. The names and places of residence of thirteen direc- tors of the company who shall manage its affairs for the first year and until others are chosen in their places.' Each subscriber must sign the articles of association, giving his place of residence and the number of shares he agrees to take.* When at least one thousand dollars of stock for every mile of road proposed to be made has been subscribed, and ten percent, paid thereon, in good faith in cash, to the directors named in the articles, an affidavit of such subscription and payment, and that it is intended in good faith to construct or to maintain and operate the road, must be made by at least three of the directors, and indorsed on or annexed to such articles, and such affidavit must be filed and recorded, with the articles of association,' in the office of the secretary of state ; and thereupon the subscribers, and all persons who shall afterwards become stockholders, shall be a body cor- porate, with all the privileges of corporations under the laws of this state/ In case the whole of the capital stock is not before sub- scribed, the directors may then open books of subscription to fill up the capital stock of the company, provided, how- ever, that every subscriber at the time of subscription shall pay at least ten per cent, on the amount subscribed by him, in money.^ The directors must be thirteen in number, and each must 1 By chapter 829 of Laws of 1872 of the directors so chosen may be in- it was provided that when such arti- serted with like efifect as though cles of association are made, except inserted in the original articles, the names and residences of the direc- * Laws of 1850, chap. 140, § i. tors, and such directors are subse- ^ Id. § 2. quently chosen at a meeting of the ^ Id. § i. subscribers, the names and residences ^ Id. § 4. ORGANIZATION. 31 be a stockholder absolutely in his own right, and qualified to vote for directors.' Subdivision 2. Foreign Railroads. — Companies may be formed for the purpose of constructing, maintaining and operating in any foreign country a railroad or railroads for public use in the conveyance of persons and property, or for the purpose of maintaining and operating any railroad already constructed in whole or in part for the like public use, with power to construct, maintain and operate in connection with such railroad or railroads a line or lines of telegraph and such lines of steamboats or sailing-vessels as may be proper or convenient for use in connection there- with. The corporators must be at least ten in number, and a majority of them inhabitants of this state." They must make and sign articles of association, in which shall be stated, in addition to the objects for which the com- pany is organized, as expressed above : 1. The name of the company. 2. The number of years the same is to continue, not exceeding one hundred years. 3. The place from and to which the said line or lines shall be constructed, maintained and operated, as nearly as practicable. 4. The amount of the capital stock of the company. 5. The number of shares of which such capital stock shall consist. 6. The names and places of residence of not less than seven persons, who shall act as a board of directors for the management of the affairs of the company for the first year and until others are chosen in their places. ' Laws of 1850, chap. 140, § 5, as directors may be seven. Laws of 1864, amended by Laws of 1S54, chap. 2S2, chap. 582, § 3, as amended by Laws and Laws of 1S73, chap. 710 ; on roads of 18S3, chap. 46. of less than twenty miles in length the 2 Laws of 1881 , chap. 468, § i. 32 THE LAW OF CORPORATIONS. Each subscriber must subscribe his name, place of resi- dence, and number of shares of stock he agrees to take. Such articles of association must be approved by the governor and filed in the ofifice of the secretary of state, and he, upon payment to him of a fee of fifty dollars, will cause the same to be recorded and will issue a certificate under the seal of the state, certifying that the persons named in such certificate, their associates and successors, are legally established as a corporation under the name and for the purpose stated in the articles of association, with all the powers and the privileges, and subjects to all theduties, liabil- ities and restrictions, set forth in this act.' It is provided that this certificate, or a duly certified copy of the record thereof, shall be conclusive evidence of the establishment of the corporation at the date of such certifi- cate.' Upon the issue of above certificate, such corporation may proceed to organize by calling a meeting of the subscribers, of which notice shall be given to each subscriber of the place and purpose of such meeting, at least five days before the day appointed for such meeting.' When such corporation shall have been organized, in case the whole of the capital stock has not been subscribed, the board of directors may open books of subscription to fill up the same, and may continue to receive such subscriptions until the whole capital stock is subscribed ; provided, how- ever, that no subscription shall be received unless ten per cent, of the amount subscribed for be paid to the directors, in money, at the time of subscription." Every corporation formed under this act is required to maintain its principal ofifice within this state, and to have there an officer or agent upon whom the service of process may be made. ' Laws of i88i, chap. 468, § 2. ^ Id. § 6. 8 Id. § 3. " Id. § 7. J ORGANIZATION. 33 It must also hold its annual meeting for the choice of directors at such place within the state as may be estab- lished by the by-laws of the company.' Article VI. Miscellaneous Corporations. Under this article are included the various laws which the legislature has passed from time to time for the incorporation of companies for special purposes. Most of such laws, enacted prior to the Business Act, are covered by that act, and companies may be formed under either. The method of organization generally consists in making a certificate, signed and acknowledged in duplicate, by the corporators, which should set forth the chapter, etc., of the act under which it is desired to organize, and in addition thereto : 1. The corporate name. 2. The objects for which the company shall be formed, as provided in the act under which it is proposed to organize. 3. The amount of capital stock. 4. The number of shares of which the stock shall consist. 5. The time of its existence. 6. The number and names and residences of the direc- tors or trustees who shall manage the affairs of the company for the first year, or until their successors are chosen. 7. The place or places w^here the company shall carr}- on its business. One certificate should be filed in the ofHcc of the secre- tary of state and the duplicate in the ofifice of the clerk of the county where the principal place of business of the company is to be located.* ' Laws of i88r, chap. 468, § 9. either in the text or in the foot-notes. ** Where any material variation from The laws in this article are arranged this course is necessary, it is indicated in chronological order. 34 THE LAW OF CORPORATIONS. Plank Road and Turnpike Companies. — Any number of per- sons, not less than five, may form a corporation for the pur- pose of constructing and owning a plank road or turnpike. Notice must be given, in at least one newspaper printed in each county through which the road is intended to be con- structed, of the time or places where subscription books will be opened, and when stock to the amount of at least five hundred dollars per mile of road has, in good faith, been subscribed, the persons subscribing may sign articles of asso- ciation, adding thereto the number of shares taken by each subscriber. Before such articles of association can be filed, at least five per cent, of the amount of the stock subscribed must be paid in, in cash, to the directors named in the articles, and an affidavit, made by at least three of such directors, of such payment and that the requisite amount of stock per mile has been subscribed, must be made and indorsed on the articles, or be annexed thereto. The duration of such company cannot exceed thirty years.' Gas Light Companies. — Any three or more persons may form a company for the purpose of manufacturing and sup- plying gas for lighting the streets and public and private buildings of any city, village or town, or two or more vil- lages or towns, not over five miles distant from each other, in this state. The duration of such company cannot exceed fifty years. The directors may not be less than three nor more than thirteen in number, and shall be stockholders in such company, and a majority of them must be citizens of this state.* Bridge Companies. — Any number of persons, not less than ' Laws of 1847, chap. 210. as amend- chap. 311; and Laws of 1883, chap, ed by Laws of 1849, chap 250. 497. Such a company may use elec- ' Laws of 1848, chap. 3"7 as amend- tricity for the purposes of lighting^ ed by Laws of 1871, chap. 95; Laws Laws of 1879, chap. 512, as amended of 1872, chap. 374; Laws of 18S1, by Laws of 1882, chap. 73. J ORGANIZATION. 35 five, may form a corporation for the purpose of constructing and owning a bridge or causeway across any stream, or channel, or water, which it may be necessary to cross in order to form, in connection with such bridge or causeway, a continuous roadway. The articles of association must be signed by each sub- scriber, and must state the number of shares of stock taken by him, and must be filed in the offices of the state engineer and surveyor and clerk of the county or counties in which the bridge is built ; and such articles cannot be filed until one fourth of the capital has been actually subscribed and five per cent, of that amount paid in, in cash, and an affi- davit of such subscription and payment made by at least three of the directors and filed with the articles. The capital stock must be divided into shares of twenty- five dollars each, and the duration of the corporation cannot exceed fifty years. The directors may not be less than five nor more than nine in number, and shall respectively be stockholders in the company to the extent of at least four shares, and shall be citizens of this state, and a majority of the directors must be residents of the county or counties in which such bridge shall be located ; and every stockholder must be a citizen of the United States.* Telegraph Companies. — Any number of persons may asso- ciate and form a company for the purpose of owning or constructing, using and maintaining, a line or lines of electric telegraph, whether wholly within or partly beyond the limits of this state ; or for the purpose of owning any interest in any such line or lines of electric telegraph, or any grants therefor. The certificate must be signed by the shareholders, and the number of shares held by each of them respectively stated therein, and a copy must be filed in the ofiice of the ' Laws of 1848, chap. 259, as amended by Laws of 1881, chap. 313. LJ_ 36 THE LAW OF CORPORATIONS. clerk of the county where any office of such association shall be established. No restrictions are imposed as to the amount of capital to be employed, the duration of the company, the qualifica- tions of the corporators, or as to the number and qualifica- tion of the directors." Navigation Companies. — Any number of persons, not less than seven, may form a company for the purpose of building for their own use, equipping, furnishing, fitting, purchasing, chartering, navigating and owning vessels to be propelled solely or partially by the power or aid of steam or other expansive fluid or motive power, to be used in all lawful commerce or navigation upon the oceans, seas, sounds and rivers, navigable by ocean steamers, or for the transporting of passengers, freight and mails. The certificate must state particularly the ports between which such vessels are intended to be navigated. The capital may not be less than fifty thousand dollars, nor more than four million dollars, and the duration of the company may not exceed twenty years. There may not be less than five nor more than nine di- rectors, who must respectively be stockholders in such com- pany and citizens of the United States, and a majority of them must be residents of this state.'' Building and Elevator Companies. — Any number of persons, not less than five, may form a company for the erection of buildings, or for the laying out and subdivision of lands into building lots and villa plots, and the improvement and sale thereof; or the construction or leasing of elevators and warehouses for the storage and elevating of grain, and for the making, purchasing and selling of materials for the con- struction of buildings. The capital of such company cannot be less than three 'Lawsof 1848, chap. 265, as amend- ed by Laws of 1853, chap. 124. and ed by Laws of 1853, chap. 471. Laws of 1875, chap. 445. * Laws of 1852,' chap. 22S, as amend- ORGANIZATION. 37 thousand dollars nor exceed one million dollars, and the term of its existence cannot exceed fifty years. There must be a board of not less than three nor more than nine trustees, who shall respectively be stockholders in such company and citizens of the United States, and a majority of whom shall be citizens of this state.' Ferry Companies.— Any three or more persons may form a company for the purpose of conducting and managing a ferry. The certificate must state, in addition to the matters ordinarily contained therein, the places to and from which the ferry established, or to be established, shall run. The duration of such company cannot exceed fifty years. The directors may not be less than three nor more than fifteen in number, and each must be a stockholder in the company and a citizen of the United States, and a majority must be citizens of this state. No such company is authorized to commence business until at least one half of its capital has actually been paid in, and an affidavit of such payment sworn to by a majority or the directors has been filed in each of the offices in which the certificate of incorporation is required to be filed.'' Inland Navigation Companies. — Any five or more persons may form a company for the purpose of building for their own use, equipping, furnishing, fitting, purchasing, charter- ing or owning steam, sail or other boats, ships or vessels, or property to be used in lawful business, commerce, trade or navigation upon the lakes or rivers, and for the carriage, transportation or storing of lading, freight, mails, property or passengers on such lakes and rivers. . The capital of such company may not be less than three thousand dollars nor more than two million dollars, and the time of its duration may not exceed twenty years. ' Lawsof 1853, chap. 117, asamend- ° Laws of 1853, chap. 135. ed by Laws of 1883, chap. 238. 38 THE LAW OF CORPORATIONS. There may not be less than three nor more than thirteen directors, who shall respectively be stockholders of such com- pany/ Guano Companies. — Any five or more persons may form a company for the purpose of mining the article of ammoniated or other guano, and importing, exporting, buying or selling the same, and purchasing, chartering and navigating such steam or sailing vessels, and the purchasing of any such real or personal estate as may be necessary, proper or convenient in transacting such business. The duration of such company cannot exceed thirty years. The trustees may not be less than five nor more than nine in number, and each must be a stockholder in the company and a citizen of the United States, and a majority must be citizens of this state.^ Skating Parks and Sporting Grounds. — Any number of per- sons, not less than seven, may form a company for the pur- pose of constructing parks to be used for skating and other lawful sports. The duration of such company cannot exceed fifty years, and the capital must be divided into shares of twenty- five dollars each. Each subscriber to the articles of association must add to his name and residence the number of shares of stock taken by him. The articles of association cannot be filed until one fourth of the capital stock has been subscribed, nor until at least one twentieth has Been actually paid in to the directors in cash, and an aflfidavit of such payment made by at least three of such directors and annexed to or in- dorsed on such articles of association. They must then be filed in the office of the state engineer and surveyor, and in the oflfice of the county clerk. The directors may not be less than five nor more than nine in number, and each must be a stockholder owning at ' Lawsof 1854, chap. 232,asamend- ' Laws of 1857, chap. 546. ed by Laws of 1878, chap. 394. ORGANIZATION. 39 least four shares of stock and must be a citizen of this state, and a majority of the directors must be residents of the county where the real estate of such corporation is located.' Stage-Coach Companies. — Any number of persons, not less than five, may form a company for the purpose of establish- ing, maintaining and operating any stage or omnibus route for pubhc use in the conveyance of persons and property elsewhere than in the city of New York, or for the purpose of maintaining and operating any such stage route already established. ■ The articles of association, in addition to the statements generally made therein, must state, as nearly as practicable, its route, and each subscriber shall add his place of residence and the number of shares he agrees to take. When at least ten per cent, of the capital has been paid in, and an afifidavit indorsed on such articles or annexed thereto stating the amount of stock subscribed and the fact of such payment, and that it is intended in good faith to maintain and operate the stage route or routes mentioned in such articles of association has been made by at least three of the directors, a copy must be filed in the office of the town clerk of each of the towns through which the stage route is intended to run. In case the whole of the capital has not been then sub- scribed, the directors may open books of subscription to fill up the capital stock, provided that every subscriber at the time of subscribing shall pay to the directors ten per cent, upon the amount subscribed by him. The directors may not be less than three nor more than five in number, and each must be a stockholder, owning stock absolutely in his own right. No other restrictions are imposed.' Driving-Park and Agricultural Associations. — Any number of persons, not less than six, citizens of this state and of full age, ' Laws of 1861, chap. 149. ' Laws of 1S67, chap. 974. 40 THE LAW OF CORPORATIONS. may form a company for the purpose of maintaining a driv- ing park or agricultural association in this state. The articles of association cannot be filed until the whole of the capital stock has been subscribed, and one twentieth of the amount has been actually paid in, in cash, and an afifidavit of such subscription and payment made by at least three of the directors and attached thereto, or indorsed thereon, and filed with such articles. The capital stock must be divided into shares of not less than ten dollars nor more than one hundred dollars each. The officers of such association must consist of a presi- dent, at least one vice-president, a secretary, a treasurer and any number of directors which is divisible by three, not exceeding fifteen, — the directors to be divided into three classes, one third to be elected annually.' Homestead Corporations. — -Any number of persons, not less than three, may form a company for the purpose of accumu- lating funds for the purchase of real estate, paying off en- cumbrances thereon, the improvement and subdivision thereof into lots or parcels suitable for homesteads, and the distribution of such lots or parcels among the shareholders. No restrictions are imposed by the act as to the number or qualification of the directors or trustees, nor as to the amount of capital stock or the number of shares, nor as to the time of its existence.' Water-Works Companies. — Any number of persons not less than seven may form a water-works company, to supply water to any of the towns or villages and to the inhabitants thereof in this state. Before making their certificate, such persons must present to the town or village authorities an application setting forth the persons who propose to form such company, the pro- posed capital stock and number and character of the shares, and the sources from which water is intended to be supplied, ' Laws of 1872, chap. 248, as amend- '-^ Laws of 1S72, chap. 820. ed by Laws of 1872, chap. 609. ORGANIZATION. 4 1 and shall request the authorities of such town or village to consider the application to supply it with pure and whole- some water; and such authorities must determine, within thirty days, whether such application shall be granted, and not until such application is granted shall a certificate of organization be made and filed. The certificate, filed in the office of the secretary of state, must recite, in addition to the matters ordinarily contained therein, the fact of such application and deter- mination, and such certificate must be subscribed by the persons by whom such application was made and be sworn to by a majority of such persons. The act contains no restrictions as to the number or qualifications of the directors or trustees, nor as to the amount of capital stock or the duration of the company. Such a company may lay and maintain its pipes and hydrants in any of the highways of the town from which the consent has been obtained, and may contract with such town, or any other town in the county in which it shall be organized, to supply it with water.' Railroad-Supply Companies. — Any nine or more persons may form a corporation in the manner specified or required in the Manufacturing Corporations Act' for the purpose of building, manufacturing, owning, furnishing, letting, selling and main- taining locomotive engines, cars, rolling-stock and machin- ery to be used or operated upon railways, or for any one or more of such purposes." ' Laws of 1873, chap. 737, as amend- lages in this state are authorized to ed by Laws of 18S1, chap. 213. Such construct water-works, and may take a company, when fully organized, any of the works constructed by any may acquire any land necessary to corporation, which they may need, at carry out the purposes for which it an appraised valuation, was formed. Laws of 1876, chap. 415, ''Ante, p. 6. as amended by Laws of 1S85, chap. ^ Laws of 1S73, chap. 814. Such a 422. None of the provisions of this company may lay and maintain such act apply to any towns in the county railway tracks, not exceeding one mile of Kings. in length, as may be necessary to con- By Laws of 1S75, chap. iSi, vil- nect its works with any railroad within 42 THE LAW OF CORPORATIONS. Hotel Companies. — Any five or more persons may form a company for the purpose of erecting buildings for hotel purposes, or for keeping hotels, or for either or both of such purposes. The capital of such company may not be less than ten thousand dollars nor more than one million dollars, and its duration may not exceed fifty years. There may not be less than three nor more than nine trustees, who must respectively be stockholders in such company and citizens of the United States, and a majority of whom must be citizens of this state.' Pipe-Line Companies. — Any number of persons, not less than twelve, may form a company for the purpose of con- structing and operating, for the public use, lines of pipe for the conveying or transporting therein petroleum, gas, liquids, or any products or property, or for the purpose of maintain- ing and operating any line of pipe already constructed. The capital of such company may not be less than fifteen hundred dollars for every mile of pipe constructed, or proposed to be constructed. The certificate, in addition to the matters usually con- tained, must state as near as may be the length of such pipe- line and the places from and to which it is to be constructed or maintained and operated, and the name of each county in this state through and into which it is to be constructed, and must also state the number of shares taken by each subscriber. No such articles of association can be filed until at least ten hundred and fifty dollars of stock for every mile of pipe- line proposed to be constructed or maintained has been subscribed, and twenty-five per cent, thereon paid in, in cash, and an affidavit indorsed thereon or annexed thereto, made by at least three of the directors, which shall state that such the state, and take the necessary land or Kings. Laws of 1880, chap. 267. therefor. This, however, does not ' Laws of 1874, chap. 143, apply to the counties of New York ORGANIZATION. 43 subscription and payment has been made, and that it is in- tended in good faith to construct or to maintain and oper- ate such line, and that such corporation was not projected and formed with the intent or for the purpose of selling or conveying its franchise to any person or corporation, nor with intent or for the purpose of injuring any person or corporation, nor for any fraudulent purpose ; and such afifidavit must be taken and held as part of the articles of association. There must be a board of seven directors, and each di- rector must be a stockholder absolutely in his own right. No other restriction or qualification is imposed.' Tramway Companies. — Any number of persons, not less than thirteen, may form a company for the purpose of con- structing, maintaining and operating an elevated tramway, constructed of poles, piers, wire, rods, ropes, bars or chains for the transportation of freight in suspended buckets, cars, or other receptacles, for hire. The articles of association must be subscribed with the number of shares and place of residence of each subscriber, and, in addition to the matters usually contained therein, must state the places from and to which the tramway is to be constructed, maintained and operated ; its length, as near as may be; and the name of each county in this state through or in which it is made or intended to be made ; and when properly made and executed must be filed in the ofifice of the secretary of state. The first section of the act provides that the directors to manage the affairs of the company for the first year shall not be less than three in number. By the fourth section it is provided that there shall be a board of three directors. When organized, such a corporation may acquire land ' Laws of 187S, chap. 203. The necessary for its use. It does not, act provides for the condemnation and however, apply to the city of New acquisition of such land as may be York. 44 THE LAW OF CORPORATIONS. for its use in the manner provided for its acquisition by railroad corporations. It is expressly excepted from the provision of the Re- vised Statutes requiring corporations to commence business within one year from the time of organization.' Article VII. General Provisions. The following provisions, except when otherwise indi- cated, are applicable to all corporations organized under the general laws : Amending Certificate. — If by reason of the omission of any matter required to be stated in a certificate of any corpora- tion organized under a general act any informality exists therein, the directors may make and file an amended certifi- cate to conform to the general act under which it was organ- ized, and it will then be deemed a corporation from the time of filing the original certificate. No suit pending against such a corporation is affected, and no rights accrued are im- paired by the filing of such amended certificate." The purpose of the statute is to remedy patent omissions, that is, the omission of things which are required to be stated, and which, being omitted, make the certificate imperfect on its face.^ Filing and Recording Certificate. — All certificates of incorpo- ration required to be filed in the office of the secretary of state or in the office of any county clerk, must be recorded in such office ; and it is provided that no certificate shall be 1 Laws of 1888, chap. 462. seem that any defect in the organiza- '^ Laws of 1870, chap. 135. tion of a corporation would be cured Hn re N. K, L. &= IV. R. J\.Co.,2S by a subsequent recognition of the Hun, 556, it was held, therefore, corporation by the legislature. B. R. that a change in the route of a rail- &= U. R. R. Co. v. Barnard, 31 Barb. road could not be effected by filing 25S. an amended certificate. It would ORGANIZATION. 45 filed or recorded until the fee for filing and recording is paid.' It was held, however, in Raisbcck v. OcstcrricJier^ that the failure to file the duplicate certificate of a manufacturing corporation in the office of the secretary of state was not sufficient to render the members partners between them- selves and liable to account as such ; but a corporation de Jure, which may successfully maintain itself against an in- quiry on the part of the state, is not created until all the formalities required by the act of organization are complied with.' Organization Tax. — Every corporation having capital stock divisible into shares, except literary, scientific, medical and religious corporations and corporations organized under the banking laws of the state, or under the act for the incorpo- tion of building, mutual loan and accumulating fund asso- ciations,* must pay to the state treasurer a tax of one eighth ' Laws of 1881, chap. 22. The fee for recording is the same as that for recording deeds. IbiJ. The fees of the Secretary of State are established by Laws of 1882, chap. 156, and, so far as relates to corporations, are as follows : For filing every certificate of in- corporation under chap. 40, Laws 184S, ten dollars. For filing every certificate of in- corporation of gaslight companies, turnpike companies, waterworks companies, ferry companies, navi- gation companies, telegraph com- panies, telephone companies, hotel companies and co-operative associa- tions, and of every business corpora- tion or company (except as herein- after stated), ten dollars. For filing, recording and issuing all the necessary papers in and about the organization of business corpo- rations formed under chap. 611 Laws 1875, ten dollars ; and for a certified copy of the certificate of incorpora- tion of such last-named business cor- porations, three dollars. For filing articles of association of a railroad to be constructed in a foreign country and issuing certifi- cate of incorporation and recording the same, fifty dollars. For filing articles of association of every other railroad, and for filing every agreement of consolidation be- tween two or more railroads, twenty- five dollars. ^ Common Pleas. Sp. Term 1878, 4 .'\bb. N. C. 444. As to the general rule that members of a corporation cannot set up a defect in its organi- zation to escape any of the liabilities attaching thereto, see Chap. VII., post. '^ B.&^ A. Ji. R. Co. V. Qiry. 26 N. Y. 75; C/iildsv. Smith, 46 id. 34. •• Laws of 1S5T, chap. 122 46 THE LAW OF CORPORATIONS. of one per cent, upon the amount of its capital stock or upon any subsequent increase thereof ; and no such company is permitted to exercise any corporate powers, nor will the secretary of state or county clerk file such certificate, until such tax is paid.' Where a new company is formed out of an old one, but with increased capital stock, it is subject to a tax on the whole of its capital.^ The Corporate Name. — Several of the acts for the organiza- tion of corporations provide that they shall not have the same name as an existing corporation in this state, or so nearly resembling it as to be calculated to deceive f and the Superintendent of the Insurance Department is required to reject the name of any insurance company which he shall deem to be so nearly similar to any already in use as to lead to confusion or uncertainty on the part of the public." But even in the absence of any statutory provision, no corpora- tion would be allowed to assume a name so closely resem- bling that of another corporation organized within the state as to be likely to deceive;" and an injunction will issue to prevent the use of such a corporate name, or a name nearly approaching it, by an individual.' In corporations organized under the Business Act, where it is desired to limit the liability of the stockholders,' the name of the company must, in every case, have as its last word the word "limited," and such a corporation must keep its full name affixed, in legible characters, outside of its place or places of business, and it must also be stated in every notice, advertisement ^nd other official publications of such ' Laws of i8S6, chapter 143, as ' American Grocer v. Grocer Piib- amended by Lawsof 1887, chap. 284. lishing Co., 25 Hun, 398. '^ People exrG\.Schurzv.Cook,People ^ New York Cab Co. v. Mooney, 15 ex rel. Yl/^r/^Mj, V. id., no N. Y. 443. Abb. N. C. 152; Supreme Ct. Sp. ^ This is substantially the language Term, 1884. of the Business Corporations Act, ' As to the liability of stockhold- Laws of 1875, chap. 611, §4. ers in the different kinds of corpora- •• Laws of 1S77, chap. 211. tions, see Chap. WW., post. ORGANIZATION. 47 company, and in all its bills of exchange, promissory notes, checks, orders for money, bills of lading, invoices, receipts* letters and other writings used in the transaction of the business of the corporation.' Within the foregoing limits, any name may be assumed to designate a corporation organized under the laws of this state.^ Forfeiture for Non-User. — ^It is provided in the Revised Statutes,' that if any corporation shall not organize and com- mence the transaction of its business within one year from the date of its incorporation, its corporate powers shall cease. The true construction of this section would probably refer the business here spoken of to such as it might lawfully do under its act of incorporation, and the failure to do this business, although it might do other business, would sustain an action by the'people for its dissolution." Railroads are expressly excepted from the operation of this section.^ The Choice of Laws under which to Organize. — Generally, in the incorporation of insurance and guarantee companies, banking, safe deposit and trust companies, and railroad and construction companies, no room for choice is offered in the selection of the act under which such a company may organ- ize ; but the incorporation of many companies for other pur- poses than those above mentioned may be effected under different laws. Thus, a company for the purpose of doing any manufacturing business may be incorporated under the Act of 1848,° or under the Business Act of 1875.' and differ- ent considerations will govern in the selection. For instance, the latter act is somewhat more onerous in its requirements for organization than the former, and the liabilities of trus- tees are somewhat greater ;' while, on the other hand, the liability of the stockholder is, in some respects, less." ' Laws of 1875. chap. 611, § 35. ^ Ante, p. 2; app. A, post. *See ante. p. 7. ''Ante. p. S; app. B, post. 3 Part I. chap. XVIII., title 3. ^7. « See Liabilities of Officers and * People V. Troy House Co., j^.^'Ba^xh. Directors, Chap. V., post. 625. 9 See Liabilities of Stockholders, 'Laws of 1846, chap. 155. Chap. VII.. post. 48 THE LAW OF CORPORATIONS. The same maybe said, mutatis mutandis, as to the choice between the Business Act and the various special acts enu- merated in the last article. The Business Act is broad enough in its terms to cover any of the corporations pro- vided for in the other acts, except those containing provi- sions for the appropriation of land ; and with this exception, so far as laws enacted prior to the Business Act' are con- cerned, a corporation may be organized under either. Where, however, a law has been passed for the organization of cor- porations for special purposes, subsequent to such a. general act, it is probable that a company for such special purposes could be incorporated only under the special act.'' ' This act was passed June 2ist, 1875. ^ A special act is not repealed by a general act covering the sameground, unless a clear intention to repeal it is manifest in the act itself. Matter of D. b' H. C. Co., 69 N. Y. 209; Village of Glorersville v. Howell. 70 id. 287 ; Barnes V. Broiuu, So id. 527; McKen- na V . Edintindsto)ie, 91 id. 231. But where a special act is passed subse- quent to a general act covering the same subject, a different rule pre- vails. As was said by Earl, J., in Heck maun v, Pinkney (81 N. Y. 211, 2i5):'Tt is the undoubted rule that re- peals by implication are not favored. Where there is no repealing clause in a later statute, and that and a for- mer one can stand together, and both have effect, they will generally both be held to be in force. But where a later statute, not purporting to amend a former one, covers the whole subject, and was plainly in- tended to furnish the only law upon the subject, the former statute must be held repealed by necessary impli- cation." Following the rule thus laid down, it was held in People ex rel. Eden Mu- see Americain Co. {Lint.) v. Carr (36 Hun. 4S8, aff d on opinion below, 100 N. Y. 641) that the provisions of the act of 1875, prescribing the man- ner in which business corporations might reduce their capital stock, was repealed by implication by the pas- sage of chap. 264 of the Laws of 1878, entitled " An act to authorize corpo- rations organized under the laws of this state to reduce their capital stock ;" and that from and after the passage of the latter act all corpo- rations thereafter organized could only reduce their capital stock by complying with its terms and provi- visions. The effect of this rule would be to prevent the organization of com- panies under the Business Act for such purposes as "searching and guaranteeing titles to real estate," and perhaps "guaranteeing the col- lection of claims " after the passage of special acts for the organization of companies for those purposes. See ante, pp. 18,20; but see reorganization of corporations under the .Business .•\ct. Chap, n., post. POWERS AND PRIVILEGES. 49 CHAPTER II. POWERS AND PRIVILEGES. Art. I. General Powers .vnd Privileges. Art. n. Incidental Powers and Privileges. Art. III. Special Powers and Privileges. Article I. General Forcers and Privileges. The Revised Statutes enumerate the following general powers as belonging to every corporation :' O-eiaeral Powers. — I. Every corporation, as such, has power : 1. To have succession by its corporate name for the period limited in its charter ; and when no period is limited, perpetually. 2. To sue and be sued, complain and defend, in any court of law or equity.' 3. To make and use a common seal, and alter the same at pleasure. 4. To hold, purchase, and convey such real and personal estate as the purposes of the corporation shall require, not exceeding the amount limited in its charter. 5. To appoint such subordinate officers and agents as the business of the corporation shall require, and to allow them a suitable compensation. 6. To make by-laws, not inconsistent with any existino- law, for the management of its property, the regulation of its affairs, and for the transfer of its stock. ' Revised Statutes, part I. chap. - In regard to suits by and against xviii., title 3. . corporations, see Chap. VIII., /cj^. 50 THE LAW OF CORPORATIONS. In what Corporations to Vest. — 2. The powers enumerated in the preceding section shall vest in every corporation that shall hereafter be created, although they may not be speci- fied in its charter or in the act under which it shall be incor- porated. What other Powers to he Possessed. — 3. In addition to the powers enumerated in the first section of this title, and to those expressly given in its charter, or in the act under which it is or shall be incorporated, no corporation shall possess or exercise any corporate powers, except such as shall be necessary to the exercise of the powers so enumerated and given. That corporations have the powers expressly conferred on them by their charters, and such others as are necessarily incidental to the exercise of those powers, is an elementary proposition. The difficulties lie in the apphcation of the rule to particular cases, and in that respect it is one of the difificult problems that is constantly presenting itself to the courts, but which, as coming within the general law of cor- porations, rather than as being affected by statutory pro- visions, does not come within the scope of this work. Corporate Name. — As we have seen," the latitude allowed a corporation in its choice of name is practically unlimited, and it is unnecessary to consider that subject further here. The manner of changing the corporate name will be considered in Art. III. of this chapter. Duration. — When no time is limited as to the duration of a corporation either in its charter or in the act under which it is organized, its duration is perpetual (^^c/r^) ; subject, how- ever, to the provisions that the charter of every corporation organized under the laws of this state is subject to altera- tion, supervision and repeal, in the discretion of the legisla- ture." * Ante, p. 46. ^ Rev. Stat, part i. chap, xviii., title 3, § 8. POWERS AND PRIVILEGES. 5 I Extending Term of ^^i^\.eno^.~Manufacturing Corporations Any company formed under the Manufacturing Act which may have fixed the duration of its existence for less than fifty years, may by vote of the stockholders representing a majority of the stock extend the term of its corporate exist- ence from time to time to a period not longer in the aggre- gate than it could have originally fixed it. A new or amended certificate under its corporate seal must be signed and acknowledged by the president and two thirds of Its directors or trustees, and filed in the office of the clerk of the county where its business is carried on, and m the ofiice of the secretary of state.' S^me.— Business Cor/>oratwns.~Whenever any corpora- tion organized under the Business Act has fixed the dura- tion of Its corporate existence for a less period than fifty years, it may at any time extend the term of its existence for a term which, with the term originally fixed, will not exceed fifty years. The stockholders owning two thirds in amount of the capital stock must sign a certificate either in person or by attorney duly authorized and acknowledged or proved, so as to enable it to be recorded, and such certificate must be filed in the office of the secretary of state and of the clerk of the county in which the principal business office of such corporation is situated.' Same— ^rt;^^^._Any bank organized under the laws of this state may extend the term of existence beyond the time mentioned in the certificate of incorporation, by the consent of the stockholders owning two thirds in amou'nt of the capital stock, by a certificate signed and acknowledged by such stockholders, and filed in the office of the clerk of the county in which the original certificate of incorporation Avas filed, and a copy in the office of the superintendent of the banking department, and upon filing such certificate, its ' ^7^ u^ /^^^' "^^^- '9' § '' ^' ' ^^''' °f ^875, chap. 611. ^ 20. amended by Laws of 1S67, chap. 12. 52 THE LAW OF CORPORATIONS. time of existence will be extended, as designated therein, for a period not exceeding the time for which it was organized in the first instance, and will continue to enjoy all the rights and be subject to all the liabilities as before such extension.' Same. — Turnpike and Plank-Road Coinpanies. — Plank-road and turnpike companies may at any time within five years of the expiration of their corporate existence continue their corporate existence for a period not exceeding thirty years, with the consent of a majority of all the members of the board of supervisors of the county or counties in which any such road is located, together with the consent, in writing, from persons owning two thirds of the capital stock of such company. This does not apply to the counties of Kings, Queens, Yates, Seneca and St. Lawrence.' Extending Term of Existence. — Generally. — It is provided by an act passed May ijtli, 1867,' that any company or cor- poration previously formed under any general law of this state may at any tiine within three years of the expiration of its term of existence extend such term beyond the time mentioned in the original articles of association or certificate of incorporation. A certificate signed by the stockholders owning two thirds in amount of the capital stock of such company must be acknowledged or proved so as to enable it to be recorded ; and filed in the office of the secretary of state and in the office of the clerk of the county in which its original certifi- cate or articles of association, if any, are filed and recorded ; and ^thereupon the time of existence of such company will be extended, as designated in such certificate, for a term not exceeding the term for which it was organized in the first instance. ' Laws of 1SS9, chap. 177. amended by Laws of 1870, chap. 253. '■'Laws of 1876, chapter 135, as ^ Laws of 1S67, chap. 937. POWERS AND PRIVILEGES. 53 The Corporate Seal. — The seal of a corporation may be made by an impression directly on the paper.' If a corporation have no formal seal, it may adopt any seal it deems proper, and the seal so adopted is the seal of the corporation /r^ Jiac vice. Thus the adoption of the seal set opposite the name of one of the ofificers as the corporate seal is sufificient.^ The Right to Hold Real Estate. — A corporation organized under the laws of this state may hold such property either real or personal within the state as may be necessary for the purposes of its business, not exceeding the amount limited in its charter or the act under which it is organized.' The same right is in effect extended to corporations organized under the laws of any other state of the United States by conferring on such corporations the right to hold and convey such real estate within this state as is necessary for the pur- poses of their business.'' Many of the acts contain restrictions as to the amount of real estate that corporations may hold and the purposes for which it can be purchased and held ; and in the purchase of real estate beyond the amount actually necessary for the purpose of the business of such company these acts should be consulted.^ Lands in Other States or Countries. — Any corporation organ- ized under the laws of this state, and transacting business in it and other states or foreign countries, except savings-banks, may acquire, hold and convey in such states or foreign countries, with the consent thereof, such real estate as is requisite for such corporation in the convenient transaction of its business.^ ' Code of Civ. Proc. g 960. s Laws of 1848, chap. 40, § i (App. "' South Baptist Soc.x.Clapp.\Z'Q2.xh. h, post) ; Laws of 1875. chap. 611, 35 ; Christie v. Gage, 2 T. & C. 344. § 2 (App. ^, post) ; and ihe special 2 Rev. Stat., part i. chap, xviii., laws given in Chap. \., ante. ^'^^^ ?• § ^- ^ Laws of 1S72. chap. 146, as 4 Laws of 1887. chap. 450. amended by Laws of 1S83, chap. 54 THE LAW OF CORPORATIONS. Adjacent Lands. — Any corporation which has sold or con- veyed any part of its real estate, may, notwithstanding any restrictions in its charter, purchase, take and hold from time to time any lands adjacent to those already held by it. But it is provided that such purchase must be authorized by the supreme court upon the application of such corporation, and the court must be satisfied that the value of all the lands proposed to be purchased does not exceed that of lands sold and conveyed by it within three years preceding such application.' ■ The Right to Hold Stock of other Companies. — Several of the acts for the organization of corporations contain clauses re- stricting such companies from holding stock in other com- panies.^ Manufacturing Companies. — Corporations organized under the Manufacturing Act are authorized to hold stock in the capital of any corporation engaged in the business of mining, manufacturing or transporting such materials as are re- quired in the prosecution of the business of such company so long as they continue to furnish or transport such mate- terials for the use of such company, and for two years there- after, but no longer. They may also hold stock in the cap- 361. As to the right to hold stock in other corporations conferred by the same act, see post, p. 56. ' Laws of 1SS2, chap. 290. "^ Even when no prohibition is ex- pressly imposed a corporation has no implied right to subscribe for the stock of other companies. Thus it was held in T/w iVassaii Bank v. Jones, 95 N. Y. 115, that a banking corporation, organized under the general laws of this state, has no power to subscribe for the stock of a railroad corporation. It is there said (p. 121) that "the language employed in the act de- fines their [the banks'] powers and duties, and excludes by necessary implication a capacity to carry on any other business than that of banking, and the adoption of any other methods for the prosecution of such business than those speci- fically pointed out by the statute." The same rule would doubtless apply in the case of any cor- poration becoming a subscriber to the stock of other corporations, but a distinction mig'ht possibly be made between a subscription to stock and an investment in stock already is- sued. POWERS AND PRIVILEGES. 55 ital of any corporation which uses or manufactures materials mined or produced by them.' Except as expressly authorized, companies organized under the above act arc not permitted to use any of their funds in the purchase of any stock in any other corpora- tion." Insurance and Guarantee Companies. \\"Ith the exception of life insurance companies, insurance and guarantee com- panies are generally permitted to invest their surplus in the stock of other solvent, dividend-paying companies organized under the laws of this state or of the United States. They are not, however, permitted to purchase their own stock.^ Railroads. — Railroad companies organized under chapter one hundred and forty of Laws of 1850 are prohibited from using any of their funds in the purchase of any stock in their own or any other corporation;* but by subsequent legislation, any railroad corporation organized under the laws of this, or of any adjoining state, is authorized to subscribe for, take and hold the stock of union railway depot companies.* Corporations organized for the purpose of building and operating railroads in foreign countries are prohibited from using their funds in the purchase of any stock in their own or any other corporation, except so far as the same may be agreed upon in their articles of association. ° Pipe-Line Companies — Any Company organized for the purpose of constructing pipe lines, etc, is prohibited from using any of its funds in the purchase of any stock in its ' Laws of 1866, chap. 838, § 3, as of 1853, chap. 466, § 8, as amended amended by Laws of 1876, chap. by Laws of 1871, chap. 60S, ^ i. 35S. Also Laws of 1S53, chap. 463, § 8, ^ Laws of 1S4S, chap. 40, § 8. as amended by Laws of 1868, chap. 'As to what the capital and sur- 31S, § i, as modified by Laws of plus of such companies may be in- 1S65, chap. 328, § 2 ; also Laws of vested in consult the acts under 1S75. chap. 423, § 2, as amended by which the company is organized as Laws of 18S6, chap. 394. given in Chap I., ante; Laws of 1849, •* Laws of 1S50, chap. 140, § 8. chap. 30S, § S, as amended by Laws * Laws of 1SS2, chap. 273, § 2. of 1S57, chap. 469, § I. Also Laws ^ Laws of iSSi, chap. 46S, § 12. 56 THE LAW OF CORPORATIONS. own or any other corporation, or from in any manner be- coming liable for the debt or miscarriage of any person or corporation.' Stock of Foreign Corporations. — The laws heretofore given are modified by a law passed in 1872, and amended in 1883, which provides that any corporation, except a savings- bank, organized under the laws of this state, and transacting business in it and other states or foreign countries, may " in- vest its funds in the stocks, bonds or securities of other corporations owning lands situated in this state or such states, provided that loans shall not be made on any stocks upon which dividends shall not have been declared con- tinuously for three years immediately before such loans are made ; and provided further that such stocks shall be continuously of a market value twenty per cent, greater than the amount loaned or continued thereon."" This act, as originally passed in 1872, authorized any corporation organized under the laws of this state, and transacting business in several states, to hold real estate in such states.' The amendment of 1875 extended it to cor- porations doing business in foreign countries, as well as other states, and authorized them also to hold stock in other corporations, provided such stock was based upon or repre- sented real estate required in its business. The amendment of 1883 extended it still further, as above stated, but ex- cepted savings-banks from its provisions. Originally in- tended to enable corporations to invest in real estate in other states and foreign countries, this act has by successive amendments assumed a much broader scope, but whether as broad as the language of the act, aside from its history, would indicate, cannot in the absence of judicial construc- tion safely be assumed. The Right to Appoint Officers. — Corporations have the right to ' Laws of 187S, chap. 203. § 9. ed by Laws of 1SS3, chap. 361, § I. ' Laws of 1S72, chap. 146, as amend- ^ See aiiti\ p. 53. POWERS AND PRIVILEGES. 57 appoint such subordinate officers and agents as the business of the corporation ma}' require, and to allow them a suitable compensation.' A corporation must necessarily transact its business through officers, and should have at least a president, secretar\- and treasurer. Most of the acts for the organiza- tion of corporations provide for the election of a president from the board of directors or trustees.* The Business Act provides that all the officers of the company prescribed by the by-laws shall be elected from the board of directors, and that there must be a president, secretary and treasurer.^ The act for the incorporation of Title Guarantee Com- panies contains the same provision as to officers, and in ad- dition to the officers above named requires the election of a General Manager.^ By-Laws. — A corporation has the right to make by-laws, not inconsistent with any existing laws, for the management of its property, the regulation of its affairs, and for the transfer of its stock.^ Such by-laws must be reasonable and consistent with the general principles of law, and, while they may regulate and modify the constitution of the corporation, thc}' cannot alter it, and all amendments must be equally in accord with such principles.^ Unless expressly authorized by its charter, or by the act ' See ante, p. 49. ' See the several acts for the incor- poration of the following corpora- tions, as given in Chapter I., ante, which provide that a president shall be elected : Building associations, ferry companies, gas-light compa- nies, guano companies, hotel compa- nies, manufacturing corporations, pipe-line companies, railroad-supply companies, stage-coach companies. 'Laws of 1S75, chap. 611, g 10, as amended by Laws of iSgo, chap. 23- ■» Laws of 1S85, chap. 538, ^ 6. ^ See ante, p. 49. As to the effect of by-laws, and as to who is presum- ed to have notice of them under the decisions in this State, see Chap. VIIL ' Kent V. Qtiicksih'er Mining Co., 78 \. Y. 159 ; Driscoll v. West Brad- ley, etc., M. Co., 59 N. Y. 96. 58 THE LAW OF CORPORATIONS. under which it is organized, a corporation has no power to enact a by-law creating a Hen on its shares.' Who Authorized to Make By-Laws. — The directors or trustees of the following corporations are empowered by the acts under which they are organized to make necessary by-laws." Manufacturing corporations, insurance and guarantee companies, safe deposit companies, trust companies, railroad construction companies, building and apartment-house com- panies, ferry companies, gas light companies, guano compa- nies, hotel companies, and navigation companies. ■ The act for the incorporation of business corporations provides that when one half of the capital has been sub- scribed the subscribers shall adopt by-laws.' But whether adopted by the stockholders or directors they must be adopted at a meeting held within the state.' What the By-Laws Must Provide. — There is generally no pro- vision as to what shall be contained in the by-laws. Under the Business Act, however, the subscribers, when one-half of the capital has been subscribed, must meet and adopt by- laws, which shall provide : 1. The number of directors of the corporation, 2. The term of office of such directors, which shall not exceed one year. 3. The manner of filling vacancies among directors and ofificers. 4. The time and place of the annual meeting. 5. The manner of calling and holding special meetings of the stockholders. 6. The number of stockholders who shall attend either in person or by proxy at every meeting, in order to con- stitute a quorum. 1 Driscoll V. West Bradley, etc., M. Co., 59 N. Y. 96. ■^ See the acts under which they are organized as given in Chap. I., ante. When the directors are not empow- ered by the charter to make by-laws that power remains in the sharehold- ers. Taylor on Corporations, § 582. ^ Laws of 1S75, chap. 6ir, § 5. ■* Ortnsliy v. Fermont Copper Min- iug Co., 56 N. Y. 623. POWERS AND PRIVILEGES. 59 7. The officers of the corporation, the manner of their election by and among the directors, and their powers and duties. But such officers shall always include a president, a secretary and a treasurer. 8. The manner of electing or appointing inspectors of election. 9. The manner of amending the by-laws.* The act for the incorporation of title guarantee compa- nies provides that when one third of the capital has been subscribed, a meeting of the subscribers shall be called for the purpose of electing directors and adopting by-laws, and there is the same provision as to what the by-laws shall contain as in the Business Act, except that in the former the officers must include a general manager as well as a presi- dent, secretary and treasurer.'' By-Laws— How Amended. — No rules for the modification or amendment of by-laws are prescribed by the several acts ; and, since amending a by-law is but substituting a new by- law in place of an old one, it follows that the same body that has power to make by-laws has power to amend them.' The Business Act provides that no amendment to the by-laws of corporations organized under it shall take efYect until a copy of such amended by-law has been filed in the office of the secretary of state, and in the office of the clerk of the county where its principal business office is located. Title guarantee companies, in case of the amendment of any by-law, are required to file a copy of such amended by- law, duly certified under the seal of the corporation, with the superintendent of the insurance department, and with the clerk of the county where its principal place of business is located, and no amendment to a by-law can take effect until so filed.' ' Laws of 1S75, chap. 611, §6. 78 N. Y. 159. ' Laws of 1SS5. chap. 538, §6. * Laws of 1S75, chap. 611, ^ 7. ^A''eta V. Quicksilver Mining Co., = Laws of 1885, chap. 53S, g 7. 6o THE LAW OF CORPORATIONS. Certain By-Laws to be Published. — No by-law, made by the directors or managers of a corporation, regulating the elec- tion of directors or ofificers, is valid unless it shall have been published for at least two weeks in some newspaper in the county at least thirty days before such election.' No by-law of any moneyed corporation " regulating the election of its directors, whether made by the directors or stockholders, is valid unless made at least sixty days be- fore the day appointed for the election, and unless it is pub- lished for at least two weeks in succession, immediately following its enactment, in some newspaper in the city or county where the corporation is situated.^ Any by-law designating the time and place of an election comes within the provisions of these statutes.^ Article II. Incidental Pozvcrs and Privileges. In addition to the powers above enumerated, and to those expressly given in its charter, or in the act underwhich it is incorporated, a corporation possesses no powers, except such as are necessary to the exercise of the powers so given or enumerated.^ This statute is not intended to establish any rule incon- sistant with the presumption that a corporation may, within the reasonable scope of its business, make every contract that a natural person could make.' Unless restrained by law, it may make any contract necessary to advance the ob- jects for which it was created.' It may borrow money ' Revised Statutes, parti ., chap. ^ Matter of Long Island. K. K., 19 xviii., title 4, § 6. Wend. 37. • Moneyed corporations are defin- ^ Revised Statutes, part i., chap. ed as corporations having banking xviii., title 3, § 3 ; ^^w/t', p. 50. powers or having the power to make ^ Fe'eny v. Peopys Fire Jns. Co., loans upon pledges or deposits, or N. Y. Super. (2 Robt.) 599. authorized by law to make insur- '' Legrand v. Manhattan Mei-cantiie ances. Assn., 80 N. Y. 63S. 2 Laws, 1SS2, chap. 409, § 207, POWERS AND PRIVILEGES. 6l necessary for its business' and, unless expressly prohibited, may mortgage its property to secure the same ; but, in the absence of some statute allowing it, it cannot mortgage its franchises.* Even where the statute did expressly prohibit corpora- tions organized under it from mortgaging or creating any lien upon their property, it was held that a purchase-mone}' mortgage given by such a corporation (one organized under the Manufacturing Act before it was amended) ' was a valid lien upon the property until the purchase price was paid, as against any one but bona fide purchasers.* As pertaining to the incidental powers of corporations, organized under the laws of this state, it has been held that a company, organized for the purpose of raising and smelt- ing ore, had the power to purchase smelting works and all the appurtenances, and that even though the property in- cluded some foreign to the purposes required for the busi- ness, yet if made in good faith the purchase would not be void.' SPECIAL PROVISIONS REGULATING MORTGAGES. Manufacturing Corporations. — Corporations organized under the manufacturing acts as originally passed, were prohibited from mortgaging or creating a lien upon any of their prop- erty," but in 1864 an act was passed enabling corporations organized under that act, or any acts amending or extending the same, to mortgage their real estate, providing that the written assent of the stockholders owning at least two thirds of the capital stock should first be filed in the office of the clerk of the county where the mortgaged property was ' Ciirtiss V. Leavitt, 15 N. Y. 9; ^ Laws of 1348, chap. 40, § 2. Kent V. Quicksilver Mining Co., 7S * Coman v. Lakey, 80 N. Y. 345. N. Y. 159. ' Moss V. Averell, 10 N. Y. 449. '^Carpenter v. Black Hawk Gold « Laws of 1848, chap. 40, § 2. Mining Co., 65 N. Y. 143. 62 THE LAW OF CORPORATIONS. situated/ This power was extended in 1871 to personal, as well as real estate/ In 1878 an act was passed to enable any such corpora- tions to secure a debt "by mortgaging all or any part of the goods and chattels of such corporation, and also the fran- chises, privileges, rights and liberties thereof." But in order to do this the written assent of a majority of the stock- holders owning at least two-thirds of the capital stock must be filed in the office of the clerk of the county where the corporation has its principal place of business, and also in the office of the clerk of the county where such goods and •chattels are situated.' This amendment was not intended to supersede the amendments of 1864 and 1871 and does not take away the previously existing power of the owners of two thirds of the stock to authorize the mortgaging of the real and personal property of the corporation, but only gives power to add to a chattel mortgage a mortgage upon the corporate franchises; but such franchises, privileges, rights and liberties must be speciallymentioned in the assent signed by the stockholders, or the mortgage will be inoperative as to them while still a lien upon the property." These amendments effectually relieve such corporations from the restriction upon their corporate capacity to give any lien upon their property, by mortgage or otherwise, im- posed by the second section of the original act. As is said by Rapallo, J., in the case of Lord v. Yonkers Fuel Gas Co. {supra): " It is evident that such restriction is intended only to limit the general powers of trustees of such corporations, and subject them to the control of the stockholders in the matter of giving mortgages or liens, and was not founded on any supposed policy of withholding from that particular class of corporations, the full control of their property, and 1 Laws of 1864, chap. 517, § 2. " Lordw. Yonkers Fuel Gas Co., 99 2 Laws of 1871. chap. 481. § i. N. Y. 547- -3 Laws of 1S7S, chap. 163. § i. POWERS AND PRIVILEGES. 63 the corporate power of disposing of or incumbering it which is possessed by corporations in general. With the prescribed consent of the stockholders, they are declared to be as com- etent as natural persons to secure the payment of their legitimate debts by mortgage upon their real or personal property." It will be noticed that, with the exception of the power to mortgage real property, which should be named, a com- pliance with the last amendment is broad enough to cover both. Business Corporations. — Corporations organized under the Business Act are authorized to borrow money for the leo-jti- mate purposes of their business, and for that purpose to issue bonds with or without coupons attached, or to mort- gage any portion of their real estate. Such bonds or mortgages cannot bear interest at a rate exceeding six per cent., and the amount outstanding must at no time exceed one half of the value of the corporate property. The written assent of stockholders, owning more than two thirds of the stock, must first be obtained. Any issue in excess of the amount above specified renders anv director voting for the same personally liable to the holders of such bonds or mort- gages for any damages caused by such over-issue.' There is no provision for a mortgage of the franchises of such corporations, and, as we have seen,^ without such a provision none can be made. No bonds can be issued by such a company, except for money, labor done or property actually received for the use and legitimate purpose of such corporation at its fair value, and all fictitious increase of indebtedness, in any form, is void." Building Companies. — Any company organized under chapter one hundred and seventeen of Laws of 1853, or its amend- ' Laws of 1875, chap. 611. g 13, as « Auh-, p. 61. amended by Laws of 1S8S, chap. ^ Laws of 1S75, chap. 611, § 14, 394. 64 THE LAW OF CORPORATIONS. ments/ may secure the payment of any debt contracted in the purchase of property for the business for which it was incorporated or to develop property already purchased, by mortgaging, and issuing mortgage-bonds on any part of its real estate, goods and chattels, and on its franchises, privi- leges, rights and liberties, provided that the written assent of a majority of its stockholders, owning at least two-thirds of its capital stock, be first filed in the office of the clerk of the county where the corporation has its principal place of business, and also in the office of the clerk of the county wliere such real estate, goods and chattels are situated." Gas-Light Companies. — These companies may borrow money necessary for their business, to an amount not exceeding one- half of their capital stock, and may issue bonds for any amount so borrowed, and mortgage the corporate property and franchises to secure the payment of any debt so con- tracted.^ Railroads. — Railroad companies are authorized to borrow^ money for completing or operating their road, and to issue bonds for any amount so borrowed, and to mortgage their corporate property and franchises to secure the payment of any debt contracted for such a purpose.' Such a mortgage upon real and personal property need not be filed as a chattel mortgage, if recorded as a mortgage of real estate in each county in or through which the railroad runs.' The rolling-stock of a railroad is not real estate, and un- less this requirement is complied with a mortgage upon rolling-stock must be filed as an ordinary chattel mortgage.^ Stage-Coach Companies — Companies organized under chap- ter nine hundred and seventy-four of the laws of i867for the 1 See ante, p. 36. subdv. 10. as amended by Laws of 2 Laws of 1880, chap. 182, as 1SS7. chap. 724. amended by Laws of iSSg. chap. 57. ^ Laws of 186S, chap. 779. 3 Laws of 184S, chap. 37. § 2, as « Hoyle v. Plattshurgh ^ Montreal amended by Laws of 1S72, chap. 374- R- R- Co., 54 N. Y. 314. 4 Laws of 1S50, chap. 140, § 28, POWERS AND PRIVILEGES. 6$ purpose of establishing and operating stage or omnibus routes may borrow money for the purpose of equipping and operating their hues, and may issue bonds for any amount so borrowed, and may mortgage their corporate property and franchises to secure the same. To Secure Future Advances. — After some V'acillation in the State courts, it has been finally decided in the Supreme Court of the United States, that a mortgage to secure future advances is valid unless prohibited by statute;' and it seems now to be well settled in this state that a corporation may secure the payment of its negotiable bonds, to be thereafter issued, even though the debts authorized to be secured were not in existence at the time of the execution of the bonds and mortgage. If the bonds are negotiated only for the purpose of securing or paying debts contracted before the negotiation, the secur- ity to the creditors then for the first time comes into being and is as effectual as if the mortgage were executed at the same time with the delivery of the bonds.^ Renewals of notes are protected by a mortgage executed as a collateral and continuing security for the payment which then had been or should thereafter be made." A mortgage may cover the future as well as present estate of a company ; ° and it may be given to trustees to secure bonds issued.^ The Assent of the Stockholders. — Where the statute requires ' Laws of 1S67, chap. 974, ^ 13, cannot be made to raise money subdv. 4. merely to carry on the operations of '■Jones V. A'. Y. Guaranty iSr" In- the company;" but this expression denniHy Co., toi U. S. 622. was not concurred in by the other "^ Lord V. Yonkcrs Fuel Gas C(?.,g9 members of the commission, and is N. Y. 547 ; Martin v. iViagara Falls overruled by the cases above cited. Paper Mfg. Co.. 44 Hun, 130; Jones ^Martin v. A'iagara Falls Paper V. iV. V. Guaranty ^ Indemnity Co., Mfg. Co., 44 Hun, 130. loi U. S. 622. In Carpenter V . Black * Fisk v. Potter, 2 Abb. Ct. App. Haivk Gold Mining Co. (65 N. Y. 43), Dec. 138. Carpenter v. filack Hawk it is said {obiter) that "a mortgage Gold Mining Co., 65 N. Y. 43. upon real estate is allowed only to * See cases cited in note 3 (.?///>/-«). secure ihe payment of debts. It 66 THE LAW OF CORPORATIONS. that the assent of the stockholders be obtained before a mortgage is executed, such assent is an indispensable con- dition to a valid mortgage.' The assent of the corporation itself is not a compliance with the statute. It must be the individual act of the stockholders.^ Whether, in the very common case of stock remaining in the treasury of the company after it is issued, it is neces- sary to have the assent of stockholders owning two-thirds of the whole amount issued has not been decided — the ques- tion, in the case of Vail v. Hamilton {stipra), having been raised, but, as not necessary to the decision of the case, not having been passed upon. Where the assent of two-thirds of the whole can be obtained, it is perhaps safer to obtain it, but in the case of the Grccnpoint Sugar Company v. Whitin, ^ it was held that stock not issued could be de- ducted in estimating the amount necessary to constitute two- thirds, as otherwise it might happen that there would not be a sufficient ownership of stock to enable the company to execute a mortgage at all, and the same reasoning would apply in the case of the ownership of stock by the company. In the same case it is said that the purpose and intent of the requirement is to protect stockholders from improvident or corrupt acts of the of^cers, and that its general purpose and design was in the interests of the stockholders only. It was accordingly held that an assent to the issue of a bond secured by mortgage, not specifying any amount, nor describing the property covered by the mortgage, and filed with the mortgage, was sufficient. Where a mortgage has been executed without the required assent of the stock- holders, it is validated by a subsequent assent if there are no intervening rights, and from that time it becomes a valid mortgage.* 1 Vail V, Hamilton, 85 N. Y. 453; ^ 6q N. Y. 328. Rochester Sa-'ings Bank v. Averell, '^ Rochester Savings Bank\. Averell, 96 id. 467. 96 N. Y. 467. '■' Vail V. Hamilton (supra). POWERS AND PRIVILEGES. (i'J Filing Assent where Real Estate is out of the State. — Where a corporation makes a mortgage of any of its real estate situ- ated beyond the limits of this state, and the recording office of the county in which it is situated refuses to file or record the assent, it may be filed in the office of the clerk of the county where the company has its principal place of busi- ness within the state.' Failure to file Assent. — By a law passed April I, 1875,' it was provided that in cases where a corporation had before that time executed a mortgage of any of its real estate, and the requisite assent of the stockholders had been given at or before the time of the giving of the mortgage, but had not been filed in the office of the clerk of the county where the real estate was situated, the consent, accompanied by an affidavit of an officer or stockholder that it was made and signed at the time it purported to have been made, might be filed, and the mortgage would then have the same validity and effect, from the time of filing such assent, as if it had been filed with, or had preceded the filing of the mortgage, except that no intervening rights either by action, lien or otherwise, should be affected by such a morteaee. This statute is construed as in entire conformity with the more general principle that where a mortgage has been executed without the requisite assent, the defect is cured by a subse- quent assent if there are no intervening rights, and from the time of such assent it becomes a valid mortgage.' The filing of the assent is not an indispensable condition to the validity of the mortgage as against a subsequent mortgagee or purchaser with notice, and if essential to com-, plete the rights of the mortgagee, it may be filed as of the time the assent was siven.^ &' ' Laws of 1869, chap. 706. 3 Rochester Savings Bankv.Averell, - Laws of 1875, chap. 88. 96 N. Y., 467. * Ibid. 68 THE LAW OF CORPORATIONS. • Article III. Special Poivers and Privileges. In addition to the general powers enumerated in the first article of this chapter, and the incidental powers re- ferred to in Article IL, there are certain special powers conferred by statute upon corporations which are not among those enumerated, nor are they such as incidentally flow from the powers granted to all corporations. CONSOLIDATION OF CORPORATIONS. Manufacturing Corporations. — Corporations organized under any general or special law for the purpose of carrying on any kind of manufacturing business of the same or similar nature, may be consolidated into a single corporation. The directors of companies desiring to consolidate must enter into an agreement under their respective corporate seals for the consolidation of such companies, prescribing the terms and conditions of consolidation, the mode of carrying it into effect, the name of the new corporation, the number of trustees (not less than three nor more than thir- teen), the names of the trustees who shall manage the con- cerns of the company for the first year and until others shall be elected in their places, the term of existence of such new company (not exceeding fifty years), the name of the town or towns, county or counties in \<'hich the operations of the new company are to be carried on, and if any of the consolidated companies were organized for the purpose of carrying on any part of their business in any place out of this state, and the new company proposes to do the same, the ao-reement must so state, and must also state the name of the town or city and county in which the principal part POWERS AND PRIVILEGES. 69 of the business of the new company within the state is to be transacted, the amount of capital, the number of shares of stock into which the same is to be divided, and the manner of distributing such capital among the consohdated corpora- tions or their stockholders, and such other particulars as may be necessary. The capital cannot be larger in amount than the fair aggregate value of the property, franchises and rights of the several consohdated corporations, but it maybe increased in the same manner as that of manufacturing corporations.' The agreement so made must be submitted to the stock- holders of the respective corporations at meetings specially called for that purpose, upon notice specifying the time and place of such meeting and its object, addressed and mailed to each of the stockholders where their address is known, at least thirty days before such meeting, and published for at least three successive weeks in a newspaper published in each of the counties of this state in which any of the cor- porations to be consolidated has its place of business. At such meetings each share of capital stock present either in person or by proxy is entitled to one vote, and when sanctioned by two-thirds in amount of the stock so represented, in a vote taken by ballot at each of the meet- ings, the agreement of the directors is deemed to be the agreement of the several corporations, and a verified copy of the proceedings of such meetings made by the respective secretaries, and attached to the agreement, is evidence of such action. If at such meetings, or within twenty days thereafter, any stockholder of any such corporations object to such con- solidation, and demand payment for his stock, if such con- solidation take effect, he, or the new company may apply at any time within sixty days after such meeting of the stock- ' Laws of 1884, chap. 367, § i. For 1S67, chap. 960. As to how the cap- ail act nearly identical, but applying ital stock may be increased, see: Chap, only to corporations organized under 111., fosi. chap. 40 of Laws of 1S48, see Laws of 70 THE LAW OF CORPORATIONS. holders to the supreme court, at any special term held in any county in which the new corporation may have its place of business, upon eight days' notice, for the appointment of three appraisers to appraise the value of the stock. The court will thereupon appoint three such appraisers and designate the time and place of the first meeting, and will give such directions in regard to the proceedings on such appraisement as may be deemed proper, and will also direct the manner in which payment for such stock shall be made. The court may fill any vacancy in the board occur- ring through refusal or neglect to serve or otherwise. At the time and place designated the appraisers, or any two of them, after being duly sworn honestly and faithfully to discharge their duties, must estimate and certify the value of such stock at the time of such dissent and deliver one copy of such appraisal to such new company, and one copy to the stockholders if demanded. The expenses of the appraisal are to be paid by the company. When the corporation has paid the stockholder the value of his stock so appraised as directed by the court, all interest of such stockholder in the stock and in the property of such corporation ceases, and such stock may be held or disposed of by the new corporation.' Duplicate copies of the agreement, which, it will be noticed is similar in its terms to the certificate required under the Manufacturing Act, and of the proceedings at the stockholders' meetings verified as required above, must be filed in the ofifice of the clerk of the county in this state where the operations of the corporation are to be carried on and in the office of the Secretary of State, and from the time of such filing, the corporations agreed to be consol- idated shall be merged in the new corporations,'' and shall ^ Laws of 1SS4, chap. 367, ^ 2. time of the dissent. Trask y. Peeks- Such, stockholder is entitled to interest kill Plow IVorks, 6 Hun, 236. on the award from the time of filing - Laws of 1SS4, chap. 367, § 3. he report only, and not from the POWERS AND PRIVILEGES. /I possess the general powers of corporations and be entitled to enjoy the rights, franchises and privileges of each of the companies from which it has been formed, subject, however, to the liabilies, restrictions, duties and provisions contained in the Manufacturing Act, so far as the same may be appli- cable to such corporations.' Upon the consolidation of such corporations all the powers, privileges, rights and franchises of both vest in the new, and all property mentioned in the agreement is deemed transferred without any other deed or transfer,' and such new company may carry on the business of an}- of the com- panies so consolidated.^ It is provided that the rights of creditors shall not in any way be impaired by such consolida- tion, and any suit pending against any of the consolidated companies, or its stockholders, shall not be discontinued, but may be prosecuted to completion, or the new company may be substituted in the place of the old.^ Consolidation of Insurance Companies. — The directors of any two companies organized under chapter four hundred and sixty-six of laws of 1853, or its amendments,* may enter into and make an agreement under their respective corporate seals for the merger of one of the companies into the other, prescribing the terms and conditions thereof, the mode of carrying the same into effect, the amount of capital (which cannot be larger than the aggregate capital of the two), the number of shares into which it is to be divided, with such other particulars as may be deemed necessary, not incon- sistent with the provisions of the act under which they are organized. This agreement must be submitted to the Super- intendent of the Insurance Department for his approval." It is provided that such an agreement, after the approval of the Superintendent of the Insurance Department, shall ' Laws of 1884, chap. 367, §4. * This now includes only fire and ^ Id. § 5. inland-navigation insurance com- ' Id. i^ 7. panics. 4 Id. § 6. « Laws of 1878, chap. gS, § i. 72 THE LAW OF CORPORATIONS. become the agreement of the companies only after it has obtained the assent of a majority of the whole number of directors of each company, and the assent of one-half of the stockholders owning two-thirds of the stock of each, which assent in writing, attached to the agreement, is evidence of the assent of the stockholders.' Upon filing such agreements or duplicates thereof, with the assent of the stockholders and approval of the Superin- tendent of the Insurance Department, in the office of the clerk of the county where the principal place of business of sach company is located and in the office of the Superin- tendent of the Insurance Department, the corporations are merged and the details may be carried into effect, and the new corporation may require the return of the original cer- tificates issued to the stockholders of the old corporations and issue new certificates for such number of shares of its own stock as such stockholders are entitled to receive.* Similar provisions as to corporate property and franchises and as to the ritrhts of creditors are made as in the act for the consolidation of manufacturing corporations.' ConsoUdation of Banks. — Any two or more banking associa- tions organized under the general banking laws of this State, and located in the same city, village, or town may consoli- date into a single association to be located in the same place.'' An agreement under their respective corporate seals must be made by the directors of the banks to be consoli- dated which shall prescribe the terms and conditions of the consolidation, the mode of carrying it into effect, the name and duration of the new association, the number of directors and the names of those who shall constitute the first board, the time and place of holding the first election of directors the manner of converting the shares of each into the new association, with such other details as may be deemed expe- 1 Laws of 1878, chap. gS, § 2. 3 id. pg 4 and 5- See an^e,p. -Ji. 2 Id. §3, •• Laws of 18S2, chap. 409, § 48. POWERS AND I'RIVILEGES. 73 dient not inconsistent with the Banking Act. Notice of the intention to consoHdate must be served personally or by mail upon each stockholder of each association at least ten days before entering into the agreement.' The written consent of stockholders owning at least two- thirds in amount of the capital stock of each association is requisite to the validity of the agreement. Upon the presentation of the agreement duly proved or acknowledged, together with proof of the requisite consent of the stockholders, and proof of the service of notice upon- each stockholder, to the Superintendent of the Banking Department, he will cause an examination of the books, property, effects and liabilities of such association to be made, and from the results of such examination determine the value, in his judgment, of such property and efTects, above and beyond the debts and liabilities, and certify the same in writing, and the amount so determined will be the capital stock of the consolidated association ; ' and such certificate must be filed in the ofificc of the clerk of the county where the association is located, and a certified copy in the Banking Department of the State,' Recording the agreement and certificate perfects the consolidation, and the separate existence of the constituent associations ceases, and the new association becomes vested with all the property and effects and becomes subject to all the obligations and liabilities of the old.^ Similar provisions exist as to pending suits and out- standing liabilities as in the act for the consolidation of manufacturing corporations.' Within twenty days after filing and recording the certifi- cates in the county clerk's office any stockholder of any of the consolidated associations who has not signed the assent to the consolidation may object, in writing, to such consoli- ' Laws of 1SS2, chap. 409, § 49. •* Id. i? 53. 'Id- §50. =Id. §§54, 55. Md. §51. 74 THE LAW OF CORPORATIONS. dation and demand payment for his stock, and within three months of fiHng such dissent the association must pay to him the value of his stock as determined in the certificate of the Superintendent of the Banking Department ; and upon such payment his interest in the property and effects of such association shall cease, and the stock so purchased may be held and disposed of by the association for its own benefit.' Consolidation of Railroads. — Any railroad company organ- ized under the laws of this state, or of this state and any other state, and operating a railroad or bridge either wholly within, or partly w^ithin and partly without this state, may be consolidated with any other railroad, similarly organized, or with a road organized under the laws of any other state, whenever such railroad or branch, or any part of the same, form or may form a continuous line by means of any inter- vening railroad, bridge or ferry.^ The directors of such companies may enter into an agree- ment under their corporate seals for the consolidation of the companies, prescribing therein the terms and conditions of such consolidation, the mode of carrying the same into ef- fect, the name of the new corporation, the number and names of the directors and other ofificers, and who shall be the first directors and ofificers, and their places of residence, the number of shares of capital stock, the amount or par value of each share and the manner of converting the old stock into the new, and how and when directors and ofificers shall be chosen, with such other details as they may deem necessary to perfect the consolidation. The capital stock of such new company may not exceed the par value of the capital stock of the companies consoli- 1 Laws of 18S2, chap. 409, § 56. i?>. Co.. 12 Abb. N. C. 230. For an "^ Laws of 1869, chap. 917, § i, as act making this particularly applica- amendedby Laws of 1S81, chap. 6S5. ble to railroads organized under the As to what will constitute a " con- Laws of Pennsylvania, see Laws of tinuous line" within the meaning of 1S75, chap. 256. the statute see People v. Boston, etc.. POWERS AND PRIVILEGES. 75 dated ; nor may any bonds or other evidences of debt be issued as a consideration for, or in connection with, such consoHdation. Such agreement must be submitted to the stockholders of each of the companies at meetings called separately for the purpose of considering it, of which notice must be given by written or printed notices, stating the objects of such meeting, and delivered to such stockholders personally, or sent by mail when their post-office address is known, at least thirty days before the time of holding such meeting, and also by a general notice published daily, for at least four weeks, in the city, town or county where such company has its principal office or place of business. At such meeting the voting must be by ballot, each share being entitled to one vote, and if two thirds of all the votes of all the stockholders are for the adoption of the agreement, that fact must be certified thereon by the secretaries of the respective companies,' under the corporate seal, and the agreement so adopted, or a certified copy, must be filed with the secretary of state, and from thence must be deemed and taken to be the agreement and act of consolidation of such companies ; ' and from the time of such filing the con- solidation is perfected and the corporations that are parties to such agreement constitute one corporation by the name provided in such agreement.' Upon the consummation of the act of consolidation all the rights, privileges, franchises, and property of the old corporations, including stock subscriptions and choses in ac- tion, vest in the new and it becomes entitled to the same without further act or deed.' Similar provisions exist as to pending suits, the rights of creditors, etc., as in the act for the consolidation of manufac- turing corporations.^ ' Laws of i86g, chap. 917, § 2, as •■ Id. ^ 4, amended by Laws of iSSo, chap. 94. •• Id. g 5, an^e, 71. ' Id. § 3. 76 THE LAW OF CORPORATIONS. Consolidation of Telegraph Companies. — Any telegraph com- pany organized under the laws of this state may lease, sell, or convey all, or any part of, or interest in, its property, rights, privileges or franchises to any other telegraph com- pany, organized under the laws of this or any other state ; and it may likewise acquire by law, purchase or conveyance such interest in the property, rights, privileges or franchises of another company ; and it may make payments therefor in its own stock, money or property, or may receive stock, money or property of such other company in payment for its own. No such purchase, sale, lease or conveyance will be valid until it has been ratified and approved by a three-fifths vote of its board of directors, and also by a consent thereto in writing, or by a vote at a general meeting duly called for that purpose of three fifths in interest of the stockholders in such company present, or represented by proxy at such meeting.' Rights of Creditors on Consolidation. — Most of the acts that have been considered contain provisions that the rights of creditors shall not be impaired by consolidation, and that the new company shall assume the obligations of the old. This provision, however, does not constitute the new company the successor of all its components. So far as a creditor of one of the original companies is concerned, the consolidated company is the successor of such old company ; but in respect to the property of the other companies, it is a new and independent company, and such creditor has no claim against it upon their original contract, but only by virtue of its assumption of the obligations of the old com- panies.^ ' Laws of 1870, chap. 56S. without making the new company '' So held in a case where an action a party. Pronty v. L. S. cr= M. S. R. was begun against one of two com- Co. 52 N. Y. 363. See also Board- panics before consolidation and judg- man v. Id. 84 N. Y. 157. Chase v. ment entered against such company Vanderbilt, 62 N. Y. 307. after the consolidation was perfected POWERS AND PRIVILEGES. 7/ The consolidation of two or more corporations is not a surrender of their personal identity and corporate existence to the extent of preventing their officers doing all necessary- acts to vest the new company with the property of the old/ II. REORGANIZATION. We have seen heretofore " the provisions made for the extension of the time of existence limited in the charter of corporations. In addition to these there are several provisions for the reorganization of corporations, either after foreclosure, or in cases where it becomes desirable to reorganize under the Business Act. The latter act provides for two distinct classes of corpor- ations known respectively as : 1. Full liability companies. 2. Limited liability companies.' In " full liability companies " all the stockholders are sever- ally individually liable to the creditors of the company for all the debts and liabilities of the company.^ Such compan- ies may reorganize as " Limited liability companies " as fol- lows : Reorganization as " Limited Liability Companies." — Any corpor- ation organized and doing business as a " Full liability com- pany " under the Business Act, whose debts, liabilities, or other obligations are not greater than the amount of its cap- ital stock actually paid in and unimpaired, may reorganize as a " Limited liability company," with all the rights, privi- leges and duties, and subject to all the regulations and lia- ' Thus, where to satisfy the United tion and in execution of the terms States Patent Law, which requires agreed upon, it was held by the every assignment of a patent to be United States Circuit Court that such in writing, a conveyance, executed conveyance was valid. Edison Elec- by the officers of one of two com pan- trie Light Co. y. New Haven Electric ies consolidated under the general Co., 21 Abb. N. C. 119. laws of this state, was made after the ^ Ante, p. 52. consolidation, in pursuance of the ^ Laws of 1875, chap. 611, § 33. authority conferred before consolida- ''Id. §34. 78 THE LAW OF CORPORATIONS bilities pertaining to the same, together with the privilege and right of retaining and continuing the corporate name with the word " limited " as its last word.' The directors must publish a notice signed by at least a majority of them in a newspaper published in the county in which the principal business office of the company is located, once a week for three successive weeks, calling a meeting of the stockholders, and mail a copy of the same to each stock- holder at his last known place of residence, at least two weeks previous to the day fixed for holding such meeting. The notice must specify the object of the meeting and the time and place when and where the meeting will be held. At the time and place specified in the notice the stock- holders must organize by choosing one of the directors chairman of the meeting and a suitable person as secretary, and proceed to a vote of those present, either in person or by proxy, and if votes representing a majority of all of the stock of the company shall be in favor of the change, the chairman and secretary with two other directors must make a certificate of the proceedings, showing a compliance with the act, duly acknowledged and stating: 1. The name of the corporation. 2. The original object for which it was formed. 3. The amount and description of the capital stock, and into how many shares the same is divided. 4. The location of the principal business office. 5. The duration of the corporation (not exceeding fifty years). 6. The names of the directors for the ensuing year. This certificate, with a copy of the by-laws, must be filed in the office of the secretary of state and of the clerk of the county in which the principal business office of the com- pany is located, and from the time of such filing such cor- poration becomes a " Limited liability" corporation, as if ' Laws of 18S5, chap. 535, §§ i, 2. POWERS AND PRIVILEGES. 79 originally organized as such, and may have and exercise all the rights and franchises it previously had and exercised, and no stockholder or officer will thereafter be subject to any greater liability than if such corporation had been originally organized as a limited liability company," If at the time of such reorganization the capital of such company has not been paid in full, it is provided that the time for payment shall begin to run from the time of such reorganization, and the time and manner of payment shall be the same as if such company were then originally organ- ized as a " Limited liability" company.' Reorganization under the Business Act. — It is provided in the Business Act,^ that any corporation organized under the general laws of this state, except such corporations as are particularly excepted by the first section of the act from organizing under it,* may come under and avail itself of the privileges of the act. The procedure is similar to that of the reorganization of " Full liability companies" as " Limited liability companies" {supra). The directors must publish a notice of the stockholders' meeting, signed by at least a majority of them, in a news- paper published in the county where the principal business office of the company is located for at least three successive weeks, and deposit a written or printed copy thereof in the ' Laws of 1885, chap. 535, § 2. Md.,§3. ■^ Laws of 1S75, chap. 611, ^ 32, as amended by Laws of 1885, chap. 540. •* The only companies expressly excepted from the right to organize under the provisions of this act are companies organized for the purpose of carrying on the business of bank- ing, insurance, the construction and operation of railroads, or aiding in the construction thereof, and the business of savings-banks, trust companies, or corporations intended to derive profit from the loan or use of money, or safe-deposit companies, including the renting of safes in burglar- and fire-proof vaults. Id. § I. In People ex rel. Clansoti v. N'eivhurg, etc.. Plank-road Co., 86 N. Y. I, it was held that a plank- road company could reorganize un- der this act ; it would seem, there- fore, that the words of the statute would not be limited by judicial con- struction. 8o THE LAW OF CORPORATIONS. post-office, postage prepaid, addressed to each stockholder at his last known place of residence at least three weeks before the day for holding the meeting. The notice must specify the object of the meeting and the time and place when and where it is to be held. At the time and place specified in the notice, the stock- holders must organize by choosing one of the directors chairman and a suitable person for secretary, and proceed to a vote of those present, either in person or by proxy, and if votes representing a majority of all the stock of the com- pany are given in favor of reorganization, the officers must make a certificate of the proceedings, showing a compliance with the act, duly acknowledged, in which shall be stated: 1. The name of the corporation. 2. The object for which it is formed, including the nature and locality of its business. 3. The amount and description of the capital stock. 4. The number of shares of which such capital stock consists. 5. The location of the principal business office. 6. The duration of the corporation (not exceeding fifty years). 7. The names of the directors for the ensuing year. This certificate, with a copy of the by-laws, must be filed in the office of the secretary of state, who will thereupon issue to the directors named therein a certificate setting forth that such corporation is fully reorganized in accordance with the act. This will include a copy of the certificate of the proceedings (not including the by-laws), the date and place of the stockholders' meeting, the names of the direc- tors elected, and a statement that all the provisions of the act have been duly observed in the reorganization. Within ten days from the issuing of such certificate by the secretary of state it must be filed in the office of the clerk of the county in which the principal business office of such corporation is situated. From the time of such filing 1 POWERS AND PRIVILEGES. 8 1 the corporation will be deemed to be a corporation organ- ized under the Business Act, and if original)}' organized under any general law of this state it may continue to have and exercise all the rights and franchises it had and exer-" cised under the laws pursuant to which it was originally incorporated. It is provided that the existing liabilities of a corporation shall in no way be affected, changed or diminished by such reorganization. The fees for filing, etc., are the same as for the original organization under the act. Reorganization after Foreclosure.' — Whenever the franchises, privileges, easements, rights and liberties of any corporation created by any act of the legislature of this state, or organ- ized under any general law of the state and empowered by such act to mortgage its property or franchises, have been or may be sold by virtue of any mortgage executed by such corporation, and the purchaser or purchasers have acquired title to the same in the manner prescribed by law, such purchaser or purchasers may associate with themselves any number of persons, and upon making and filing articles of association as prescribed, they and their associates and their successors and assigns, " being residents of this state," may become a body corporate, and may take and receive a con- veyance, and shall thereupon succeed to possess, exercise and enjoy all the rights, powers, franchises, privileges, ease- ments, liberty, property, estate and effects of which the title shall have been so acquired and conveyed." If such corporation was organized under any general laws of the state the certificate must set forth the particulars ' Upon foreclosure of a mortgage bonds and share in the distribution given to secure its bonds, a holder accordingly up to the amount of his ot bonds pledged as collateral is not debt. Dunconih v. A'. F. , Hoiisatonic, limited to proof of an amount simply ^ Noi-th. R. R. Co.. 84 N. Y. 190. equal to the amount ot his debt, but * Laws of 1S73, chap. 469, § i. may prove the whole amount of his 82 THE LAW OF CORPORATIONS. required by the act to be set forth in the original certificate of incorporation.' If it was created by any special act the certificate must set forth the following particulars, namely: 1. The name of the corporation so to be formed. 2. The amount of capital stock (which cannot exceed the amount of capital stock of the former corporation authorized by law at the time of the sale) and the number of shares of which the stock shall consist. 3. The title and time of passage of the original act creating the former corporation, and any other act or acts relating thereto. 4. The number of directors who shall manage the con- cerns of the company, and the names of the first board of directors, who shall hold their ofifices for one year and until others are chosen in their places.^ The certificate must be executed in duplicate and prop- erly acknowledged, and one of the duphcates must be filed in the ofifice of the secretary of state and the other in the of^ce of the clerk of the county in which the former corpora- tion had its principal place of business. Thereupon the corporation so formed shall exist for the time, and may and shall possess, exercise and enjoy all the powers, privileges, rights, liberties, easements and franchises possessed by the former corporation, and in the same man- ner and to the same extent, and with the same force and effect as they could have been exercised by the former cor- poration if such sale had not been made. Whenever by the decree of the court having jurisdiction of the foreclosure proceedings it has been adjudged and determined what powers, privileges, rights, liberties, ease- ments and franchises were possessed and enjoyed by such former corporation at the time of entering such decree, and were therein ordered to be sold, the same shall be possessed and enjoyed by the new corporation to which they have 1 Laws of 1S73, chap. 469, § 2. ^ Id. § 3. POWERS AND PRIVILEGES. 83 been conveyed by virtue of the decree of foreclosure. But no omission in such decree to set fortli or define any of the rights, privileges or franchises of such former corporation shall in any way impair the rights of such purchasers, or of such new corporation, to possess and enjoy all that was possessed by the former corporation at the time of such sale.' The tax of one eighth of one per cent, on the capital stock must be paid on such reorganization, the same as for the original organization of a corporation.'' Same. Railroads. — Special provisions are made for the reorganization of railroads after foreclosure. In case a railroad and property connected therewith, and the rights, privileges and franchises of any corporation (except a street-railroad company created under the general railroad law of this state, or existing under any special or general act of the legislature), shall be sold under a decree of foreclosure, the purchasers,^ and such persons as they may associate with themselves, and their grantees or assignees, or a majority of them, may become a body politic and cor- porate, and take the title and property included in such sale, and have all the franchises, rights, powers, privileges and immunities which were possessed before such sale by the corporation whose property has been sold. A certificate, duly executed and acknowledged, must be filed in the of^ce of the secretary of state, in which must be described by name and by reference to the act or acts of the legislature of this state under which it was organized the corporation whose property and franchises have been ' Laws of 1873, chap. 469, § 4, as ments in regard to common and amended by Laws of 1880, chap. preferred stock as may be desirable. 113. By Laws of 1890, chap. 193, ''■ People ex rel. Mertens v. Cook, when the property of a corporation no N. Y. 443. organized under the Manufacturing ^ A mortgagee may be a purchaser Act is sold under a decree of fore- on foreclosure sale. Laws of 1857, closure, or under an execution or by chap. 444, § i. And a foreign cor- a receiver on proceedings for dis- poraiion may purchase land mort- solution, the creditors may purchase gaged to it by a corporation of this the property and reorganize the com- state, and hold the same for five pany, and may make such agree- years. Laws of 1S77, chap. 15S, § I. 84 THE LAW OF CORPORATIONS. acquired, and also the court by authority of which such sale was made ; giving the date of the judgment or decree direct- ing the same, together with a brief description of the prop- erty sold, and also : 1. The name of the new corporation. 2. The maximum amount of its capital stock, the num- ber of shares into which the same is to be divided, specify- ing how much of the same shall be common and how much preferred, and the classes thereof, and the rights pertaining to 'each class. 3. The number of directors by whom the affairs of the new corporation are to be managed, and the names and resi- dences of those selected to act as directors for the first year. 4. Any plan or agreement which may have been entered into pursuant to the second section of the act. Such plan, agreement and articles may regulate voting on the part of the holders of the preferred and common stock of the company, and may provide for and allow voting at such meetings and for directors on the part of the bond- holders of the old company, or of the new on such conditions as may be therein declared. Upon filing such certificate in the of^ce of the secretary of state, the persons executing the same and their successors and ?LSS\gns, provided that a majority of such persons are citi- zens and residents of this state, become a body politic and corporate by the name specified in the certificate, and are vested with, and are entitled to enjoy all the rights, privileges and franchises which at the time of the sale belonged to or were vested in the corporation which last owned the prop- erty, or its receiver.' Where purchasers have acquired the property and fran- chises of a railroad in pursuance of a plan of readjustment making provision for the representation of the interests of the former stockholders and creditors in the bonds or stock ' Laws of 1S74, chap. 430. § i, as amended by Laws of 1876, chap. 446. . POWERS AND PRIVILEGES. 85 of the new corporation, such new corporation may issue its bonds and stock in pursuance of such plan, and may at an}- time within six months after its organization compromise, settle, or assume the payment of any debt, claim or liability of the former company upon such terms as ma\- be lawfulh- approved by a majority of the agents or trustees intrusted with the carrying out of such plan of reorganization, and may establish preferences in respect to the payment of divi- dends in favor of any portion of its capital stock. The supreme court may direct a sale of the whole of the property, rights and franchises covered by a mortgage or mortgages foreclosed at any one time, either in case of non- payment of interest only, or of both principal and interest due and unpaid ; but such sale and formation of new com- pany will not interfere with the authority or possession of the receiver until his removal or discharge by order of the court.' Every stockholder in a company whose property and franchises have been sold may assent to the plan of reorgani- zation pursuant to which the same has been purchased at any time within six months after the organization of the new company, and by complying with the terms and con- ditions of the plan become entitled to his /^ro rata benefits therein according to its terms.'' This act repeals section 2 of chapter 502 of Laws of 1853, which gave to each stockholder of sucli a company, upon paying within six months after the sale under foreclosiu'e to the purchaser a sum equal to such proportion of the price paid by him as his individual stock bore to the whole capital stock of the company, the right to have the same relative amount of stock or interest in the compan}- and its road franchises and other property.' After the foreclosure sale, the only property interest which a stockholder of the old company has left is in the ' Laws of 1S74, chap. 430, § 2, as ^ Id. g 3. amended by Laws of 1876, chap. 446. ^ Prait v. Miuisoii, 84 N. Y. 582. 86 THE LAW OF CORPORATIONS. surplus, if any, after satisfying the mortgage and other pref- erential claims. The statute secures to him the option of joining the new company by a compliance with the terms of the plan. But this option must be exercised within six months, and if he fails within that time to exercise it, he loses the right to join or become interested in the new com- pany, or to acquire any interest in the property.' If the maximum amount of capital stock of any railroad company as set forth in the certificate of incorporation on file in the ofifice of the secretary of state is insuf^cient to carry out any plan of reorganization set forth in such certi- ficate, the majority of the directors may execute a new cer. tificate setting forth such insuf^ciency and the additional amount of capital stock required to carry out such plan of reorganization, and may thereupon, with the approval of the state engineer and surveyor, issue such capital stock the same as if it had been mentioned in the original certificate.* In the case of roads formed by the consolidation of roads lying partly in this state and partly in other states, where a decree of foreclosure has been made by a court of compe- tent jurisdiction of the state or states in which the greater part of such line of railroad is situated, such judgment or decree and the sale thereunder may be confirmed by the supreme court of this state in the judicial district in which some part of such line is situated. When so confirmed, the sale thereunder will operate to pass title to the purchaser of that part of the line of railroad lying in this state, with its appurtenances and franchises, with the same force and effect as if the sale had been made under the judgment and decree of a court of competent jurisdiction of this state; and if a receiver of the entire line has been appointed by such a court of the state where the greater part of the line is situated, he may perform within this state the duties of his ofifice, not inconsistent with the ' Vatable v. N. V., L. E. iSr W. '^ Laws of iSSo, chap. 155, § i. R. A\ Co., 96 N. Y. 49, POWERS AND PRIVILEGES. S/, laws of the state, and may sue and be sued in the courts of the state.' Where a corporation is organized, after such sale and confirmation, in the state where the greater portion of the line is situated, for the purpose of taking title to the entire line of railroad so sold, it may operate that portion of the line within this state and have all the rights and franchises of the corporation executing the mortgage, such as are con- ferred upon railroad corporations organized under the laws of this state, and will be subject to all the duties and liabil- ities of such corporations. An exemplified copy of the char- ter, certificate of incorporation, or articles of association under and by virtue of which such corporation is created, and of the judgment or decree under which the entire line was sold and a certified copy of the order or judgment or decree of confirmation and approval must be filed in the ofifice of the secretary of state. ^ Reorganization of Plank-Road Companies. — When a plank road or turnpike road has been sold upon the foreclosure of a mortgage given by such a company upon its road and franchise, to secure the payment of any bonds of such com- pany, the purchaser at such sale may maintain and operate such road in the same manner, and with the same privileges, and subject to the same restrictions as the original company at the time the sale was made.' Such purchaser or purchasers, on associating with him or them not less than four persons, may organize a corpora- tion for the purpose of maintaining such road in the man- ner prescribed for organizing plank-road companies." Any stockholder of such company has, for six months after such sale under foreclosure, the right, on paying to the purchaser or purchasers under such sale, or to the mort- gagees named in such mortgage, for the use and benefit of such purchasers,- a sum equal to such proportion of the ' Laws of 1S79, chap. 505, § I. 3 Laws of 1866, chap. 7S0, § I. ^ Id. § 2. 4 Id. § 2. (See auU; p. 34.) 88 THE LAW OF CORPORATIONS. price paid on such sale, and the costs and expenses thereof, as such stockholder's stock in such company bears to the whole capital stock, and upon such payment to have the same relative amount of stock or interest in such company and its road, franchises and property.' Proceedings for the Sale of Corporate Real Property. — Whenever any corporation or joint stock association is required bylaw to make application to the court for leave to mortgage, lease or sell its real estate, the proceeding therefor is as follows:^ The proceeding is instituted by the presentation to the supreme court of the district or the county court of the county where the real property, or some part of it, is situated, by the corporation or association, applicant, of a petition setting forth the following facts : 1. The name of the corporation or association, and of its directors, trustees or managers, and of its principal officers, and their places of residence. 2. The business of the corporation or association, or the object or purpose of its incorporation or formation, and a reference to the statute under which it was incorporated or formed. 3. A description of the real property to be sold, mort gaged or leased, by metes and bounds, with reasonable cer tainty. 4. That the interests of the corporation or association will be promoted by the sale, mortgage or lease of the real property specified, and a concise statement of the reasons therefor. 5. That such sale, mortgage or lease has been authorized, by a vote of at least two-thirds of the directors, trustees or ' Laws of 1S53, chap. 502, § 2. This nothing repugnant to the section in section, so far as relates to railroad later statutes relating to plank-roads, companies, has been repealed by im- it is, so far as such companies are con- plication by later statutes, {see ante, cerned, undoubtedly still in force, p. 85 ;)but as such statutes apply only to - Code Civ. Proc, § 33QO. the foreclosure of railroads. and there is POWERS AND PRIVILEGES. 89 managers or the corporation or association, at a meeting thereof, duly called and held, and a copy of the resolution granting such authority. 6. The market value of the remaining real property of the corporation or association, and the cash value of its per- sonal assets, and the total amount of its debts and liabilities, and how secured, if at all. 7. The application proposed to be made of the moneys realized from such sale, mortgage or lease. 8. Where the consent of the shareholders, stockholders or members of the corporation or association is required by law to be first obtained, a statement that such consent has been given, and a copy of the consent or a certified tran- script of the record of the meeting at which it was given, shall be annexed to the petition. 9. A demand for leave to mortgage, lease or sell the real estate described. The petition must be verified in the same- manner as a verified pleading in an action in a court of record.' Upon presentation of the petition, the court may immedi- ately proceed to hear the application, or it may, in its dis cretion, direct that notice of the application shall be given to any person interested therein, as a member, stockholder, officer or creditor of the corporation or association, orother- Vv'ise, in which case the application will be heard at the time and place specified in such notice, and the court may in any case appoint a referee to take the proofs and report the same to the court with his opinion thereon.^ Upon the hearing of the application, if it appear to the satisfaction of the court, that the interests of the corpora- tion or association will be promoted thereby, an order may be granted authorizing it to sell, mortgage or lease the real property described in the petition, or any part thereof, for such sum and upon such terms as the court may prescribe, ^ Code Civ. Pro., § 3391. ^ Id. § 3392. 90 THE LAW OF CORPORATIONS. and directing what disposition shall be made of the proceeds of such sale, mortgage or lease. Any person whose interests may be affected by the pro- ceedings, may appear upon the hearing and show cause why the application should not be granted.' If the corporation or association is insolvent, or its prop- erty and assets are insufificient to fully liquidate its debts and liabilities, the application will not be granted, unless all the creditors of the corporation have been served with a notice of the time and place at which the application shall be heard.''' Service of notices may be made either personally or, in case of absence, by leaving the same at the place of residence of the person to be served, with some person of mature age and discretion, at least eight days before the hearing of the application, or by mailing the same, duly enveloped and addressed and postage paid, at least sixteen days before such hearing.' In all applications made, as above provided, where the mode or manner of conducting any or all of the proceedings thereon are not expressly provided for, the court before whom such application may be pending may make all the necesasry orders and give the proper directions to carry into effect the object and intent of this, or of any act authoriz- ing the sale of corporate real property, and the practice in such cases must conform, as near as may be, to the ordi- nary practice in such court." MISCELLANEOUS SPECIAL POWERS AND PRIVILEGES. Changing Place of Business. Mamifactiiring Act. — Any com- pany organized under the Manufacturing Act may change its place of business by a vote of the stockholders representing two-thirds of the stock at any meeting of the stockholders ' Code Civ. Pro., § 3393. effect May ist, 1890, and do not af- "^ Id. § 3394. feet any jproceeding previously com- 3 Id. § 3395. menced. Id. g 3397. ^ Id. § 3396. These provisions took POWERS AND PRIVILEGES. 9I regularly called, and executing and acknowledging an amended certificate specifying the name of the towns or cities from and to which the business location of the com- pany is to be changed, and in other respects conforming to the original certificate. Such amended certificate must be signed by the president and two thirds of the directors of the company and filed in the office of the secretary of state and in the ofifice of the clerk of the county where the business operations of the company are to be carried on, and published weekly in two papers in the towns or cities from and to which the business operations have been removed, and are to be carried on, for the term of three months. But the property of such com- pany is liable to taxation in any county where such property may be, or in which its business may be done, to the extent of its property in any such county. ' No company organized under the above act will be deemed or taken to have a principal office or place for transacting its financial concerns other than that at which the operations of the company are carried on, unless within the month of May in eacli year the president and treasurer, or a majority of the trustees, make a duplicate certificate, stating the amount of the then capital of such company, and the portion of such capital not invested in real estate, and stating that such company then has a principal ofifice for transacting its financial concerns in a county other than that in which the operations of the company are carried on. It must state the town or city in which such financial ofifice is located, and that the president and treasurer and a majority of the trustees of such company are then actually residents of such town or city. The duplicate certificates must be signed and sworn to by the persons making them and filed, the one in the clerk's ofifice of the county where the operations of the company ' Laws of 1864, chap. 517, § i. 92 THE LAW OF CORPORATIONS. are carried on and the other in the clerk's office of the county in which such financial office is located.' Same. Business Corporations. — Corporations organized un- der the Business Act may change their place of business by the consent of the stockholders owning two thirds in amount of the capital stock. A certificate must be signed by such stockholders, either in person or by attorney duly authorized and acknowledged or proved, and filed in the office of the secretary of state, and of the clerk of the county in which the principal business office of such corporation is situated. Upon the filing and recording of such certificates the principal business office of such corporation will be deemed to be changed as therein stated. ^ Same. Banks. — Any bank or banking association organized under the laws of this state may apply at any special term of the supreme court held in the county in which its office of discount and deposit is located, for an order authorizing it to change its place of business to another place in the same or an adjoining county.' Notice of intention to make such application, signed by the two principal officers of the bank, must be published once a week for four weeks in a newspaper published in the city of Albany, and for the same time in a newspaper pub- lished in the county in which the office of such bank or banking association is located. Such newspapers to be designated by the Superintendent of the Banking Depart- ment, and satisfactory proof of such publication must be made to the court upon the application for the change. This application must be by a petition setting forth the grounds of the application, and must be signed by a majority of the board of directors, and be accompanied by the written ^ Lawsof 1861, chap. 170, § 2. The named in the certificates as that in personal estate of such company for which such financial office is located. the year following the first day of See Chap. IX., /^jA June after filing such certificates, is ' Laws of 1875, chap 611, ^ 31. taxable only in the town or ward * Laws of 1S87, chap. 517, § i. POWERS AND PRIVILEGES. 93 assent to the proposed change of location of at least two thirds in amount of the shareholders of such bank, and also by the approval in writing of the Superintendent of the Banking Department.' If the court is satisfi'ed that there is no reasonable objec- tion to such change it will make an order authorizing the corporation to change its place of business to the location designated in the petition. A copy of such order must be filed in the ofifice of the clerk of the county in which such corporation is located and also in the office of the superintendent of the banking department, and must be published once a week for four successive weeks in the newspapers in which the notice of application was published.^ When these requirements have been complied with, such corporation may, upon or after the day specified in the order of the court, remove its property and effects to the location designated in the order, and thereafter that will be its sole business location. In the new location such corporation will have all the rights and powers to which it was entitled in its former loca- tion ; but no liability incurred or existing at the time of such change shall be impaired thereby.^ Change of Name. — As we have seen,' the restrictions as to what name may be adopted by a corporation are very few. The laws are equally liberal in regard to the change of name. It is provided that any corporation, except banks, bank- ing associations, trust companies, life, health, accident, marine and fire insurance companies may apply at any special term of the supreme court sitting in the county in which it has its principal business office for an order to authorize it to assume another corporate narae.^ ' Laws of 1SS7, chap. 517, § 2. ■* Chap. I., ante. "^ Id. § 3. * Laws of 1S70, chap. 322, g i, as * Id. § 4. amended by Laws of 1S76, chap. 280. 94 ' THE LAW OF CORPORATIONS. Such application must be by petition, which must set forth the grounds of the appHcation, and that it is made in pursuance of a resolution of the directors of the corporation, and must be verified by the chief ofificer thereof. Notice of the application must be published for six weeks in a newspaper, designated by the court or a judge, pub- lished in the county where the order is required to be filed,' and also in a newspaper of every county in which the com- pany has a business ofifice, or, if it have no business ofifice, of the county in which its principal corporate property is situated, such paper to be one of those designated to pub- lish the session laws." If the court is satisfied that such application is made in pursuance of a resolution of the directors or managers of the corporation applying, and that the requisite publication has been made and that no reasonable objection to such a change exists, it will make an order authorizing such cor- poration to assume the proposed new corporate name. A copy of the order must be filed in the of^ce of the secretary of state and in the of^ce of the clerk of every county in which such corporation has a business office, or if it have no business office, of the county in which its prin- cipal corporate property is situated, and it must also be published at least once a week for four weeks in some news- paper, to be designated by the court, in such county or counties.^ When these requirements have been complied with the corporation applying for the change of name may, from and after the day specified in the order of the court, be known by and use the new corporate name designated in such order.* 'As modified by Laws of 1SS4, judge designating both of the papers chap. 133, § 2. in which the notice shall be pub- * Laws of 1S70, chap. 322, § 2. lished. Where there is no paper designated ^ Id. § 3. which publishes the session laws, it '• Id. § 4. From the language of is usual to obtain an order from a the act it would seem that a com- POWERS AND PRIVILEGES. 95 No pending suits or legal proceedings are affected by such change, and they may be continued in the name in which they were commenced, or they may upon the appli- cation of either party, and by order of the court, be con- tinued under the new name ; and all obligations of such company may be enforced against it in the changed name.' Same. Banks. — A bank, banking association, or trust com- pany may apply at a special term of the supreme court sit- ting in the county in which it is located, by a petition set- ting forth the grounds of the application for an order author- izing it to assume another corporate name. Such application must be approved by the Superintendent of the Banking Department, and notice thereof must be published for four weeks in two newspapers designated by him, one in the city of Albany and the other in the county in which such company is located. If it appear to the satisfaction of the court that the notice has been so published, and that the application is made in pursuance of a resolution of the directors or trus. tees of such company and has been approved by the Super- intendent of the Banking Department, and that there is no reasonable objection to such corporation changing its name, it will make an order authorizing it to assume the proposed new corporate name. A copy of the order must be filed in the ofifice of the Superintendent of the Banking Department and with the clerk of the county in which the corporation is located, and be published at least once in each week for four successiv^e weeks in the newspapers in which the notice of application was published. When these requirements have been complied with, such pany could not assume its new name in some instances this practice has until the time of last publication had not been followed, and an earlier expired, and it is usual to insert a date has been named, day in the order not less than four ' Id. § 5. ■weeks after the order is made ; but 96 THE LAW OF CORPORATIONS. corporation may, from and after the day designated in the order, be known by and use the new corporate name. Similar provisions in regard to pending actions, etc., are made as in the case of the change of names of the corpora- tions above given.' Same. Insurance Companies. — Unless otherwise provided in its charter, a fire or inland navigation insurance company may change its name, by altering or amending its charter in this respect, with the written consent of the Superinten- dent of the Insurance Department, after notice of such inten- tion has been given by publication for six weeks in the paper in Albany designated by the Superintendent of the Insurance Department for the publication of notices relating to that department, and also, in some newspaper published in the county w^iere such company is located, and with the written consent of three fourths in amount of its stockhold- ers. A copy of the charter so amended, together with a declaration under its corporate seal, signed by the president and directors of such corporation, of their desire to change the name, together with the consent of the Superintendent of the Insurance Department and the consent of the stock- holders, must be filed in the of^ce of the Superintendent of the Insurance Department ; and the same proceedings must be taken in regard to the examination of the charter by the attorney-general and certification to the comptroller as in the organization of such corporations.^ Changing Number of Directors. Mauufaeturing Corporations. — The number of trustees of corporations organized under the Manufacturing Act may be increased to not more than thir- teen, or may be reduced to not less than three. The exist- ing trustees of any such corporation, or a majority of them, must make and sign a certificate declaring how many trus- ' Laws of 1SS7, chap. 51S. 20S ; see ante, p. 14, as to examina- * Laws of 1853, chap. 466, § 19, tion of charter, etc. as amended by Laws of 1875, chap. POWERS AND PRIVILEGES. 97 tees the corporation shall have in the future manaGfement of its business, and in case the number of trustees be in- creased, stating the names of the new or additional trustees, and in case the number be reduced, stating the number to which the trustees shall be reduced. The certificate must be acknowledged by the trustees signing the same, or proved by a subscribing witness, and -filed in the ofifice of the clerk of the county where the original certificate of incorporation was filed, and a duplicate or transcript thereof, duly certified under the ofificial seal of such clerk, filed in the ofifice of the secretary of state. In case of an increase in the number of trustees, from the time of filing such certificate and duplicate the trustees will be increased to the number therein stated, and the per- sons so named in such certificate will be trustees until a nevv election is had. In case of reducing the number of trustees, the number stated in such certificate will be the number of trustees to be elected at the next election and thereafter, after filing such certificate. In case a vacancy or vacancies occur in the board of trustees by resignation, or otherwise, after filing such certificate and duplicate, and before the next election, no election shall be had in the meantime to fill such vacancy or vacancies while the number of trustees remaining shall equal or exceed the number to which the trustees are reduced in such certificate.' Same. Business Act. — The number of directors of business corporations may be changed to not less than three, nor more than thirteen, by a vote of a majority in interest of the stockholders present in person or by attorney duly authorized, at a meeting of such stockholders called pur- suant to a notice specifying the purpose of such meeting, and given to each stockholder at least five days before the time fixed for such meeting. A statement of the chan^^e of ' Laws of i860, chap. 269, § 2, as amended by Laws of 1S78, chap. 316. 98 THE LAW OF CORPORATIONS. the number of directors so made, signed and verified by the president or a vice-president of the corporation, and by the secretary of the meeting at which the change was made, must be filed in the office of the secretary of state, and a copy in the office of the clerk of the county in which the principal business office of the company is situated, within ten days after such meeting.' Same. Insurance Compajiies. — Any existing life, fire, casu- alty, or marine insurance company, organized under the laws of this state, may, by a vote of its board of directors at a meeting specially called for that purpose, the call specifying the object of the meeting, and upon a written notice to all of its stockholders with a written consent of a majority in amount, reduce the number of its directors to not less than thirteen, a majority of whom must be citizens of this state, by altering or amending its charter in respect to the number of its directors, and filing a copy of the charter so amended, together with a declaration under its corporate seal, signed by its president and two thirds in number of its directors, with such written consent of a majority of its stockholders, in the office of the Superintendent of the Insurance Depart- ment. Such reduction of the number of directors may be made so as to take effect either immediately or gradually as vacan- cies may occur in the board of directors by death, resigna- tion, disqualification, or otherwise ; and when the number of directors is reduced to thirteen, seven of such number will constitute a quorum for all purposes." Same. Title Guarantee Companies. — The number of direc- tors of such companies maybe changed to not less than five nor more than thirteen, at a special meeting of the owners of a majority of the whole amount of the capital stock, called pursuant to notice specifying the purpose of such meeting, 1 Laws of 1875, chap. 611, § 10, as * Laws of 1877, chap. 183. as amended by Laws of 1890, chap. 23. amended by Laws of 1887, chap. 650. POWERS AND PRIVILEGES. 99 and served on such stockholders by mail at least five days before such meeting. A vote of a majority of the stock- holders in person or by attorney duly authorized for that purpose is necessary to effect such a change. A majority of the whole number of directors is necessary to constitute a quorum.' * Laws of 1SS5, chap. 53S, § 9. lOO THE LAW OF CORPORATIONS. CHAPTER III. THE CAPITAL STOCK. The capital stock of a corporation is, generally speaking, the amount fixed by its charter to be contributed by the stockholders as the fund to be used in the prosecution of its business; ' and there is no more justification for fixing such capital at a fictitious and exhorbitant valuation than for an individual or firm doing business to misrepresent the amount of his or its capital. Persons dealing with a corporation have a right to assume that its nominal capital represents actual and not fictitious value ; ' and where the capital is paid up in cash such is the fact. But many corporations are organized with a capital issued for property, and, unless it is expressly prohibited, an issue for property, at a fair and reasonable valuation, is not only legal, but in many cases is the safest and most con- venient method.^ Stock Issued for Property. — Persons may enter into an agree- ment to form a corporation, and they may provide how and in what manner property, shall be transferred to the cor- poration and the value to be placed upon it, and such a con- tract will be sustained if there is no evidence that it is an attempt to evade the statute or to defraud the public by putting a valueless stock on the market at an excessive valuation." And where one has contributed property as ^ Barry v. Merchants' Exchange Cottv. Van Brunt, ?,2 \6. S3S\ Blake Co., I Sandf. Chan. 280- Burrall v. v. Griswold, 103 id. 429. See Chap. Bushwick R. R. Co., is N. Y. 211: \U. post. Williams v. Western Union Tel. Co., ^ Van Cott v. Van Brunt. 82 N. Y. 03 id. 162. 535 ; Lake Superior Iron Co. v. Drexel, '■* Sagory v. Dubois, 3 Sandf. Chan. 90 id. 87. 466; Boynton v. Hatch. 47 N. Y. 225; * Lorillard v. Clyde, 86 N. Y. 384. Eoynton v. Andrews, 63 id. 93; Van THE CAl'ITAL STOCK. lOI payment for a subscription to the stock of a corporation, such property will pass to the corporation upon its organiza- tion without a formal transfer." While allowance is made for the difference of opinion as to the value of property for which stock may be issued, and even for the sanguine expectations of those interested in property like patent rights, or mining property, whose rea- sonable value depends upon many contingencies and which is difificult of estimation, yet, as we shall see in another chapter, in order to escape liability there must be a fair and honest attempt to appraise such property at a fair valua- tion." Under the Manufacturing Act. — This act as originally passed provided that nothing but money should be considered as payment of any part of the capital stock ; ^ but subsequently the act was so amended as to provide that the trustees of such a company might purchase mines, manufactories and other property necessary for their business, and issue stock to the amount of the value thereof in payment therefor, and that the stock so issued should be declared and taken to be full stock and not liable to any further calls.' The trustees are the sole judges of the necessity of such a purchase, and of the value of such property if it is pur- chased by them in good faith, and not as an evasion of the provision that the stock maybe issued to the amount of the value of such property." Under the Business Act. — -This act provides that no cor- poration organized under it shall issue either stock or bonds except for money, labor done, or property actually received for the use and legitimate purposes of such corporation at its fair value, and all fictitious increase of stock or indebted- ness in any form shall be void." ^American Silk Works v. Salomon, * Laws of 1S53, chap. 333, § 2. 6 T. & C. 352. ' Schenck v. Andrews, 57 N. Y. '^ Chapters V. and VII. 133. * Laws of 1848, chap. 40, § 14. " Laws of 1S75, chap. 611, § 14. I02 THE LAW OF CORPORATIONS. Title Guaranty Companies. — The act for the incorporation of companies to examine and guarantee bonds and mort- gages and titles to real estate contains a provision essentially the same as that contained in the Business Act.' Miscellaneous Companies. — As we have seen in the previous chapters it is required of certain corporations, as a condition of granting a certificate of organization, that an affidavit of the payment of the whole or a portion of the capital stock be first filed. When this is required it is a condition prec- edent of the organization which must* be complied with before the organization can be perfected. Preferred Stock. — The right of a corporation to issue pre- ferred stock, unless expressly authorized so to do by its charter, is one that will not be implied. And even where a meeting is called for that purpose and all of the stock- holders present vote to issue such stock, yet its issue will be enjoined on the application of a dissenting stockholder.* It is not uncommon, however, for corporations in this state to issue preferred stock without authority being con- ferred by their charters, and under the present practice at the office of the secretary of state it can only be issued in such a manner in the greater number of cases ; ' and such an issue, if provided for in the by-laws at the time of organiza- tion of a corporation, would undoubtedly be sustained. Kent V. The Qtdcksilver Mitiing Co.," is the leading case in this state on the issue of preferred stock, and in that case Judge Folger in giving the opinion of the court thus clearly states what is undoubtedly the law in relation to the issue » Laws of 1885, chap. 538, | 12. 3. This would seem to authorize 2 Kent V. Quicksilver Mining Co., different kinds of stock such as com- 12 Hun, 53; aff'd, 78 N. Y. 159. mon and preferred; but certificates * The Business Act provides that containing such descriptions of stock the certificate of incorporation shall are not, at present, filed in the office state among other things "the of the secretary of state. amount and description of the capital * 78 N. Y. 159. stock." Laws of 1875, chap. 611, § THE CAPITAL STOCK. IO3 of preferred stock where it is not expressly authorizad by the charter of a corporation. " We are not prepared to say that at the first the cor- poration might not have lawfully divided the interest in its capital stock into shares arranged in classes, preferring one class to another in the right it should have in the profits of the business. The charter gave power to make such by-laws as it might deem proper, consistent with constitution and law ; and to issue certificates of stock representing the value of the property. We know nothing in the constitution or the law that inhibits a corporation from beginning its corporate action by classifying the shares in its capital stock, with peculiar privileges to one share over another, and thus offer- ing its stock to the public for subscriptions thereto. No rights are got until a subscription is made. Each subscriber would know for what class of stock he put down his name, and what right he got when he thus became a stockholder. There need be no deception or mistake ; there would be no trenching upon rights previously acquired. No contract, express or implied, would be broken or impaired." This case came before the Court of Appeals on three appeals from judgments of the Supreme Court;' the one restraining the company from converting the common stock into preferred stock ; the second decreeing a distribution of the earnings of the company between the existing pre- ferred stockholders and the common stockholders, giving the preferred stockholders such a preference as their stock called for. The third was from a judgment dismissing the complaint in an action brought to restrain the company from paying the holders of the preferred stock any interest or dividends in excess of dividends paid on the common stock, and to have the preferred stock already issued declared illegal. These judgments were all affirmed, the preferred stock already issued being declared legal and entitled to the ' Reported below, 12 Hun, 53; 17 Hun, 169. 104 THE LAW OF CORPORATIONS. preference it purported to give, although the further issue was restrained. The charter, in addition to the usual provisions in regard to by-laws, etc., provided that the company should have power " to issue certificates of stock ; representing the value of their property in such form, and subject to such regula- tions as they may from time to time by their by-lavv's pre- scribe." It was contended by counsel for certain of the preferred stockholders that the company was authorized by its charter to create preferred stock, and that the act was not impaired by originally issuing common stock only. But this point was determined adversely by the court which in its opinion further says : ' " We are therefore of the opinion that there was no power in the corporate body, nor in a majority of the stock- holders to provide by by-law for the creation of a preferred stock so as to bind a minority of the stockholders not assent- ing thereto." The judgments as above stated were sustained so far as the legality of the preferred stock already issued was con- cerned solely and expressly on the ground of indefensible laches and estoppel on the part of those who subsequently objected to its issue ; and the further issue of preferred stock was enjoined on the ground of want of authority in the cor- poration to make it. On the same ground of estoppel this case would un- doubtedly be authority to sustain the issue of preferred stock, if provided for in the by-laws, and made at the outset of the organization, and with the knowledge of all subscribers. Change of Preferred for Common Stock. — Any corporation organized under the laws of this state which has, or which may, issue both preferred and common stock, forming part of the capital stock of such corporation, is authorized, when- ever the directors of such corporation may by vote of two ' Page 1S3. Till-: CAPITAL STOCK. 10$ thirds of their number declare it for the interest of the cor- poration so to do, and the holder of any such preferred stock may request in writing the exchange of the same for the common stock, to exchange the preferred stock of such holder for common stock, and to issue certificates of common stock therefor, share for share, or upon such other valuation as may have been agreed upon in the scheme for organiza- tion of such company or the issue of such preferred stock. It is provided, however, that the total amount of the capital stock of such company shall not be increased by such transfer/ INCREASING AND DFXREASING CAPITAL STOCK. A corporation has no implied power to increase or diminish its capital stock, and it can be changed only as authorized by the legislature.^ The Revised Statutes ex- pressly provide that it shall not be lawful for the directors or managers of any incorporated company in this state to reduce its capital stock without such consent." Reducing Capital Stock. — By a general act passed May 1 5th, 1878, any corporation organized under a general or special law of this state was authorized to diminish its capital stock, by complying with the provisions of the act, to any amount deemed sufficient and proper for the purposes of the cor- poration. It was provided that no holder or owner of stock in such corporation should be relieved by such reduction from any liability existing prior thereto, and it was also provided that the act should in no way interfere with or affect any law then in existence authorizing any corporation previously organized to reduce its capital stock.* The act provides that whenever any company shall desire to call a meeting for the purpose of diminishing the amount of its capital stock, it shall be the duty of the trustees or directors to publish a notice signed by at least a majority of ' Laws of 1880, chap. 225, § r. title 4. § 2. 2 Sutherland v. Okott, 95 N. X. 93. * Laws of 1S7S, chap. 2(34, § I. 2 Rev. Stat, part l.^ chap, xviii., I06 THE LAW OF CORPORATIONS. them in a newspaper in the county in which the bu-siness of the company is carried on, or its principal office is located, if any, at least three successive weeks, and to deposit a written or printed copy thereof in the post-office, addressed to each stockholder at his usual place of residence .at least three weeks previous to the day fixed upon for holding such meeting, specifying the object of the meeting, the time when and place where it shall be held, and the amount to which it is proposed to reduce the capital ; and a vote of at least two thirds of all the shares of stock are necessary to the diminution of the capital.' If at the time and place specified in such notice stock- holders appear in person or by proxy in numbers represent- ing not less than two thirds of all the shares of stock of the corporation, they may organize by choosing one of the trus- tees chairman of the meeting and a suitable person for sec- retary, and proceed to a vote of those present in person or by proxy; and if, in canvassing the votes, it is found that a sufficient number of votes has been given in favor of dimin- ishing the amount of capital, a certificate of the proceedings showing a compliance with the provisions of the act, the amount ^ capital actually paid in, the whole amount of debts and liabilities of the company, and the amount to which the capital stock shall be diminished must be made, signed and verified by the chairman, and such certificate must be acknowledged by the chairman and filed in the office of the clerk of the county in which the business of the company is carried on, and a duplicate in the office of the secretary of state, with the approval of the comptroller indorsed thereon, to the effect that the reduced capital is sufficient for the proper purposes of the company, and is in excess of all debts and liabilities of the company, exclusive of debts secured by trust mortgages, and that the actual market value of the stock of the company, prior to the reduction, ' Laws of 1878, chap. 264, § 2. THE CAPITAL STOCK. 10/ was less than the par value of the same, and when so filed the capital stock of such corporation shall be reduced to the amount specified in the certificate. The amount of capital left in the possession of the com- pany over and above the amount to which the capital is reduced must be returned to the stockholders, /r^ rata, at such times and in such manner as the trustees or directors may determine.* In order to enable the comptroller to indorse his approval on such a certificate, an afifidavit that the proposed capital is sufificient for the proper purposes of the company, and that the actual market value of the stock prior to the reduc- tion was less than the par value of the same, must be made and attached to the certificate. Any corporation organized since the passage of this act (May 15th, 1878) can reduce its capital stock only in the man- ner therein provided, as it has been held to repeal by impli- cation all former provisions in regard to the reduction of capital, and to furnish the only law upon the subject.'' It will be particularly noticed that the act contains two important provisions, viz., that under this act the capital can be reduced only when the actual market value of stock of the company prior to the reduction is less than the par value of the same ; and, secondly, that any corporation organized prior to the passage of the act may continue to avail itself of any law then existing authorizing it to reduce its capital. The special provisions which the above act supplants are generally contained in acts of incorporation of different classes of companies, and are usually simpler in their pro- visions and less elaborate than the one above. They will be considered in a later part of this chapter. ' Laws of 1878, chap. 264, § 3, as cain Co. v. Carr, 36 Hun, 488 ; aff'd amended by Laws of 18S2, chap. 306. on opinion of court below, 100 N. Y. 1 People ex rel. Eden Musee Ameri- 641. I08 THE LAW or CORPORATIONS. Increasing Capital Stock. — In 18/2 a general act in relation to increasing the capital stock of corporations was passed.' It provided that any corporation formed under the laws of this state, excepting banks, banking associations, trust companies, life, health, accident, marine and fire insurance companies, railroad and navigation and gas companies, might increase its capital stock as provided by section twen- tieth of the Manufacturing Act. It was provided, however, that the act should not apply to corporations created by special act of incorporation, the capital stock of which origi- nally exceeded two hundred thousand dollars, and that such increase should not exceed in the aggregate the amount of capital stock specified in the act of incorporation. And it was also provided that any corporation, the capital of which should be increased under the provisions of the act, and its stockholders should be subject to all the liabilities as regards such additional capital as is provided in the original act or charter in relation to its capital.* The provisions of the Manufacturing Act in regard to the increase of capital stock apply also to diminishing stock and to changing the business of such companies.- In regard to diminishing stock, as we have seen,' it applies only to corporations organized under the act prior to the 15th of May, 1878. And, e converso, the provisions in regard to the increase of stock w^ould probably be held to be the only ones applicable to corporations organized subsequent to the adoption of chapter 611 of Laws of 1872, except those expressly omitted from its provisions. The sections applicable to this subject are as follows : Any corporation or company heretofore formed, either by special act or under the general law, and now existing for any manufacturing, mining, mechanical or chemical pur- poses, or any company which may be formed under this act, may increase or diminish its capital stock by complying with • Laws of 1872, chap. 611. ^ Ante, p. 107, •' Id. § I. THE CAPITAL STOCK. IO9 the provisions of this act, to any amount which may be deemed sufficient and proper for the purposes of the corpo- ration, and may also extend its business to an\- other manu- facturing, mining, mechanical or chemical bu^iiu.ss. subject to the provisions and liabilities of this act. But before any corporation shall be entitled to diminish the amount of its capital stock, if the amount of its debts and liabilities shall exceed the amount of capital to which it is proposed to be reduced, such amount of debts and liabilities shall be satisfieci and reduced so as not to exceed such diminished amount of capital ; and any existing company, heretofore formed under the general law, or any special act, may come under and avail itself of the privileges and provisions of this act, by complying with the following provisions, and thereupon such company, its officers and stockholders, shall be subject, to all the restrictions, duties, and liabilities of this act.' Whenever any company shall desire to call a meeting of the stockholders, for the purpose of availing itself of the privileges and provisions of this act, or for increasing or diminishing the amount of its capital stock, or for extending or changing its business, it shall be the duty of the trustees to publish a notice signed by at least a majority of them, in a newspaper in the county, if any shall be published therein, at least three successive weeks, and to deposit a written or printed copy thereof in the post-office, addressed to each stockholder at his usual place of residence, at least three weeks previous to the day fixed upon for holding such meet- ing, specifying the object of the meeting, the time and place when and where such meeting shall be held, and the amount to which it shall be proposed to increase or diminish the capital, and the business to which the company would be extended or changed, and a vote of at least two-thirds of all the shares of stock shall be necessary to an increase or dimi- nution of the amount of its capital stock, or the extension or ' Laws of 184S. chap. 40. S co. no THE LAW OF CORPORATIONS. change of its business as aforesaid, or to enable a company to avail itself of the provisions of this act.' If, at any time and place specified in the notice provided for in the preceding section of this act, stockholders shall appear in person or by proxy, in number representing not less than two-thirds of all the shares of stock of the cor- poration, they shall organize by choosing one of the trustees chairman of the meeting, and also a suitable person for sec- retary, and proceed to a vote of those present, in person or by proxy, and if on canvassing the votes it shall appear that a sufficient number of votes has been given in favor of in- creasing or diminishing the amount of capital, or of extend- ing or changing its business as aforesaid, or for availing itself of the privileges and provisions of this act, a certificate of the proceeding showing a compliance with the provisions of this act, the amount of capital actually paid in, the business to which it is extended or changed, the whole amount of debts and liabilities of the company, and the amount to which the capital stock shall be increased or diminished, shall be made out, signed and verified by the affidavit of the chairman, and be countersigned by the secretary, and such certificate shall be acknowledged by the chairman, and filed as required by the first section of this act, and when so filed, the capital stock of such corporation shall be increased or diminished, to the amount specified in such certificate, and the business extended or changed as aforesaid, and the com- pany shall be entitled to the privileges and provisions, and be subject to the liabilities of this act, as the case maybe." Increase and Decrease of Capital Stock : Gas-Light Companies and Navigation Companies. — The acts for the incorporation of gas- light companies,' and navigation,* and inland navigation' > Laws of 1848, chap. 40, § 21. " Laws of 1S52, chap. 228, g§ 11- s Id. § 22. 14. as 120. Id. § 22. 14. Laws of 1S4S, chap. 37, §^ 20-22, => Laws of 1854, chap. 232, §§ 19- amended by Laws of 1S75, chap. 21. THE CAPITAL STOCK. Ill companies contain substantially the same provisions in re- gard to increasing and diminishing capital stock as those of the Manufacturing Act. Decreasing Capital Stock of Insurance Companies. — When it shall appear to the Superintendent of the Insurance Depart- ment from an examination made by him in the manner pre- scribed bylaw, that the capital stock of any joint-stock fire or marine insurance company, organized pursuant to law, is im- paired to an arhount exceeding twenty-five per centum of such capital ; or whenever, for any reason, three-fourths of the direc- tors of such a company (with the consent of at least one-half of the stockholders owning not less than two-thirds of the capital stock) shall desire to reduce the amount of its capital stock, and the Superintendent of the Insurance Department is of the opinion that the interests of the public will not be prejudiced by permitting such company to continue business with a reduced capital, such company, with the permission of the Superintendent, may reduce its capital and the par value of its shares to such amount as the Superintendent may, under his hand and ofificial seal, certify to be proper, and as shall, in his opinion, be justified by the assets and property of such company. No part of such assets may be distributed to the stock- holders ; and it is also provided that the capital stock of any such company shall not be reduced to an amount less than the sum now required by law for the organization of a new company, under the general insurance laws for the transac- tion of business at the place where such company is located, and of the kind which such company is authorized to transact. When any capital is reduced by this act all amounts added to the surplus account thereby must be held as a reserve for the protection of policy-holders, and may not be used in the payment of dividends to stockholders.' ' Laws of 1867, chap. 91, § i, as 327, § i. Lawsof 1SS5, chap. 327, §2, amended by Laws of 18S5, chap. repeals all acts or parts of acts in- 112 THE LAW OF CORPORATIONS. No reduction of the capital of any such company shall be made except by a resolution of its board of directors, certi- fied under its corporate seal, and signed by the president and at least two-thirds of its directors, and proved or acknowl- edged in the manner required for the proof or acknowledg- ment of conveyances, and that such certificate shall be filed in the office of the Superintendent of the Insurance Depart- ment.' In case the Superintendent permits such reduction, he ■wilt execute certificates in duplicate, and deliver one to the officers of the company, who must forthwith file the same with the clerk of the county in which such company is located, and the other will be filed in the office of the Super- intendent.^ Upon filing such certificate with the county clerk, such company, with such reduced capital, will possess the same rights and be subject to the same liabilities that it possessed or was subject to at the time of the reduction of its capital, and the charter of such company will be deemed to be amended in respect to the amount of capital and the par value of the shares so as to conform to such reduction.' The company may require the return of the original certificate of stock, held by each stockholder, and in lieu thereof issue new certificates for such number of shares as such stockholder may be entitled to, in the proportion that the reduced capital may be found to bear to the original capital of the company.* May Increase its Capital Stock. — Any company having so reduced its capital may increase it in the mode prescribed by the nineteenth section of chapter four hundred and sixty-six of the Laws of 1853.' consistent with this act, and it would seem in some points to be supersed- accordingly supersede Laws of 1S7S, ed by section 1 as amended, chap. 264, as regards fire and marine ^ Id. § 4. insurance companies. * Id. § 5. ' Laws of 1S67, chap. 91, § 2. ' Id. § 6. '■* Id. § 3. Sections 2 and 3 would THE CAPITAL STOCK. II3 That section provided that any existing fire-insurance company, or any company formed under that act, might at any time, with the written consent of the Superintendent of the Insurance Department, increase the amount of its capital stock, after notice given once a week for six weeks in the state paper, and in any newspaper pubhshed in the county where such company was located, of such intentions, with the written consent of three-fourths in amount of its stockholders, unless otherwise provided in its charter, by altering or amending its charter in this respect, and filing such consent, a copy of its charter so amended, together with a declaration under its corporate seal, signed by its president and direc- tors, of their desire so to do, with the written consent of three-fourths in amount of its stockholders to such increase in the office of the Superintendent. The same requirements must be complied with in regard to the examination of the charter and proofs of publication by the attorney-general and certification by him as in the organization of a company.' The above provisions as to the increase of capital stock are extended to any existing company incorporated by or authorized under the laws of this state, or to any company formed under that law to transact the business embraced in the second department of section one of the act to provide* for the incorporation of a life and health and casualty insur- ance companies.^ Increase of Capital Stock by Credit Guaranty Companies. — Any company formed under the act for the incorporation of credit guaranty and indemnity companies may at any time increase the amount of its capital stock, after notice pub- lished once a week for six weeks successively in two news- papers published in the county where such company is located, of such intentions, with the written consent of three- ' Laws of 1S53, chap. 466, § 19, as ^ Laws of 1S53, chap. 463, § 21, as amended by Laws of 1S75, chap. amended by Laws of iSSo, chap. 208. 427. See ante, p. 15. 114 THE LAW OF CORPORATIONS. fourths in amount of its stockholders, unless otherwise pro- vided in its charter, by altering or amending its charter in this respect, and filing a copy of the charter, so amended together with a declaration under its corporate seal, signed by its president and directors, of their desire so to do, with the consent of the stockholders to such increase, in the office of the Superintendent of the Insurance Department.' Increase or Decrease of Capital Stock by Title Guaranty Com- panies. — The capital stock of any corporation organized under th-e act to provide for the organization and regulation of cor- porations to examine and guaranty bonds and mortgages and titles to real estate may be increased to an amount not to exceed one million dollars, or reduced not below one hundred and fifty thousand dollars, by a vote of the majority of the stockholders in number, and representing a majority of the capital stock of such corporation at any meeting, con- vened for that purpose, pursuant to a notice specifying the object of such meeting, and served upon each stockholder by depositing in the post-ofifice, properly addressed to his last known place of residence, postage prepaid, at least five days before the time of such meeting. A statement of such increase or reduction must be filed in the office of the Superintendent of the Insurance Depart- ment and of the clerk of the county in which the principal business office of such corporation is situated, within ten days after such action." Reduction of Capital Stock by Banks. — Any banking associa- tion organized under the general banking laws of this state may reduce its capital stock to an amount which shall be equal to its property and effects above and beyond all its debts and liabilities, and the par value of its shares shall be reduced in the same proportion; but in no case may the capital be reduced below the amount required by law.' * Laws of 1886, chap. 611, § 12. as amended by Laws of 1886, chap. * Laws of 1885, chap. 538, g 13. 575. ^ Laws of 1882, chap. 409, § 41, THE CAPITAL STOCK. II5 Notice of such intention must be given to the Superin- tendent of the Banking Department, in writing, signed by a majority of its board of directors, and accompanied by the written assent to such reduction of at least two-thirds in amount of the shareholders.' Upon filing such notice the Superintendent of the Bank- ing Department will make an examination of the books, property, effects and liabilities of such banking association, and from the result thereof determine and certify the reduced amount of capital stock.'' The determination and certificate in writing so made of the amount to which the capital stock has been reduced must be recorded in the office of the clerk of the county in which such bank is located, and a certified copy filed in the Banking Department of the state, and must be published by the Superintendent of the Banking Department once a week for six weeks successively in the state paper, and at least one newspaper in the county where such bank is located.' It is provided that the liability of the stockholders of such bank shall in no wise be affected by such reduction, nor the rights, remedies or security of any creditors im- paired." Reduction of Capital Stock by other Moneyed Corporations. — Substantially the same provisions as those above stated in regard to banks are extended to trust companies and other moneyed corporations, organized under the laws of this state, and required to report to the Superintendent of the Banking Department.* May Increase their Capital Stock. — Any such corporation, having reduced its capital, may, after such reduction has been made, increase its capital stock to an amount not ex- ceeding the amount provided in its charter. Such increase must be apportioned among the stock- ' Laws of 18S2, chap. 409, § 42. * Id. § 45. * Id. § 43- ^ Id. §§ 228-231. 3 Id. § 44. Il6 THE LAW OF CORPORATIONS. holders of such company, who must severally be notified in writing of such apportionment, and such notification mailed to or delivered at the last known residence of each share- holder ; and if they or any of them shall not, within one month after service of such notice, accept the amount so apportioned, then such increase or the amount not accepted by the stockholders may be sold and distributed by the board of trustees in such manner as it may determine. Upon the payment to the company in money of such in- creased capital, the board of trustees must certify the same to the Superintendent of the Banking Department, who will require satisfactory proof that the increased capital has been actually been paid in in money, and such proof must be in writing, and filed in the Banking Department.' The attorney-general, in an opinion filed October twen- tieth, 1883, held that a bank might reduce its capital stock for the purpose of making good an impairment of its capital, even after a requisition had been made upon it by the Superintendent to make it good. And he further held that its own stock, held by it, should be counted as an asset of the bank, but that it could not be used in petitioning for such reduction.^ The act to provide for the organization of trust com- panies, etc., contains a provision that the capital stock of a trust company may be increased from time to time by a vote of two thirds of its stockholders, in number and amount, to a sum not exceeding two million dollars.' The act contains no provisions as to the manner of in- crease, and trust companies are expressly excepted from the general act providing for the increase of capital stock by corporations,* nor does the act apply to trust companies chartered by special acts of the legislature and existing at the time of the passage of the act.' 1 Laws of 1882, chap. 409, § 232. ^ Laws of 1S87, chap. 546, § 19. ' The opinion is given in full in * Ante, p. 108. Paine's Banking Laws, p. 120. '" Laws of 1S87, chap. 546, § 37. THE CAPITAL STOCK. I17 Increase of Capital Stock by Safe-Deposit Companies. — Corpora- tions organized under the act to authorize the formation of corporations for the safe-keeping and guarantying of personal property may increase their capital stock to an amount not to exceed one million dollars by the board of trustees, on application in writing signed by the stockholders represent- ing a majority of the stock. A statement of such increase must be filed in the ofifice of the clerk of the county in which the business of the cor- poration is carried on, and duplicates thereof in the office of the secretary of state and in the Banking Department of the state.' Increase of Capital Stock by Railroad Companies. — Any com- pany, organized and existing under the laws of this state, in case the capital stock of the company is found to be in- sufficient for constructing and operating its road, may, with the concurrence of two-thirds in amount of all its stock- holders, with the written approval of the board of railroad commissioners, increase its capital stock from time to time to any amount required for such purposes. Such increase must be sanctioned by a vote, in person or by proxy, of two-thirds in amount of all the stockholders of the company at a meeting called by the directors for that purpose, by a notice in writing to each stockholder, served on him personally, or by mail, at least twenty days prior to such meeting. Such notice must state the time and place of such meeting, its object and the amount to which it is pro- posed to increase the capital stock. The proceedings of such meeting must be entered on the minutes of the proceedings of the company, and the capital stock may thereupon be increased to the amount sanctioned by a vote of two thirds in amount of all the stockholders. A copy of such notice must also be published within the county wherein the main office of such company is located, • Laws of 1875, chap. 613, § i, as amended by Laws of 18S3, chap. 273. Il8 THE LAW OF CORPORATIONS. once a week for four weeks prior to such meeting, in a news- paper to be designated by the board of railroad commis- sioners.' Increase in Case of Reorganization. — Whenever the maximum amount of capital stock mentioned in the certificate of in- corporation of any railroad company on file in the ofifice of the secretary of state shall be insufficient to carry out any plan or agreement of reorganization set forth in such certifi- cate of incorporation, a majority of the directors may file an ad"ditional certificate with the secretary of state, setting forth the fact of such insufficiency and the additional amount of capital stock required to carry out such plan or agreement of reorganization ; and thereupon, with the approval of the state engineer or surveyor, the company may issue such capital stock as fully as if the same had been mentioned or set forth in the original certificate of incorporation. Such additional certificate must be filed in the office of the secre- tary of state within two months after the passage of the act^ Increase and Reduction of Capital Stock by Companies organized to operate Railroads in Foreign Countries. — Any corporation formed under this act may from time to time, at any regular- or special meeting of the board of directors, reduce the amount of its capital stock or increase the same with the consent in writing of stockholders owning two-thirds of the capital stock. If any increase or reduction of the capital stock is made, a certificate of the fact, signed by the presi- dent and secretary of the corporation, must be filed in the office of the secretary of state within thirty days thereafter.' Increase of Capital Stock by Bridge Companies. — The directors of every such corporation may at any time, with the consent of the majority in amount of the stockholders of such cor- ' Laws of 1850, chap. 140, § 9, as what uncertain whether it was in- amended by Laws of 1889, chap. tended to have an application to 426. companies not then availing them- '^ Laws of 1880, chap. 155, § i. selves of its provisions. While the language of the act is gen- ^ Laws of 1881, chap. 468, § Ti. eral, the last clause renders it some- THE CAPITAL STOCK. I I9 poration, provide for such increase of its capital stock as may be necessary for the completion or reconstruction of its bridge. The certificate of the amount of any such increase must, within thirty days thereafter, be filed in the offices of the state engineer and surveyor and the clerks of the counties where such bridge is located, which certificate must be au- thenticated by the signatures and oaths of a majority of the directors.' Increasing and Decreasing Capital Stock by Building Companies. — Companies organized for the purpose of erecting buildings, etc., may increase or diminish their capital to any amount not less than three thousand dollars by proceedings sub- stantially similar to those in the case of companies organized under the Manufacturing Act." Increasing and Decreasing Capital Stock by Business Corporations. — Section 15 of the Business Act provides that the capital stock of any corporation organized under the act may be increased to an amount not to exceed in the aggregate two millian dollars, or reduced by a vote of a majority of the stockholders in number and representing a majority of the stock of such corporation, at any meeting thereof convened for that purpose, pursuant to notice thereof mailed to each stockholder at least five days before such meeting. A statement of such increase or reduction must be filed in the office of the secretary of state and of the clerk of the county in which the principal business office of such corpo- ration is situated, within ten days after such action. But before any corporation shall be entitled to diminish the amount of its capital stock, if the amount of its debts and liabilities exceed the amount of capital to which it is pro- posed to be reduced, such amount of debts and liabilities must be first satisfied and reduced so as not to exceed such diminished amount of capital.^ ' Laws of 1848, chap. 259, § 13. chap. 238. 'Laws of 1853, chap. 117, §§ " Laws of 1875, chap. 611, § 15. 20-22, as amended by Laws of 1883, I20 THE LAW OF CORPORATIONS. It will be noticed that this section provides only for an increase up to two million dollars, which is the amount of capital originally authorized by the act, but which has sub- sequently been increased to five million dollars. No par- ticular formalities are prescribed, but as the section can be availed of in order to diminish the amount of capital stock only by corporations organized under the act prior to May 15th, 1878, and as even such corporations may avail them- selves of the general act,' its provisions and limitations become of comparatively httle importance. Increasing Capital Stock of Ferry Companies. — The capital stock of ferry companies may be increased up to the limit specified in the certificate of incorporation by a vote of the stockholders representing a majority of the whole stock of the company, at any annual meeting or special meeting called for the purpose. When any increase is determined upon, a certificate thereof, signed by a majority of the directors, must, within ten days thereafter, be filed in the ofifices in which the original certificate has been filed.^ Increase of Capital Stock by Driving-Park Associations. — Such associations may increase their capital stock to any amount not exceeding that provided in the act of incorporation, at any annual meeting, by a vote of not less than two-thirds in amount of the stockholders. Twenty days' notice of such intention must have been given to each stockholder by mail- ing to him such notice, stating the time and place of such meeting and to what amount it is proposed to increase the capital stock." Increase of Capital Stock by Pipe-Line Companies. — The act for the incorporation of pipe-line companies contains the following provisions as to the increase of capital stock : " In case the capital stock of any company formed under this act is found to be insufficient for constructing and oper- * Ante, p. 107. ^ Laws of 1872. chap. 24S, § 7, as 2 Laws of 1853, chap. 135, § 15. amended by Laws of 1886, chap. 140. THE CAPITAL STOCK. 121 ating its pipe line, such company may, with the concurrence of two-thirds in amount of all its stockholders, and upon an order of the supreme court to be granted in the discretion of the court, upon the petition of the directors, and notice of such application, of not less than fifteen days, upon all stockholders appearing upon the stock book of said corpo- ration, who shall not have consented to such increase (in such manner as the court shall direct), increase its capital stock from time to time, to any amount required for such purposes, and in all such cases the petition to the court shall be by affidavit, and shall show the amount of the proposed increase, and the reasons therefor ; that two-thirds in amount of all the stockholders of such corporation entitled to vote at such meeting, personally or by proxy, had voted for such increase at a meeting of the stockholders, called by a resolu- tion of the directors for that purpose, and notice thereof served upon each stockholder thereof at least twenty days previous to the time of such meeting, and that such notice contained the time, place and object of such meeting, and the amount to which such capital stock was proposed to be increased, and that the amount of the increase prayed for in the petition is not for a greater amount than that specified in such notices; and thereupon, upon the hearing, the court may make an order, in its discretion, increasing the capital stock of such company in the amount prayed for in such petition, or in such lesser sum or amount as the court may fix, and upon the filing and entry of such order the capital stock of such corporation may be increased in the amount mentioned therein, and the directors may proceed to take and receive subscriptions in the same manner as provided for in the original organization of such a corporation." ' ' Laws of 1878, chap. 203, § lo. As would follow that this would un- this act is later than the general act doubtedly be the only manner in for the increase of capital stock of which such corporations could effect corporations generally, and contains an increase of their capital stock, particular formalities to be taken, it See atite, p. 108. 122 THE LAW OF CORPORATIONS. Increase of Capital Stock by Stage-Coach Companies. — The capital stock of such companies may be increased to any amount required for their business. Such increase must be sanctioned by a vote of two-thirds in amount of all the stockholders of the company, at a meeting of the stock- holders called by the directors for that purpose, by a notice served, personally or by mail, at least twenty days prior to such meeting. Such notice must state the time and place of such meeting and its object, and the amount to which it is proposed to increase the capital.' Increase of Capital Stock by Telegraph Companies. — Telegraph companies may provide in their articles of association for an increase of their capital and number of shares. But if any such association has omitted so to do, it may increase its capital, after a notice of such intention has been published once a week for six weeks successively in the state paper, and in any newspaper of general circulation published in the county where the principal office of such company is located, and with the written consent of stockholders owning three- fourths in amount of the then capital stock, by making and executing an additional certificate, which must be proved and acknowledged by a majority of the board of directors and filed in the same manner as the original certificate.'' Increase of Capital Stock by Turnpike Companies. — The act for the incorporation of turnpike and plank-road companies provides that the directors of every such company rnay at any time, with the consent of a majority in amount of the stockholders of such company, provide for such increase of its capital stock as may be necessary to finish the making of a road actually commenced and partly constructed, but not to exceed five thousand dollars per mile for each mile of road.' Increasing and Decreasing Capital Stock by Water-Works Com- panies. — Any company formed under the act in relation to 1 Laws of 1867. chap. 974, § 9. amended by Laws of 1875, chap. 319. "^ Laws of 184S, chap. 265, g 8, as ^ Laws of 1S47, chap. 210, § 40. THE CAPITAL STOCK. 1 23 the creation and formation of water-works companies in towns and villages of the State of New York may increase or diminish its capital stock to any amount which may be deemed sufficient and proper for the purposes of the com- pany, by a vote of the stockholders representing not less than two-thirds of the capital stock, at any meeting of the stockholders, duly called, and signing and acknowledging a certificate showing the amount of the capital stock of the company, the amount to which it is to be increased or diminished, and the amount of the capital stock owned or represented by each of the persons signing the certificate, which certificate must be signed by stockholders owning or representing not less than two-thirds of the capital stock of the company, and acknowledged before some officer com- petent to take the acknowledgment of deeds, and filed in the office of the clerk of the county in which the certificate of the organization of the company is filed, and a duplicate thereof in the office of the secretary of state ; and when so filed, the capital stock of such company will be increased or diminished to the amount specified in such certificate ; pro- vided, if the amount of the debts and liabilities of the com- pany exceeds the amount of capital to which it is proposed to be reduced, such amount of debts and liabilities shall be satisfied and reduced so as not to exceed such diminished amount of capital.' STOCK CERTIFICATES AND TRANSFERS OF STOCK. The shares of stock of a corporation are personal prop- erty,^ and a certificate is the evidence of the stockholder's title thereto.* In the absence of statutory pro/isions regu- ' Laws of 1881, chap. 77. the various companies referred to in * Weaver V. Barden, 49 N. Y. 2S6. Chapter I), but this is only declara- It is very common for an article to tory of the law. be inserted in acts of incorporation ^ Jer-maiii v. Lake Shore dr" Mich. providing that the stock of such com- South. Ry. Co., 91 N. Y. 483. As pany shall be deemed personal es- to the rights of stockholders to certifi- tate (see Laws of 1848, chap. 40, cates, etc., see Chap. VI., /ojA § 8, and the acts of incorporation of 124 THE LAW OF CORPORATIONS. lating the number and par value of shares, they may be of any desired number and par value that the by-laws may prescribe, and shares may be divided and certificates issued for fractional shares ; but, except as expressly authorized, the number and par value of the shares cannot be changed from the number and amount adopted at the organization/ Nor can a company, except as authorized by its act of incorporation, impose a lien upon its shares for the in- debtedness of the shareholder to the company ;'' nor can it, except as so authorized, declare the forfeiture of its shares for the non-payment of instalments of subscription/ The several acts of incorporation generally contain pro- visions regulating the nature and transfer of stock,' and also frequently in regard to the increase and decrease of number of shares, forfeiture, etc. The principal provisions are given below. Under the Manufacturing Act. — This act provides that the stock of such company shall be deemed personal estate, and shall be transferable in such manner as shall be prescribed by the by-laws of the company ; but no shares shall be trans- ferable until all previous calls thereon shall have been fully paid in, or shall have been declared forfeited for the non- payment of calls thereon." It is further provided that the trustees may call in and demand from the stockholders, respectively, all such sums of money by them subscribed, at such times and in such pay- ments or instalments as the trustees shall deem proper, under the penalty of forfeiting the shares of stock subscribed for, and all previous payments made thereon, if payment shall not be made by the stockholders within sixty days after a personal demand or notice requiring such payment ' Oldtown R. R. Co. v. Veazie, 39 Driscollv. West Bradley, etc., M. Co., Me. 571 ; Salem Mill Dam Co. v. 59 id. 96. Ropes, 6 Pick. 23. ^ In re Long Island R. R. Co., 19 ' Bank of Attica v. Mann/actwrrs Wend. 37. dr- Traders' Bank, 20 N. Y. 501 ; * Laws of 1S4S, chap. 40, §8. THE CAPITAL STOCK. 1 25 shall have been pubHshed for six successive weeks in the newspaper nearest to the place where the business of the company shall be carried on as aforesaid.' The lesral title to stock cannot be transferred after disso- lution," but the interest of the owner may be assigned sub- ject to all existing equities.' Any such company may increase the number of shares of which its capital stock consists, provided its capital stock shall not thereby be increased or diminished." Such increase must be made by a vote of the stockhold- ers representing two-thirds of the capital stock, at any meet- ing of the stockholders called in the manner prescribed in the act, by executing and acknowledging an amended cer- tificate specifying the number of shares of which the capital stock of the company shall thereafter consist and the par value of each share, and in other respects conforming to the original certificate. The amended certificate must be signed by the president and two-thirds of the directors of such com- pany, and be filed in the ofifice of the secretary of state and in the clerk's office of the county wherein the original cer- tificate was filed." Each stockholder will be entitled to a certificate for such a number of shares of the capital stock, after the whole number has been increased, as shall at their par value be equal to the par value of the shares previously held by him in such company, on surrendering the old certificate to be cancelled. No such increase shall be made as to divide the shares, and give a fractional part of a share to any stock- holder.' Business Corporations. — The capital stOCk of corporations formed under this act must be divided into shares of not less than ten dollars, nor more than one hundred dollars • Laws of 1848, chap 40, § 6. 59 id. 96. ^ James v. Woodruff, 2 Den. 574. •* Laws of 1866, chap. 73, § I. 3 Weaver V. Barden, 49 N. Y. 286 ; * Id. g 2. Driscollv. West Bradley, etc., M. Co., ^ Id. ^ 3. 126 THE LAW OF CORPORATIONS. each. All subscriptions are made payable to the corpora- tion, in such instalments and at such time or times as may be fixed by the by-laws, or by the directors acting under the by-laws. If default is made in any payment on sub- scription, an action may be maintained in the name of the corporation to recover any instalment remaining due and un- paid for the period of thirty days after the time fixed for its payment. And no stockholder is entitled to vote at any election or at any meeting of the stockholders on whose stock any instalments or arrearages may have been due and unpaid for the period of thirty days immediately preceding such election or meeting. Such a corporation may by its by-laws prescribe other penalties for a failure to pay instalments, not exceeding for- feiture of stock and the amount paid thereon. No such forfeiture can be declared against any stockholder before demand has been made for the amount due thereon either in person or by a written or printed notice mailed to such stockholders at least thirty days prior to the time when such forfeiture is to take effect. Upon such forfeiture the shares of stock held by such delinquent stockholder must be sold at public auction at the office of the corporation, after ten days' notice conspicuously posted in such office, and the proceeds of the sale, over and above the amount due on such shares and after deducting the expense of the sale, must be paid to the stockholder.' The directors of such corporations must prepare certifi- cates of stock and deliver them, signed by the president and treasurer and sealed with the seal of the corporation, to each person entitled to receive them according to the number of shares held. Such certificates must be transferable at the pleasure of the holder in person or by attorney duly au- thorized, subject, however, to all payments due or to become due thereon. The assignee to whom stock has been trans- J Laws of 1875, chap. 611, § 11, as amended by Laws of 1S83, chap. 102. THE CAPITAL STOCK. 1 27 ferred will be a member of the corporation, and possess all the rights and privileges, and be subject to all the liabilities, of the original holder. But no certificate can be transferred so long as the holder is indebted to the corporation unless the directors consent thereto.' Such companies may increase the number of shares of which their capital stock consists, provided the shares shall not be less nor more than the amounts fixed by the act, in the same manner as is provided for companies organized under the Manufacturing Act.* Title Guaranty Companies. — The act for the incorporation of companies to examine and guaranty bonds and mortgages and titles to real estate, provides that an action may be main- tained in the name of the corporation to recover any instal- ment remaining due and unpaid for thirty days after the time fixed for the payment thereof ; and that no stockholder shall be entitled to vote at any meeting on whose shares any instalment has been due for thirty days preceding such meeting. It also provides that the corporation may prescribe by by-law other penalties for a failure to pay instalments, not exceeding forfeiture of the stock and the amount paid thereon. But no forfeiture can be declared unless a demand shall have been made for the amount due, either in person or by a notice duly mailed to such stockholder at least thirty days before such forfeiture is to take effect ; and in case of forfeiture the shares of such stockholder must be sold at public auction, and the proceeds of such sale, over and above the amount due on such shares and after deducting the ex- penses of such sale, if any, must be paid to such stockholder or his legal representatives.^ Certificates of stock of such companies, signed by the president and treasurer and sealed with the corporate seal, • Laws of 1875, chap. 611, § 12. ante, p. 125. * Laws of 18S4, chap. 397. See ^ Laws of 18S5, chap. 538, § 10. 128 THE LAW OF CORPORATIONS. must be made and delivered to each stockholder, transfer- able at the pleasure of the holder or his duly authorized attorney. But no certificate may be transferred so long as the holder thereof is indebted to the corporation, unless the board of directors shall consent thereto.' Railroads. — If any stockholder in a railroad, organized under chapter 140 of Laws of 1850, neglects to pay any in- stalment of his subscription to the capital stock, as required by a resolution of the board of directors, the board may declare his stock and all previous payments thereon forfeited for the use of the company, upon giving sixty days' notice, either personally or by mail, that if he fails to make such payment his stock and all previous payments thereon will be forfeited for the use of the company.^ It is further provided that the stock of such companies shall be deemed personal estate, and shall be transferable in the manner prescribed by the by-laws of the company ; but that no shares shall be transferable until all previous calls thereon shall have been fully paid in.^ Banks. — The shares of banks are personal property, and are transferable on the books of the association in such man- ner as may be agreed on in the articles of association.* Safe Deposit Companies. — The trustees of such companies may make calls upon the stockholders under the penalty of forfeiture of the shares of stock subscribed for, and all pre- vious payments made thereon, if payment shall not be made by the stockholders within sixty days after a personal demand of the same, or after a notice requiring such pay- ment shall have been published for six successive weeks in 1 Laws of 1S85, chap. 538, § ii. as to forfeiture of shares, upon giv- 2 Laws of 1S50, chap. 140, § 7. ing a like notice to the stockholder The act for the formation of com- thirty days before such forfeiture, panies for the purpose of construct- Laws of 18S1, chap. 468, § 8. ing and operating railroads in foreign ^ Laws of 1850, chap. 140, § 8. countries contains a like provision * Laws of 1882, chap. 409, §47. THE CAriTAL STOCK. 1 29 a newspaper printed in the city or town where the business of the corporation is carried on.' The act further provides that the stock of such corpo- ration shall be deemed personal estate, and shall be trans- ferable in such manner as shall be prescribed by the by-laws of the corporation ; but no shares shall be transferable until all previous calls thereon shall have been fully paid in, or shall have been declared forfeited for the non-payment of calls." Miscellaneous Corporations. — The acts for the organization of the several corporations combined under the above head in the iirst chapter of this work, with the exception of tele- graph companies, contain provisions as to the forfeiture of shares and the instalments paid thereon upon notice to the subscribers,' ' Law$ of 1875, chap. 613, § 6. ganization of such corporations given * Id. § 3. in Chapter I, Article VI, ante. * See the several acts for the or- 130 THE LAW OF CORPORATIONS. CHAPTER IV. THE DUTIES OF OFFICERS AND DIRECTORS. Art. I. Acts Required. Art. II. Acts Prohibited. Article I. Ads required. The acts required of corporations can only be performed by their chosen of^cers or agents, and the law casts upon such officers or agents certain duties which they are required to perform, either as the act of the corporation itself, or as their own act as such officers and agents. In most cases the performance of such duties is enforced by penalties for the failure, exacted either from the corporation itself, or certain of its officers or stockholders. REPORTS. One of the most important of the duties thus imposed is that of making corporate reports. With but few exceptions,' all corporations are required to make periodical reports, with greater or less fulness, of their financial condition. Some of these reports, as in the case of railroads and insur- ance companies, are made with great minuteness, while of others, as in the case of manufacturing and business corpor- ations, much less is requisite. Reports of Manufacturing Corporations. — Animal Reports. — Cor- porations organized under the Manufacturing Act are re- quired, within twenty days from the first day of January, if ' There appears to be no provision panics, navigation companies, or for such reports by hotel com- stagecoach companies. THE DUTIES OF OFFICERS AND DIRECTORS. I3I a year from the time of filing the certificate of incorporation shall then have expired, and if so long a time shall not have expired, then within twenty days from the first day of January in each year after the expiration of a year from the time of filing such certificate, to make a report, which shall be pub- lished in some newspaper published in the town, city or vil- lage, or if there be no newspaper published in such town, city or village, then in some newspaper published nearest the place where the business of the company is carried on, which shall state the amount of the capital, and of the proportion actually paid in, and the amount of its existing debts. This report must be signed by the president and a ma- jority of the trustees, and must be verified by the oath of the president or secretary of such company, and be filed in the ofifice of the clerk of the county where the business of the company is carried on.' How Executed. — Making such a report is a corporate duty to be discharged by making a report signed by the president and a majority of the trustees. The duty is not cast upon the trustees either as such or in their individual capacities. It is the duty of the company to make the report, and the act provides for the manner of performing it."* Thus the secretary of a company, while he is authorized to verify the report in place of the president, and may prepare the report for the signatures ot the proper ofificers, has no authority to subscribe the names of the president and trustees. This can only be done by the persons designated.' The object of the act is to require a statement of suffi- cient distinctness that, if untrue, perjury could be assigned.' P'or this reason acknowledgment is not sufficient. It must ' Laws of 1S4S, chap. 40, § 12, as loi N.Y. 373. amended by Laws of 1875, chap. 510. '^ Bolen v. Crosby, 49 N.Y. 183; As to liability of trustees for failure Sanborn v. Leffcrts, 58 id. 179. to make report, see Chapter V, post. * Whitney Arms Co. v. Barlow, 63 ^ Andrews, J., in Cornell v. Roach, N. Y. 62. 132 THE LAW OF CORPORATIONSc be verified; ' but the verification rrjay be on information and belief.' Where the president, who is a trustee of a corporation, and enough trustees to constitute with him a majority of the board sign the report, it is a compHance with the statute requiring " the president and a majority of the trustees " to sign." Form of Report. — The statute does not provide for the de- tails of the reports of manufacturing corporations. The lan- giiage is extremely concise, providing only that the report shall state "the amount of capital stock and of the propor- tion actually paid in, and the amount of its existing debts." This conciseness, and perhaps indefiniteness, taken in connection with the severe penalty attached to the omission to file a report or the filing of a false report,' has given rise to much litigation, and this section has been the subject of frequent judicial construction. As to what is a compliance with the law in the form of a report the courts have uniformly given a liberal construc- tion. As was said by Allen, J., in Whitney Arms Co. v. Bar- lozv: ' " The reports of corporations should receive a reasonable interpretation, and excessive nicety or exactness should not be exercised in bringing them to the test of the statutes." A substantial compliance with the statute is sufificient. While, therefore, clearness and exactness are certainly de- sirable in such reports, yet if from the report the amount of capital and the proportion actually paid in can reason- ably be ascertained, and if the debts are not under-stated, the statute will be complied with.*^ Where, however, any portion of the capital stock is ^ Brown v. Smith, 13 Hun, 408; further consideration of this section aff'd, 80 N. Y. 650. and the liabilities growing out of it. "" Glens Falls Paper Co. v. IVhite, * 63 N. Y. 62. 18 Hun, 214. ' Whitney Arms Co. v. Barlow, 63 'Id. N. Y. 62; Bonnellv. Griswold, 80 id. •* See Chap. V (/^J-/*) on the liabili- 128; Pier v. Hanmore, 86 id. 95; ties of officers and directors for a Whitaker v. Masterton, 106 id. 277. THE DUTIES OF OFFICERS AND DIRECTORS. n.l issued for property, this stock must not be stated or re- ported as being issued for cash paid iiito the company, but must be reported in this respect according to the fact.' But a statement in a report that a certain amount of capital has been paid in, without specifying that the alleged payment consists of the issue of stock for property purchased, is equivalent to a representation that such capital has been paid in in cash, and constitutes a false report if such be not the fact." It is not, however, essential that the exact amount of stock issued for property and the amount for cash be separately stated. It is sufificient if it appear that all the stock was issued for property, or for cash, or both.' Where a report is susceptible of two different construc- tions, one of which would constitute a false report, while the other would be fairly and reasonably consistent with the facts, if there is no evidence of fraud in making the report, such construction will be given to it as was evidently intended." But wdiere it is impossible to gather from any construction of the report the facts required by the statute, it will constitute a failure to comply with it. IV/icn Report must be made. — The statute directs that the report be made within twenty days from the first day of January, if a year from the time of filing the cer- tificate of incorporation shall then have expired, and if so long a time shall not have expired, then within twenty days from the first day of January in each year after the ex- piration of such time. ' Laws of 1853, chap. 333, § 2. etc., necessary to the business, and 2 Pier V. Hanmore, 86 N. Y. 95. for which stock to the amount of the ^ Whitaker v. Masterton, 106 N.Y. value thereof has been issued by the 277. In this case the report was as company; amount of the existing follows ; " Amount of capital of the debts of the company does not exceed company, $50,000, amount of the $38,500." It was //f/ook>nan v. Met- ance company granted subsequent calf, 32 id. 591. THE DUTIES OF OFFICERS AND DIRECTORS. 157 While the statute has no application in the case of a trans- fer to a bo7ia fide holder for value, or in the usual and cus- tomary course of business,' yet, as the object of the statute is to secure an equal distribution of the effects of the c(jm- pany in case of insolvency, a payment made by such a cor- poration when actually insolvent, or in contemplation of insolvency, and with the intent of giving a preference to creditors, is void, and may be recovered back by a receiver of the company, even though the creditor had no knowledge of the condition of the company at the time of such pay- ment.'^ For such a payment, however, to be prohibited, not only must insolvency actually be contemplated by the officers, but the transfer must be made with the intent of giving a particular creditor a preference over other creditors/ ' Ogden V. Raymond {supra) ; Rob- inson V. Bank of Attica, 21 N. Y. 406 ; Houghton v. McAuliff (supra) ; Dutcher v. Importers &" Traders' yVat. Bank, 59 N. Y. 5 ; Marine Bank v. Clements, 31 N. Y. 33. ^ Brouiver v. Harbeck, g N. Y. 589. ^ Alarine Bank v. Clements, 31 N. Y. 33 ; Curtis v. Leavitt, 15 N. Y. 9. 158 THE LAW OF CORPORATIONS. CHAPTER V. THE LIABILITIES OF OFFICERS AND DIRECTORS. The names directors and trustees are used interchange- ably in the statutes of this state to denote those persons who have the control and management of the affairs of a corpo- ration. Such persons occupy a position of trust, not only towards the stockholders of the corporation, but also towards its creditors.' As is said by Finch, J., in Duncomb v. TJic Nezv York, Housatonic & NortJicrn Railroad Co. {supra), " Whether a director of a corporation is to be called a trustee or not in a strict sense, there can be no doubt that his character is fidu- ciary, being entrusted by others with powers which are to be exercised for the common and general interests of the cor- poration and not for his own private interests, and he falls therefore within the doctrine by which equity requires that confidence shall not be abused by the party in whom it is reposed, and which it enforces by imposing a disability, either partial or complete, upon the party entrusted to deal on his own behalf in respect to any matter involving such confidence." The statutes recognize this fiduciary position of of^cers and directors by imposing upon them certain liabilities and penalties for the neglect or failure to perform the duties de- volving upon their ofifice, or for performing such duties jiegligently or fraudulently. Liability for Withdrawing Capital, etc. — The Revised Statutes provide ' that it shall not be lawful for the directors or man- 1 Hoyle V. Plaitsburgh &= Montreal Co., 84 id. 190. ./?. J\. Co., 54 N. Y. 314; Barnes v. ^ Revised Statutes, part i. chap. Bro7vn, So id. 5^7 ; Duncomb v. New xviii. title 4, § 2. York, Housatonic &^ Nortlierii R. R. THE LIABILITIES OF OFFICERS AND DIRECTORS. 1 59 agers of any incorporated company in this state " to make dividends excepting from the surplus profits arising from the business of such corporation ; and it shall not be lawful for the directors of any such company to divide, withdraw, or in any way pay to the stockholders, or any of them, any part of the capital stock of such company, or to reduce the said capital stock, without the consent of the legislature • and it shall not be lawful for the directors of such company to discount or receive any note, or other evidence of debt, in payment of any instalment actually called in and required to be paid, or any part thereof, due or to become due on any stock in the said company ; nor shall it be lawful for such directors to receive or discount any note, or other evi- dence of debt, with the intent of enabling any stockholder in such company to withdraw any part of the money paid in by him on his stock.' "In case of any violation of the provisions of this section, the directors under whose administration the same may have happened, except those who may have caused their dissent therefrom to be entered at large on the minutes of the said directors at the time, or were not present when the same did happen, shall, in their individual and private capacities, jointly and severally be liable to the said corporation, and to the creditors thereof in the event of its dissolution, to the full amount of the capital stock of the said company so divided, withdrawn, paid out or reduced, and to the full amount of the notes or other evidences of debt so taken or ' The above provisions are made specially applicable to moneyed cor- porations (Laws of 18S2, chap. 409, § 179) ; and by the Penal Code it is made a misdemeanor for a director to concur in any vote by which it is intended to do any of the above acts; or by which it is intended to apply any portion of the funds of such cor- poration except surplus profits di- rectly or indirectly to the purchase of shares of its own stock ; or to re- ceive any such shares in payment or satisfaction of a debt due to such cor- poration ; or to receive in exchange for the shares, notes, bonds or other evidences of debt of such corpora- tion, shares of the capital stock, or notes, bonds or other evidences of debt issued by any other stock cor- poration. Penal Code, § 594. l6o THE LAW OF CORPORATIONS. discounted in payment of any stock, and to the full amount of any notes or evidences of debt so discounted with the intent aforesaid, with legal interest on the said respective sums, from the time such liability accrued ; and no statute of limitations shall be a bar to any suit at law or in equity against such directors for any sums for which they are made liable by this section : provided, that this section shall not be construed to prevent a division and distribution of the capital stock of such company which shall remain after the payment of all its debts, upon the dissolution of such com- pany or the expiration of its charter." The Same of Moneyed Corporations. — In addition to the above prohibitions, the directors of moneyed corporations are for- bidden to make any loans or discounts if the corporation have banking powers by which the whole amount of the loans and discounts of the company shall be made to exceed three times its capital stock then paid in and actually pos- sessed ; or to make any loans or discounts to the directors of such corporation, or upon paper upon which such direc- tors, or any of them, shall be responsible to an amount ex- ceeding in the aggregate one-third of the capital stock of such corporation actually paid in and possessed ; but no securities taken for any such loans or discounts shall be in- valid.' In the calculation of profits of moneyed corporations previous to a dividend, debts or interest accrued and unpaid may not be included ;^ and all interest on debts due and un- paid, and all losses, must be deducted from the actual prof- its ; ' and if the losses sustained exceed the undivided prof- its, they must be charged as a reduction of the capital stock, and no dividend may thereafter be made on the shares of such stock until such deficit is made good ;* and if in conse- quence of such reduction the whole amount of the loans and ' Laws of 1882, chap. 409, § 179. ^ Laws of 18S2, chap. 409, § 180. And concurrence in such a vote is a ^ Id. § 181. misdemeanor. Penal Code, § 595. ''Id. § 182. THE LIABILITIES OF OFFICERS AND DIRECTORS. l6l discounts made by any corporation having banking powers shall exceed three times the amount to which its capital is or ought to be reduced, enough of such loans must be called in without delay to reduce the whole amount within the prescribed limit.' If any share of its own capital stock shall be hypothe- cated or pledged to any moneyed corporation, and the debt is not paid when due, such shares must be sold within sixty days thereafter ; and if not so sold, and the debt remains unsatisfied, they must be charged at the amount actually paid thereon, as a reduction of the capital stock of the com- pany, and no dividend may be made until such deficit is made good." This section does not make it the absolute duty of the directors to sell the stock in such a case, but the making a dividend is precluded until the deficit is made good.' Any director violating any of the above provisions is lia- ble, personally, to the creditors or stockholders, respectively, for any loss they may sustain.^ The Same. — Manufacturing Corporations. — If the trustees of any company organized under the Manufacturing Act de- clare and pay any dividend when the company is insolvent, or one the payment of which would render it insolvent, or which would diminish the amount of its capital stock, they will be jointly and severally liable for all the debts of the company then existing, and for all that shall thereafter be contracted while they continue in office. If, however, any of the directors object to the declaring of such dividends, or to the payment of the same, and before the time fixed for such payment shall file a certificate of their objection in writing with the clerk of the company and with the clerk of the county, they shall be exempt from such liability.* The Same. — Miscellaneous Corporatioiis. — Those directors 1 Laws of 1882, chap. 409, § 183. 143. "^ Id. § 184. '•Laws of 1882. chap. 409, § 188. ^ Butterworth v. Kennedy, 5 Bosw. 'Laws of 1848, chap. 40, § 13. l62 THE LAW OF CORPORATIONS. of business corporations who vote for such dividends are Ha- ble as in the case of manufacturing corporations.' The directors of gas-hght companies are so hable, pro- vided that if a certificate of objection be filed within thirty days after such payment, they shall be exempt.' The directors of guano companies ' and inland naviga- tion companies ' are liable in this respect in the same man- ner as the directors of manufacturing corporations, except that in the case of inland navigation companies, to free them from such liability, a certificate of the claims and de- mands in favor of and against such companies must first be made by a majority of the trustees, and verified by the president and secretary, and filed in the same manner as the original certificate ; and no dividend may be paid unless the net value of the property, claims and demands of such com- pany, as shown in such certificate, is as much as the capital stock. ^ Construction of the Above Statutes. — The object of the prohi- bitions contained in such statutes as the above is to pre- vent the dissipation of the fund designed for the security of creditors and all who have occasion to deal with such cor- porations ; and courts will look at the substance of the act rather than to the mere form for a test of the liability. There- fore any act on the part of the directors which has the effect of dividing the assets of a company among the stockholders, and thus impairing the fund available for creditors, makes the directors liable under the statute." But such prohibi- tions are for the benefit of the creditors and not of the stockholders, and therefore a receiver of a corporation can- not recover from the directors dividends so declared for the benefit of the stockholders.' 1 Laws of 1875, chap. 6n, § 19. ^ Gillet v. Moody, 3 N. Y. 479". ^ Laws of 1848, chap. 37, § 13. Rorke v. Thomas, 56 id. 559. 3 Laws of 1857, chap. 546, § 13. '' Butterworih v. O'Brien, 39 Barb. *Lavvs of 1854, chap. 232, § 14. 192. ^Id. §13. THE LIABILITIES OF OFFICERS AND DIRECTORS. 163 Where a remedy against the directors of a corporation for the impairment of the capital is given by a general act, and a subsequent act for the incorporation of companies for certain specific purposes contains a provision relating to the same matter and establishing a different penalty, the directors of such corporations can be held liable only under the act under which the corporation was organized. Ac- cordingly it was held that the trustees of a corporation organized under the Manufacturing Act' were not liable under the Revised Statutes for declaring and paying a dividend which diminished the amount of the capital stock, but that the liability was solely under section 13 of the Manufacturing Act, which imposed a different penalty from that imposed by the Revised Statutes and prescribed different modes of escaping from the results of the same act.' Loans to Stockholders Prohibited. — The provisions in re- spect to loans by moneyed corporations to their directors have been considered above. ^ In certain corporations all loans to stockholders are pro- hibited, and the of^ccrs who make such loans, or who assent thereto, become jointly and severally liable, to the extent of such loans and interest, for all the debts of the company contracted before the repayment of the sums so loaned. The following corporations are subject to the same pro- vision : corporations organized under the Manufacturing Act;' corporations organized under the Business Act;' building companies organized under chapter 117 of the Laws of 1853,° The liability under this statute is not to the company nor to the general creditors of the company, but only to those ' Laws of 1S4S, chap. 40. * Laws of 184S, chap. 40, § 14. 2 Excelsior Petroleum Co. v. Lacey, ^ Laws of 1S75, chap. 611, §20. 63 N. Y. 422. 6 Laws of 1S53, chap. 117, § 14. ^ A7ite^ p. 160. l64 THE LAW OF CORPORATIONS. who were creditors prior to the repayment of the loan ; and it seems, therefore, that the receiver of a corporation cannot maintain an action against a director for having partici- pated in making such a loan.' And in any event there must have been an actual loan of money, in such a form as to create an indebtedness and liability for repayment on the part of the stockholder in order to sustain the action. It was accordingly held in the case last cited, where stock had been voted to a stockholder in payment for patents, and subsequently a portion of the stock was retained and a money payment made instead, the stock to be delivered to him whenever he should repay the money, that this consti- tuted, at most, an option or privilege to take the stock upon the repayment of the money, but that it was in no sense a loan and created no obligation to pay the money on his part, and directors assenting thereto were not liable." Where a loan is in fact made, the directors assenting thereto are not freed from liability by informing the other of^cers and stockholders of the loan.^ Liability for FaUure to make Annual Report. The Manufac- turing Act provides that if any company organized under the act shall fail to file and publish its annual report as re- quired by the act,^ all of the trustees of the company shall be jointly and severally liable for all of the debts of the company then existing, and for all that shall be contracted before such report shall be made ; but whenever under this section a judgment shall be recovered against a trustee severally, all the trustees of the company shall contribute a ratable share of the amount paid by such trustee on such judgment, and such trustee shall have a right of action against his co-trustees, jointly or severally, to recover from them their proportion of the amount so paid on such judgment." 1 Billings V. Trask, 30 Hun, 314. ■* Ante, p. 130. 2 Id. 5 Laws of 1848, chap. 40, § 12, as 5 Clarkv. Acosta, 9 Bosw. 158. . amended by Laws of 1875, chap. 510. THE LIABILITIES OF OFFICERS AND DIRECTORS. 165 This provision is contained literally or substantially in the acts for the incorporation of the following companies : business corporations ;' building companies ;' and gas-light companies.' Construction of the Statute. — We have seen in the preced- ing chapter what constitutes a sufficient report under the above section, and the necessary acts to be done in regard to filing and publishing the same; and if a report is made which conforms with these requirements no liability exists." The liabilities imposed by this section are wholly created and regulated by the special provisions of the act.^ If the act is in form complied with, no liability attaches under this section, even though there might be a liability under some other section of the act.* Therefore in an action under this section for failure to file a report it was held that trustees were not liable for fil- ing a false report, as the penalties imposed in that case are different, and the liabilities are incurred by different per- sons ;' but in so far as they are against the same persons, the two causes of action may probably be joined.* ' Laws of 1875, chap. 611, § 18, 294; Butler v. Sfiialley, 17 J. & S. as amended by Laws of 1884, chap. 492, reversed on other grounds, loi 20S. N. Y. 71. In Bomiell v. Griswold ■^ Laws of 1853, chap. 117, § 12. the question arose on a demurrer, This act does not contain the last but not being necessary to the de- clause providing for a contribution cision of the case the court suggests among the trustees; and without the question without deciding it. In such provision no contribution can Btitler v. Sntalley the General Term be compelled. Andrews v. Murray, of the Superior Court held that the 33 Barb. 354. two causes of action might be joined; ^ Laws of 1848, chap. 37, § 12. No but there being no finding of a fraud- provision for contribution; see pre- ulent intent in the case, the claim for ceding note. liability for filing a false report was * See pp. 130-135 and notes. not urged on the appeal to the Court * Blake v. Grisivold, 104 N. Y. 613. of Appeals and the question is not * Bonnellv. Griswold, 80 N. Y. 128; passed upon, although the court re- Whitney Arms Co. v. Barlow, 68 id. fers to the abandonment of that por- 34. tion of the case without intimating ' Bonnell v. Griswold, So N. Y. that the two causes of action could 128. not be joined. * Bonnell v. Griszuold, 68 N. Y. 1 66 THE LAW OF CORPORATIONS. It is not necessary that all the liabilities be enforced by one action. There may be as many different actions against the trustees as would lie against the corporation ; and the actions may be brought against one, some or all of the trustees, and be prosecuted at the same time.' Nor is it necessary that an action be first brought against the cor- poration.^ The foundation of the action is a debt existing at the time of the failure to file the report. And the penalty is im- posed upon all who were trustees at the time of the default for the debts then existing,' or for such debts as may be ' /?oac/i V. Duckworth, 95 N. Y. 391. 2 Esmond v. Bullard, 16 Hun, 65; Miller M.White, 50 N.Y. 137; Rorke V. Thomas, 56 id. 559, 3 Garrison v. Howe, 17 N. Y. 458; Boughton V. Otis, 21 id. ibi\ Jones v. Barlow, 62 id. 202; Bruce v. Piatt, 80 id. 379. As to whether a judgment against a corporation is in any case an " ex- isting debt" within the terms of the statute is a question of some per- plexity. It seems to be pretty well settled that such a judgment is not even prima facie evidence of such a debt as against a trustee who was not a party to the action. Miller V. ^/aV(?, 50 N. Y. 137; McMahonv. Macy, 51 id. 155; Rorke v. Thomas, 56 id. 559; Whitney Arms Co. v. Bar- low, 63 id. 62. In Miller v. White an action was brought against the defendants as trustees of a corporation for failure to make the annual report. The complaint set forth the recovery of a judgment against the company, that the execution had been returned un- satisfied, and the judgment was still unpaid and in full force. Upon the trial a motion was made to dismiss the complaint on the ground that it did not set forth any original cause of action against the company. The motion was denied and exception taken. The judgment roll was offered in evidence, and the court held the judgment conclusive against the defendants and directed a verdict for plaintiff. No evidence of any default in making the report subsequent to the entry of the jurig- ment was given, though subsequent defaults were alleged. The Court of Appeals in reversing the judgment in this case did so on the ground, as stated in the opinion, that " the prin- ciples of law are better sustained by holding this judgment not evidence against these defendants; that they are neither parties nor privies to it, and that they should not be bound by it ; that for this as for other claims they should be personally served with process, and given an oppor- tunity of trying the question of debt." The authorities upon this question are collated in the opinion. In Esmond v. Bullard, 16 Hun, 65, the question as to whether a judg- ment was such a debt was discussed, and it was held that a judgment against a corporation for a tort was not a liability for which the trustees THE LIABILITIES OF OFFICERS AND DIRECTORS. 167 incurred while the default continues ; and a person who be- comes a trustee after the twenty days from the first of January, if there has been default in making such report, is liable for all debts incurred while he is trustee until such could be held. This case was affirmed on other grounds, sub no- mine Losse V. Bullard, 79 N. Y. 404. In Letvis v. Artnstrong, Supreme Court, Special Term, 1880, 8 Abb. N. C. 385, it was held, oti a demurrer to the complaint, that a judgment against the corporation on a contract was an existing debt within the meaning of the statute. In J^orkd V. Thomas, 56 N. Y. 559, which was an action against trustees for paying a dividend when the com- pany was insolvent, based on a judgment against the corporation for damages for breach of contract and costs, the judgment was modi- fied by striking out costs and in- terest on the judgment against the company and. as modified, affirmed, on the ground, as expressed in the opinion, that "the costs are not within the terms of the statute." In Allen v. Clarke, 43 Hun, 377, it was held, relying upon Miller v. IVhite, that a judgment for costs against a plaintiff corporation, re- covered in an action for trespass commenced by it, is not such a debt of the corporation as will make a trustee liable for failure to make a report. This case was reversed in the Court of Appeals (loS N. Y. 269); Earl, J., in giving the opinion of the court, saying: "The sole question for our deter- mination is whether the judgment for costs in favor of [the plaintiffs] in an action brought against them by the company for a tort is a debt which can be enforced against the defendant as a trustee of the com- pany, by reason of its failure to make, publish and file the report re- quired by section 12. . . . "This judgment for costs was in every sense a debt of the company which it was under precisely the same obligation lo pay as any other debt. It IS true it was not a debt existing antecedently to the judg- ment, but it was a debt created by the judgment itself; and as it was a debt against the corporation which it was bound to pay, it could be en- forced against the defendant. " It may be that the judgment is not collusive as against the defend- ant, and it is undoubtedly open to him to show that the recovery was either collusive or fraudulent. But it is a debt created by the judgment itself. It is proved by the produc- tion of the judgment, and that is at \eci.s\. prima facie evidence of its ex- istence. It is unlike the case of Miller v. IVkite, where the judgment was upon a debt antecedently ex- isting, in which case it was held that the judgment was neither conclusive nor prima facie evidence of the debt, and that it was the duty of the plain- tiff to prove and establish his debt independently of the judgment. The reason upon which that decision is based can have no application to a case like this, where there was no liability on the part of the company to pay ihe costs antecedently to or independently of the judgment." The distinction in these cases, which is certainly narrow, is that where an antecedent debt against the corporation exists, a judgment 1 68 THE LAW OF CORPORATIONS. report is made.' But his liability is limited to debts con- tracted while he remains a trustee. Therefore a person who was a trustee when default was made is not liable for debts contracted after he ceased to be a trustee, although the default continued.' And where a trustee resigned after the debt was incurred but before the time for making the report, it was held that he was not liable for the failure to make such a report, nor was it nec- essary for him to give notice of his resignation to any one other than his associates.^ But, on the other hand, if a per- son participates in the meetings and in the business transac- tions of the company, and so acts generally as to induce the public to consider him an officer of the company, he may, as a de facto trustee, become liable for such a default, even if he were never legally elected ;* so in like manner a trustee who holds over without election and continues to act as such trustee is liable ;' and it being proved or admit- ted that he was a trustee prior and subsequent to the de- based on such a debt is no evidence against the trustees, and does not constitute a debt for which they are liable ; but if there be no antecedent debt, one may be created by a judg- ment; but whether under circum- stances essentially different from those in the last case, where the judgment was incurred by the af- firmative act of the corporation, is doubtful. 1 Chandler v. Hoag, 2 Hun, 613; aff'd. 63 N. Y. 624. 5 Shaler &^ Hall Quarry Co. v. Bliss. 27 N. Y. 297. 3 Bruce v. Plait, 80 N. Y. 379. But a mere statement made by a trustee to a fellow-trustee, that he would have no more to do with the company, cannot be construed as a resignation. The intention to resign must be brought home to the corpor- ation. Kindburg v. Mudgett, Sup. Ct., Gen'l. Term., 24 Wk. Dig. 229. And declarations by a director to the secretary and treasurer of a company at the time of assigning his stock to the latter individually that he severed all connections with the company and would have nothing to do with it, but without any request that his resigna- tion be communicated to the board is not sufficient; and evidence that such director, after assigning his stock, consented to take back a new certifi- cate of the requisite number of shares to entitle him to continue a director, is sufficient to justify the inference that he intended to remain one. Chemical Natl. Bank v. Colwell. Common Pleas, Gen. Term., 9 N. Y. Supp. 285, 288. * Easterly v. Barber, 65 N. Y. 252. 5 Cra7v V. Easterly, 54 N. Y. 679; Dewing v. Puleston, 55 id. 655; Van Amburgh v. Baker, 81 id. 46. THE LIABILITIES OF OFFICERS AND DIRECTORS. 169 fault, it will be presumed that he continued to act as such.' But where his'term of office had expired before contracting the debt for which it is sought to make him liable, it is nec- essary for plaintiff to prove that he held over and continued to act as trustee. This will not be presumed, and any cir- cumstances that tend to show that he was not in fact a trustee at the time of the default, such as bankruptcy and an assignment of his stock to an assignee, are admissible to show that he was not.* Nor is it sufficient to show that a person is a stockholder and was elected a trustee. If there were no acceptance of the office and no conduct in- dicating an intention to accept it, no liability attaches/ A debt imposed upon a corporation by the fraud of a creditor or his agent will not render the trustees liable under this section ; * nor are they liable where bonds issued by the corporation were, to the knowledge of the plaintiff, diverted from the purpose for which they were intended;* nor where recovery is sought for the tortious act of the corporation ; * nor where the action is on an unliquidated claim for damages; ' nor where the obligation to pay is contingent ; * nor, perhaps, where an action has previously been brought against the corporation and judgment has been rendered for defendant.' Pleadings and Proofs. — The plaintiff in these actions is held to a strict proof of all the facts necessary to constitute his ' Reedv. Keese, 60 N. Y. 616. ^ Phil. 6^ Read. Coal and Iron Co. V. Hotchkiss, 82 N. Y. 471. ^ Cameron v. Seaman, 69 N. Y. 396- * Adams v. Mills, 60 N. Y. 533. * Kirkldtid V. Kille, 99 N. Y. 390. * Esmond V. Bttllard, 16 Hun, 65. ' Victory Webb Co. v. Beecher, 26 Hun. 48; aff'd. 97 N. Y. 651. ' Whitney Arms Co. v. Barlow, 68 N. Y. 34. ' Tyng V. Clark, 9 Hun, 269. In this case the court held the proposi- tion as above stated on the ground that, having brought an action against the corporation and it having been adjudged that the corporation was not indebted to plaintiff, any claim that plaintiff might have had against the corporation was extin- guished by such judgment. It is difficult to reconcile this decision with the cases above cited, and it would seem, as intimated in Kraft V. Coykendall, 34 Hun, 285, that the dissenting opinion of Mr. Justice Daniels in this case is more in con- formity with the law as now settled. I JO THE LAW OF CORPORATIONS. cause of action. It must be alleged in the complaint that the debt was existing at the time of the default in making the report, or that it was contracted afterwards and before such report was published/ Every fact necessary to estab- lish the liability must be affirmatively proved by the plain- tiff, even though it involve proving a negative, such as failure to publish.'* Where a defendant attempts to rely upon a default made more than three years prior to the commencement of an action, and in his answer sets up an affirmative defence which alleges that the defendants, three in number, had failed to file a report for more than three years, and that more than three years had elapsed since any penalty or claim had arisen against them as trustees in plaintiff's favor, it constitutes no defence in law ; for, as the Manufacturing Act provides that corporations organized under it may have thirteen trustees, it will not be assumed that three constituted a majority of the board." If the prior default had been alleged as a default by the corporation instead of the default of trustees that might constitute less than a majority of the whole number, it would be a good defence, as when a trustee has once become liable for a particular debt, the statute of limitations beeins to run in his favor from that time as to that debt, notwithstanding the default may be continued during suc- cessive years.* The action to enforce the liability of a trustee under this section is not based upon the theory of affording compensa- tion to the injured party for damages sustained by the de- fault complained of, but is highly penal in its nature, and the amount of the debts then existing is the measure of the penalty imposed.^ 1 Chambers v. Lewis, 28 N. Y. 454. Vanderbilt, 98 N. Y. 170; Cornell v. 2 Whitney Arms Co. v. Barlow, 68 Roach, loi N. Y. 373. j^ Y 24. ^ Merchants' Bank v. Bliss, 35 ^ Cornell V. Roach, loi N. Y. 373- N. Y. 412; Jones v. Barlow, 62 id. '^ Losee v. Bullard, 79 N. Y. 404; 202; Losee v. Billiard, 79 id. 404; The Rector, etc., of Trin. Ch. v. Bruce v. Piatt, %o \A. 2-()\ Bonnellv. THE LIABILITIES OF OFFICERS AND DIRECTORS. I/I All the attributes of an action to recover a penalty follow it. It must be commenced within three years from the time the cause of action accrues;' it abates upon the death of either party, and cannot be revived by or against their per- sonal representatives; ' it cannot be interposed as a counter- claim in an action ; ' nor can the cause of action be joined with an action against defendant to charge him with a liabil- ity as a stockholder because of the failure of the corporation to file a certificate of payment of capital stock ; ' and it is no defence that the corporation is indebted to the tru.stee." A trustee sued to enforce this liability is entitled to have the action tried in the county where the cause of action arose, irrespective of the convenience of witnesses;'" and he may .serve an unverified answer to a verified complaint.' All of the trustees being equally chargeable with the duty of making a report, one trustee, being a creditor, cannot re- cover from his co-trustees under this section, nor can his assign- ees nor a firm with which he is connected.' But such duty not being imposed upon the stockholders, a stockholder who is a creditor may enforce the remedy as well as an outside creditor ; " and the action may be maintained by the assignee of a creditor." The liability of the trustee is coextensive with that of the corporation, and he may avail himself of any defence Griswold, id. 12S ; Duckworth v. Roach, 81 id. 49; Veeder v. Baker, 83 id. 156; Pier v. George, 86 id. 613; Stokes V. Stickiny, 96 id. 323; Gadsen V. Woodward, 103 id. 242. ' Merchants' Bank v. Bliss, 35 N. Y. 412; Losee v. Bidlard, 79 id. 404; Duckworth V. Roach, Si id. 49; Rector, etc., Trin. Ch. v. Vanderbilt, 98 id. 170. ■^ Stokes V. Stickney, 96 N. Y. 323; Brackeit v. Griswold, 103 id. 425, Boyle V. Thurber, 50 Hun, 259. In the case of Blake v. Griswold, 104 N. Y. 613, where the plaintiff died after judgment but pending appeal to the Court of Appeals, the represen- tatives of the deceased were substi- tuted in his place. ^ Clapp V. Wright, 11 Hun, 240. ■• Wiles V. Suydam, 64 N. Y. 173. * Morey v. Ford. 32 Hun, 446. « Veeder \. Baker, S3 N. Y. 156. ' Gadsen v. Woodward, 103 N. Y. 242. ^Easterly v. Barber, 65 N. Y. 252; Knox V. Baldwin, So id. 610. ' Sanborn V. Lefferts, 58 N. Y. 179. ^^ Bolen V. Crosby, 49 N. Y. 183; Pier V. George, 86 id. 613. 172 THE LAW OF CORPORATIONS. which would be a valid defence to an action brought against the corporation ; but he cannot set up any defence which would not constitute a legal or equitable defence in such an action.' In such an action the declarations of the president of the corporation in a matter affecting its business and in respect to which he was acting for it are competent evidence against the trustees to prove the indebtedness of the com- pany.^ The strictness with which this section is construed by the colirts is well illustrated in the case of Bonnell v. Griswold^ where it was held that, under the Manufacturing Act, no penalty attaches for failure to make the annual report if all of the capital stock was issued for property purchased. This on the ground that the statute empowering such corporations to issue stock in payment for property was an independent act," not amending any particular section of the Manufactur- ing Act, and that the penal provisions of section 12 could not be extended by implication so as to cover it. This, of course, has no application to companies which are authorized by their acts of incorporation to issue stock for property. Liability for False Reports under the Manufacturing Act If any certificate or report made, or public notice given, by the ofificers of any such company, in pursuance of the provisions of the above act, is false in any material representation, all the ofificers who have signed the same, knowing it to be false, are jointly and severally liable for all the debts of the company contracted while they are stockholders or ofificers thereof.' The cause of action under this section, like that for fail- ing to file a report, is highly penal in its nature and does not affect or concern any property-right or interest, and is not ^ Jones V. Barlow, 62 N. Y. 202; ■* Laws of 1853, chap. 333, § 2. Whitney Arms Co. v. Barlow, 63 id. * Laws of 1848, chap. 40, § 15. It 62; J'!oach v. Duckzuorth, q^ id. 391. is also made a misdemeanor by the * Hoag V. Lamont, 60 N. Y. 96. Penal Code, S 603. 3 80 N. Y. 128. THE LIABILITIES OF OFFICERS AND DIRECTORS. 1 73 in any way based upon the theory of compensation for injury suffered.' The decisions cited under the former sec- tion, so far as relates to its penal character, are applicable to this and will not be repeated here.* Those trustees only who sign the report are liable under this section/ and the gist of the action is the fraudulent intent of the ofificers making it. As is said by Judge Rapallo, in giving the opinion of the court in the case last cited ; " We are of the opinion that the words * knowing it to be false* import a wilful misrepresentation with actual knowl- edge of its falsity, and not merely such constructive knowl- edge as can be imputed from the presumption that the ofificer signing the report knew the law and comprehended the precise import of the language used, when construed with reference to statutory provisions. . . . To charge the officer with the severe penalty imposed for signing a false report, knowing it to be false, some fact or circumstance must be shown indicating that it was made in bad faith, wilfully or for some fraudulent purpose, and not ignorantly or inadvertently ; and this is a question of fact which must be passed upon before the liability can be adjudged." * In this case a portion of the capital stock was issued for property, but was reported as "capital paid in;" the court, following Bonne// v. Griszvo/d,' held that this implied the payment of the capital in cash, and, as such, contained an untrue representation as to the amount of capital paid in, and that this representation was material ; yet as there was no evidence which would warrant a finding of bad faith or intention to deceive, or of a fraudulent purpose, and it ap- pearing, rather, that the report was signed heedlessly and carelessly, the judgment of the General Term affirming a judgment in favor of plaintiff was reversed, and a new trial ordered. ' Stokes V. Stickney, 96 N. Y. 323 ; Pier v. Hanmore, 86 id. 95. Bracken v. Griswold, 103 id. 425. * Pier v. Hanmore, 86 N. Y, 95. * Ante, p. 164 et seq. ^ 80 N. Y. 128. '^ Bonnellv. Griswold, 80 N. Y. 128; 174 THE LAW OF CORPORATIONS. The case of Bonnell v. Griswold^ was based upon a similar state of facts, and it was held that, as there was no proof of a wilful or fraudulent intent on the part of the trustees sign- ing the report, they were not liable under the above section. But in Blake v. Gris%vold^ upon the same pleadings and the same state of facts, but where the finding of the trial court was that the defendant signed the report in bad faith, know- ing it to be false, it was held that the facts justified such a finding, and that he was liable to a creditor. The statement was : " That the capital stock of said company is two mill, ions of dollars ; that said capital stock has been paid up in full." It appeared that one half of the stock had been issued to another company for property worth not over sixty thousand dollars, and that the other moiety had been issued to one of the trustees, without consideration, and by him distributed 1 89 N. Y. 122. ''■ 103 N. Y. 429. These cases -were heard together and were four times before the Court of Appeals. The actions were originally brought against the trustees of a corporation organized under the Manufacturing Act for failure to file a report, and for filing a false report. Demurrers to the complaints were sustained, on the ground that the two causes of action did not affect all the parties equally, as some of them had not signed the report (68 N. Y. 294). The cases again coming before the court (So N. Y. 128, 631), on appeal by de- fendants from judgments in favor of plaintiffs for failure to file a report, the judgments were reversed and new trials granted on the ground that the section imposing a liability for failure to file a report did not ap- ply where stock was issued for prop- erty (see ante, p. 172). On the third appeal from judgments of the Gen- ■eral Term of the Supreme Court, affirming a judgment of the Special Term on the ground that the report was false in a material representa- tion, the Court of Appeals reversed the judgments and granted new trials on the grounds above stated (Sg N. Y. 122). The plaintiff, Bonnell, having died pending the action, an order was made reviving and contin- uing the action in the name of the administrator, and judgment again rendered against defendant for mak- ing a false report. On appeal from the judgment and order, it was again reversed on the ground that the ac- tion abated upon the death of the plaintiff {Brackett v. Grisivold, 103 N. Y. 425). But in Blake v. Griswold on the last appeal (103 N. Y. 429) the judgment was affirmed as above stated ; and on a motion to substi- tute the administrator of the plaintiff for the plaintiff who died pending the appeal, the motion was granted. 104 N. Y. 613. THE LIABILITIES OF OFFICERS AND DIRECTORS. I75 among other trustees and stockholders, and that the de- fendant, as a trustee, signed the report, knowing these facts to be true.' In Arthur v. Griszvold'^ (one of the same series of cases) the cause of action against defendant as trustee for making a false report was joined with a cause of action for obtaining money by false and fraudulent representations by issuing a false prospectus. One of the defendants had not signed the annual report, and the court charged the jury that, as a matter of law, plaintiff was entitled to a verdict against those defendants who had signed the report,^ and if they found that the defendants had assented to the making and circulation of representations known by them to be false and fraudulent, then they should find a verdict against all the defendants ; but if they found no fraud on the part of the defendants in these representations, then their verdict should be in favor of the defendant who had not signed the report and against the others. The jury rendered a verdict against all. Errors in the admission of evidence regarding the false representa- tions made a new trial necessary, and the only remaining question was whether a new trial should be granted as to all or only as to the one who had not signed the report. The court held that the judgment should be reversed, and a new trial granted as to all the defendants.^ The history of the different appeals in the above cases shows that it is the fraudulent purpose on the part of the trustees signing a report which renders them liable. Unin- tentional error or inadvertence is not enough, even though there be a false material representation. The fact that cer- tain liabilities of the company were omitted in stating the ' See same case on a former appeal, under the circumstances of this case. 89 N. Y. 122. ■• An appeal from an order reviv- '■' 55 N. Y. 400. ing this action against the represen- ^ Under the later decisions in Bon- tatives of one of the defendants was nell \. Griszvold, cited above, it is subsequently dismissed as not afTect- not probable that defendants could inga substantial right. S.C.,6oN.Y. be held liable, as a matter of law, 143. 1/6 THE LAW OF CORPORATIONS. indebtedness, and that it was known to the trustee at the time the report was made, is not sufficient to render him hable, unless there be a fraudulent intent or facts showing actual fraud/ The cause of action under this section arises in the county where the report is filed ; and if the action is brought in a different county, defendants are entitled to have it re- moved. It is no defence to a motion to change the venue in such a case that the convenience of witnesses or the ends of justice would be promoted by retaining the place of trial in the county in which the action was originally brought.'' The records of a corporation are admissible at the trial to the extent of showing the corporate acts; ' but whether to the extent of charging a defendant in an action of this na- ture with knowledge of the facts recorded is doubtful. The language of this section in regard to the liability of officers for making a false report is followed in the acts for the incorporation of gas-light companies^ and guano companies," and substantially the same in the act for the incorporporation of ferry companies, except that in the latter act it refers only to " directors," and the hability is limited to debts contracted while they are directors." Liability under the Business Act. — The Business Act pro- vides that if any certificate or report made or public notice given by the officers of any such corporation shall be false in any material representation, all the officers who shall have signed the same shall be jointly and severally liable for all the debts of the corporation contracted while they are officers thereof.' This section does not, as does the corresponding section of the Manufacturing Act, restrict its application to cases where trustees have signed a report with a knowledge of its ' Butler V. Smalley, lOi N. Y. 71. * Laws of 1S57, chap. 546, § 15. * Veeder v. Baker, 83 N. Y. 156. '^ Laws of 1853, chap. 135, § 17. 3 Blake V. Griswold, 103 N, Y. 429. ' Laws of 1875, chap. 611, § 21. * Laws of 1848, chap. 37, § 14. THE LIABILITIES OF OFFICERS AND DIRECTORS. 1/7 falsity. The words " knowing it to be false" are omitted, and thus the liability would be incurred if any report was as a matter of fact false in any material representation, irre- spective of the fraudulent intent of the officers signing the same.' It was accordingly held in Torbett v. Eaton " that the fact that defendant had signed a false report in good faith, having no knowledge or information that it was in any re- spect untrue, and that he did not have any reason to believe it to be untrue in any respect, and that he exercised proper care and diligence before he signed the report to ascertain the facts set forth and to which it related, constituted no defence. Judge Daniels, in giving the opinion of the court in this case, says that the omission of the words " knowing it to be false" from the corresponding section of the Manu- facturing Act must be presumed to have been intentional on the part of the legislature, and it follows from such omis- sion that the design was to render the officers of corpora- tions formed under this act liable for the payment of its debts when a report proves false in a material representa- tion, and it was also held that directors were officers within the meaning of the statute. In the case of Huntington v. Attrill^ recently decided in the Court of Appeals, it was held that knowledge of the fal- sity of a report signed by directors was not necessary in or- der to render them liable under the provisions of this act ; nor would the jury in an action brought against directors to charge them with this liability be required to give the de- fendants the benefit of all reasonable doubts, in the sense applicable to criminal cases, but should decide by a fair pre- ponderance of evidence; In HatcJi V. Attrill,*' decided at the same time, it was held that a report of commissioners that one-half of the ' Va7i Ingen v. Whitman, 62 N. Y. ^23 North East. Rep. 544. 513. ■•23 North East. Rep. 549. ''49 Hun, 209; aff'd, 113 N.Y. 623. 178 THE LAW OF CORPORATIONS. capital stock had been subscribed and ten per cent, thereon paid in in cash, which report was false in fact, was compe- tent evidence against the directors in such an action. The language of the Business Act is followed substan- tially in the acts for the incorporation of building compan- ies ' and inland navigation companies,'' except that in these acts the liability is extended to any debts contracted while the persons signing the false report or certificate are stock- holders or officers of the corporation. Liability Independently of Statute. — Independently of any statutory provisions, a director of a corporation who know- ingly makes or publishes false reports or statements whereby others are injured is liable for loss occasioned by such acts.' Liability for Debts in Excess of Capital. — If the total amount of the debts which any incorporated company shall at any time owe, whether for deposits or by bond, bill, note or other contract, over and above the actual deposits with such com- pany, shall exceed three times the amount of the capital stock actually paid in, the directors under whose adminis- tration the same may have happened, except those who may have caused their dissent therefrom to have been entered at large on the minutes of the directors at the time, and except the directors who were not present when the same happened, are, in their individual and private capacities, jointly and severally liable for such excess to the corporation, and in the event of its dissolution, to any of its creditors, to the full amount of such excess, with legal interest from the time such liability accrued ; and no statute of limitations is a bar to any suit at law or in equity against such directors for any sums of money for which they are thus liable." 'Laws of 1853, chap. 117, § 15- personally therefor. Hun v. Gary, '-'Laws of 1854, chap. 232. § 15. 82 N. Y. 65; Brinckerhoff v. Bost- 3 Wakemanv. Dalley, 51 N.Y. 27 ; wick, 88 id. 52. But not so if they Morgan v. Skiddy, 62 N. Y. 319. And acted without negligence. Excelsior directors losing or wasting the cor- Petroleum Co. v. Lacey, 63 id. 422. porate funds in consequence of gross '♦Rev. Stat., part I. chap, xviii. negligence on their part are liable title 4, § 3. THE LIABILITIES OP^ OFFICERS AND DIRECTORS. 1/9 The acts for the incorporation of certain companies provide that if the indebtedness of any such company shall at any time exceed the amount of its capital stock, the directors or trustees of such company assenting thereto are personally and individually liable for such excess to the creditors of such company. The acts which contain this provision are those for the incorporation of the following companies : manufacturing companies;' business companies ;'^ building companies;^ park associations.* The liability under these sections is not penal in its nature, but contractual." When the debts exceed the amount of the capital in the four classes of corporations last named, or three times the amount of the capital of other corporations, the liability of the trustee begins. He be- comes a surety for the debts of the corporation for such ex- cess. His hability, however, does not extend to any partic- ular debt. It is a general liability, and when once discharged does not revive. Thus it is a good defence to an action to enforce this liability that the trustee has already paid the amount of the excess, or that he is a creditor of the corpo- ration to that extent." And it also follows from its contrac- tual nature that the cause of action survives, and the action may be continued, against the representatives of an assent- ing trustee.' The liability is joint, not several, and all of the assenting trustees must be joined in an action to enforce it." And all creditors must be made parties to the action in order to ' Laws of 1848, chap. 40, § 23. Patterson v. Robinson, 36 Hun, 622, '■'Laws of 1875, chap. 611, § 22; 37 id. 341; Hornor v. Henning, ()2 the language of this section "the U. S. 228. directors of such corporation creating ^ Tallmadge v. The Fish kill Iron such indebtedness," etc. Co., 4 Barb. 382. 3 Laws of 1853, chap. 117, § 23. ' McConib v. Kellogg, Sup. Ct, ^ Laws of 1861, chap. 149, § 2. Genl. Term, i N. Y. Supp. 206. * Cortting v. McCullottgh, i N. Y. « McClave v. Thompson, 36 Hun, 47; Story V. Ftirman, 25 id. 214; 365. I80 THE LAW OF CORPORATIONS. establish the excess of indebtedness over capital, and in order that all may participate ratably in the distribution.' In estimating the indebtedness, bonds still in the treasury of the company do not comprise a part of it f nor does a judgment against the company in favor of a co-trustee.^ In the case of Patterson v. Robinson,^ where the debts of a corporation exceeded its capital, but an arrangement was made by certain of the trustees of the company with the creditors to suspend such indebtedness and go on with the business, and apply the proceeds of its manufactures to cur- rent expenses, and no part to such suspended debt until all outstanding subsequent claims were paid, it was held that a bank receiving notes and drafts of such a company subse- quently drawn could not hold them, after presentation and payment, on account of the former indebtedness, and by that means increase the debts of such company beyond its capital, and thus render the trustees liable for them. Liability for Debts Generally. — The officers of driving-park associations are jointly and severally liable for every debt of such associations contracted while they are officers thereof, provided a suit for its collection be brought within one year after it becomes due.^ The act for the incorporation of trust companies pro- vides that for all losses of money which the capital stock shall not be sufficient to satisfy, the trustees shall be respon- sible in the same manner and to the same extent that trus- tees are responsible in law or equity.^ ' Anderson v. Speers, 21 Hun, 568. is stated in the dissenting opinion in In Chambers v. Lewis, 28 N. Y. 454, the case. there is a remark to the effect that a ^ McClave 'v. Thompson, 36 Hun, trustee would be liable to a single 365. creditor if that creditor alleged in his ^ Knox v. Baldwin, So N. Y. 610; complaint that the excess of indebt- AlcClave v. Thompson, 36 Hun, 365. edness over capital was equal to or * 116 N. Y. 193. exceeded his debt. This decision ^ Laws of 1872, chap. 248, § 8. was on a demurrer which was sus- * Laws of 1887, chap. 546, § 30 ; tained, but it could as well have see, as to liability independently of been sustained on other grounds, as statute, ante, p. 178. THE LIABILITIES OF OFFICERS AND DIRECTORS. l8l Where the capital of a fire-insurance company or of a marine-insurance company becomes impaired, and the Superintendent of the Insurance Department directs the ofificers of such a company to require the stockholders thereof to pay in the amount of such deficiency within a period named, in the event of any additional losses accruing upon risks taken after the expiration of the period so lim- ited, and before the deficiency has been made up, the direc- tors of such a company are individually liable to the extent of such losses.' Miscellaneous Ijiabilities and Prohibitions. — It is a misde- meanor, punishable by fine and imprisonment, for any direc- tor or ofificer of a railroad corporation to sell or to agree to sell, or to be directly or indirectly interested in the sale or agreement to sell, any shares of the stock of the corpora- tion of which he is such ofificer or director, unless at the time of the sale or agreement to sell he is the actual owner of such shares;* or for such director or officer to vote for, sign or certify to any bond secured by mortgage or pledge of the corporate property, without the issue thereof having been sanctioned by a majority in amount of its stockholders, voting in person or by proxy at a meeting duly called for that purpose.* A person who signs the name of a fictitious person to any subscription for, or agreement to take, stock in any cor- poration, existing or proposed ; and a person who signs, to any subscription or agreement, the name of any person, knowing that such person does not intend in good faith to comply with the terms thereof, or under any understanding or agreement that the terms of such subscription or agree- ment are not to be complied with or enforced, is guilty of a misdemeanor.* ' Laws of 1853, chap. 466, § 24, subdiv. 10, as amended by Laws of and Laws of 1S66, chap. 577. 1S87, chap. 724. ' Laws of 1884, chap. 223. ■* Penal Code, § 590. 3 Laws of 1850, chap. 140, § 28, l82 THE LAW OF CORPORATIONS. An officer, agent or other person in the service of any joint-stock company, or corporation formed or existing under the laws of this state, or of the United States, or of any state or territory thereof, or of any foreign government or coun- try, who wilfully and knowingly, with intent to defraud, either — 1. Sells, pledges or issues, or causes to be sold, pledged or issued, or signs or executes, or causes to be signed or executed, with intent to sell, pledge or issue, or to cause to be sold, pledged or issued, any certificate or instrument pur- porting to be a certificate or evidence of the ownership of any share or shares of such company or corporation, or any bond or evidence of debt, or writing purporting to be a bond or evidence of debt of such company or corporation, w'ithout being first thereto duly authorized by such company or cor- poration, or contrary to the charter or laws under which such corporation or company exists, or in excess of the power of such company or corporation, or of the limit im- posed by law or otherwise upon its power to create or issue stock or evidences of debt ; or 2. Re-issues, sells, pledges or disposes of, or causes to be re-issued, sold, pledged or disposed of, any surrendered or cancelled certificates, or other evidence of the transfer or ownership of any such share or shares, — Is punishable by imprisonment for not less than three years nor more than seven years, or by a fine not exceeding three thousand dollars, or by both.' An officer, agent or clerk of a corporation, or of persons proposing to organize a corporation or to increase the cap- ital stock of a corporation, who knowingly exhibits a false, forged or altered book, paper, voucher, security or other in- strument of evidence to any public officer or board autho- rized by law to examine the organization of such corpora- tion, or to investigate its affairs, or to allow an increase of ^ Penal Code, § 591. I THE LIABILITIES OF OFFICERS AND DIRECTORS. 1 83 its capital, with intent to deceive such officer or board in respect thereto, is punishable by imprisonment in a state prison not exceeding ten years and not less than three years,' A person who, without authority, subscribes the name of another to, or inserts the name of another in, any prospectus, circular or other advertisement or announcement of any cor- poration or joint-stock association existing or intended to be formed, with intent to permit the same to be published, and thereby to lead persons to believe that the person whose name is so subscribed is an officer, agent, member or pro- moter of such corporation or association, is guilty of a mis- demeanor." A director of a stock corporation who concurs in any vote or act of the directors of such corporation, or any of them, by which it is intended — 1. To make a dividend, except from the surplus profits arising from the business of the corporation, and in the •cases and manner allowed by law ; or 2. To divide, withdraw, or in any manner pay to the stockholders, or any of them, any part of the capital stock of the corporation ; or to reduce such capital stock without the consent of the legislature ; or 3. To discount or receive any note or other evidence of debt in payment of an instalment of capital stock actually called in and required to be paid, or with intent to provide the means of making such payment ; or 4. To receive or discount any note or other evidence of debt with intent to enable any stockholder to withdraw any part of the money paid in by him on his stock ; or 5. To apply any portion of the funds of such corpora- tion, except surplus profits, directly or indirectly, to the purchase of shares of its own stock ; or 6. To receive any such shares in payment or satisfaction of a debt due to such corporation ; or Penal Code, g 592. « Id. | 593. 1 84 THE LAW OF CORPORATIONS. 7. To receive in exchange for the shares, notes, bonds or other evidences of debt of such corporation, shares of the capital stock, or notes, bonds or other evidences of debt issued by any other stock corporation, — Is guilty of a misdemeanor.' A director of a corporation, organized under the laws of this state, having banking powers, who concurs in any vote or act of the directors of such corporation, or any of them, by which it is intended, either — •I. To make a loan or discount, by which the whole amount of the loans and discounts of the corporation shall be greater than the amount allowed by law, or, where there is no express statutory limitation of the amount, greater than three times its capital stock then paid in and actually possessed ; or 2. To make a loan or discount to any director of such corporation, or upon paper upon which any such director is responsible, to an amount exceeding the amount allowed by statute, or, where there is no express statutory limitation of the amount, exceeding in the aggregate one-third of the capital stock of such corporation, then paid in and actually possessed, — Is guilty of a misdemeanor.' But this will not render any loan made by the directors of any such corporation, in violation thereof, invalid.^ An officer or agent of any corporation having banking powers who sells, or causes or permits to be sold, any bank notes of such corporation, or pledges, or hypothecates, or causes or permits to be pledged or hypothecated, with any other corporation, association or individual, any such notes, as a security for a loan or for any liability of such corporation ; * or who issues or puts in circulation, or causes or permits to be issued or put in circulation, the bank notes of such cor- 1 Penal Code, § 594- ^ I^. § 596- 2 Id. § 595. * Ifi- § 597. THE LIABILITIES OF OFFICERS AND DIRECTORS. 185 poration to an amount which, together with previous issues, leaves in circulation or outstanding a greater amount of notes than such corporation is allowed by law to issue and circulate, is punishable by imprisonment in a county jail not exceeding one year, or by a fine not exceeding five thousand dollars, or both.' An officer or agent of any banking corporation who makes or delivers any guaranty or endorsement on behalf of such corporation whereby it may become liable on any of its discounted notes, bills or obligations in a sum beyond the amount of loans and discounts which such corporation may legally make, is guilty of a misdemeanor.' An officer, agent, teller or clerk of any banking associa- tion or savings-bank, who knowingly overdraws his account- with such bank, and thereby wrongfully obtains the money, notes or funds of such bank,' or who receives any deposits knowing that such bank or association is insolvent, is guilty of a misdemeanor." A director, officer or agent of any corporation or joint- stock association who knowingly receives or possesses him- self of any property of such corporation or association otherwise than in payment of a just demand, and, with intent to defraud, omits to make, or to cause o.r direct to be made, a full and true entry thereof, in the books or accounts of such corporation or association ; and a director, officer, agent or member of any corporation or joint-stock association who, with intent to defraud, destroys, alters, mutilates or falsifies any of the books, papers, writings or securities belonging to such corporation or association, or makes or concurs in making any false entry, or omits or concurs in omitting to make any material entry in any book of accounts, or other record or document kept by such cor- poration or association, is punishable by imprisonment in a ' Penal Code, § 598. ^ Id. g 600. Md. § sgg. Md. g6oi. 1 86 THE LAW OF CORPORATIONS. state prison not exceeding ten years and not less than three years, or by imprisonment in a county jail not exceeding one year, or by a fine not exceeding five hundred dollars, or by both such fine and imprisoment.' A director, officer or agent of any corporation or joint- stock association who knowingly concurs in making or pub- lishing any written report, exhibit or statement of its affairs or pecuniary condition, containing any material statement which is false, other than such as are elsewhere by the Penal Code specially made punishable, is guilty of a misdemeanor.^ The insolvency of a moneyed corporation is deemed fraudulent unless its affairs appear, upon investigation, to have been administered fairly, legally, and with the same care and diligence that agents receiving a compensation for their services are bound by law to observe/ In every case of the fraudulent insolvency of a moneyed corporation, every director thereof who participated in such a fraud, if no other punishment is prescribed therefor by the Penal Code or an}- special statute, is guilty of a misde- tneanor." A director of any moneyed corporation who wilfully •does any act, as such director, which is expressly forbidden by law, or wilfully omits to perform any duty expressly im- posed upon him as such director by law, the punishment for which act or omission is not otherwise prescribed by the Penal Code or by some special statute, is guilty of a mis- demeanor/ A director of a corporation or joint-stock association is deemed to have such a knowledge of the affairs of the corpo- ration or association as to enable him to determine whether any act, proceeding or omission of its directors is a violation of these provisions." A director of a corporation or joint-stock association > Penal Code, § 602. * Id. § 605. Md. §603. Md. p6o6. 3 Id. ^ 604. 6 Id. § 609. THE LIABILITIES OF OFFICERS AND DIRECTORS. 1 87 who is present at a meeting of the directors at which any act, proceeding or omission of such directors in violation of these provisions occurs is deemed to have concurred therein, unless he at the time causes, or in writing requires, his dis- sent therefrom to be entered in the minutes of the directors ; ' and although not present at such a meeting of the directors, he will be deemed to have concurred therein if the facts constituting such violation appear on the record or minutes of the proceedings of the board of directors, and he remains a director of the same company for six months thereafter without causing, or in writing requiring, his dissent from such illegality to be entered in the minutes of the directors." A director, trustee or other ofificer of a joint-stock asso- ciation or corporation, upon whom a notice of application for an injunction affecting the property or business of such joint-stock association or corporation is served, who omits to disclose to the other directors, oflficers or managers thereof the fact of such service, and the time and place of such ap- plication, is guilty of a misdemeanor/ It is no defence to a prosecution for a violation of these provisions that the corporation was one created by the laws of another state, government or country, if it carried on business, or kept an ofifice therefor, within this state/ The term " director," as here used, embraces any of the persons having by law the direction or management of the affairs of a corporation, by whatever name such persons are described in its charter or are known in law/ 1 Penal Code, § 610. " Id. § 613. 2 Id. §611. Ud. §614. 2 Id. §612. 188 THE LAW OF CORPORATIONS. CHAPTER VI. THE RIGHTS OF STOCKHOLDERS. Questions regarding the rights of stockholders oftenest come before the courts on applications addressed to the equitable power of the courts to enforce such rights. There are, however, certain statutory rights, and summary methods of relief, given in certain cases which form the subject of this chapter. Right to Certificate of Stock. — Unless the act of incorpora- tion or the by-laws of a company require it, a certificate of stock is not necessary to constitute one a stockholder. En- tering the name of a subscriber on the books of a company as a stockholder is sufificient.' In case, however, of the loss or destruction of a certifi- cate of stock of a corporation organized under the laws of this state, the owner, or his legal representatives, may ap- ply at a Special Term of the Supreme Court in the judicial district where he resides for an order requiring the corpora- tion to show cause why it should not be required to issue a new certificate of stock in place of the one so lost or de- stroyed. The application must be by petition, duly verified by the owner, in which shall be stated the name of the corpora- tion, the number and date of the certificate if known, or if it can be ascertained by the petitioner, the number of shares of stock named therein and to whom issued, and as particu- lar a statement of the circumstances attending such loss or ' Thorp V. Woodhiill, i Sand. Ch, N. Y. ^ N. H. R. R. Co. v. Schuyler, 411; Van Allen v. Illinois Cent. R. 34 id. 30; Rutter v. Kilpatrick, 63 R. Co., 2 Keyes, 673; Buffalo, etc., id. 604. R. R. Co. V. Dudley, 14 N. Y. 336; THE RIGHTS OF STOCKHOLDERS. 189 destruction as the petitioner may be able to give. Upon the presentation of said petition, the court will make an or- der requiring such corporation to show cause, at a time and place therein mentioned, why it should not be required to issue a new certificate of stock in place of the one described in the petition. A copy of such petition and order must be served upon the president or other head of such cor- poration, or on the cashier, secretary or treasurer thereof, personally, at least ten days before the time designated in the order for showing cause.' At the time and place specified in the order, and on proof of due service thereof, the court will proceed in a sum- mary manner and in such mode as it may deem advisable to inquire into the truth of the facts stated in the petition, and to hear such proofs and allegations as may be offered by or in behalf of the petitioner, or by or in behalf of the corpora- tion or other party, relative to the subject-matter of inquiry, and if, upon such inquiry, the court shall be satisfied that such petitioner is the lawful owner of the number of shares of the capital stock, or any part thereof, described in the pe- tition, and that the certificate therefor has been lost or de- stroyed and cannot after due diligence be found, and that no sufficient cause has been shown why a new certificate should not be issued in place thereof, it will make an order requiring such corporation or other party, within such time as shall be therein designated, to issue and deliver to such petitioner a new certificate for the number of shares of the capital stock of such corporation which shall be specified in the order as owned by the petitioner, and the certificate for which shall have been lost or destroyed. In making such order the court will direct that the petitioner deposit such security, or file such a bond in such form and with such sureties, as to the court shall appear sufficient to indemnify any person other than the petitioner who shall thereafter ' Laws of 1873, chap. 151, § i. 190 THE LAW OF CORPORATIONS. appear to be the lawful owner of such certificate stated to be lost or stolen ; and the court may also direct the publi- cation of such notice, either preceding or succeeding the making of such final order, as it shall deem proper. Any person or persons who shall thereafter claim any rights un- der such certificate so alleged to have been lost or destroyed shall have recourse to such indemnity, and the corporation shall be discharged of and from all liability to such person or persons by reason of compliance with such order ; and obedience to the order may be enforced by the court by at- tachments against the officer or officers of such corporation, on proof of his or their refusal to comply with the same. ' This is not the proper proceeding in case there is any controversy as to the ownership of the shares. To entitle him to the order it must appear that the petitioner is the legal owner of the shares and that the certificate has been lost or destroyed.* Compelling Transfer. — Mandamus will not lie to compel a corporation to transfer stock on its books.' The common remedy for a refusal on the part of the corporation to make such transfer is an action for damages •* but where adequate relief cannot be obtained in this manner, as, for instance, where the stock is of little value and the purchaser desires to hold it as an investment, he may bring an equitable ac- tion to compel its transfer on the books of the company.^ A corporation may defend an action to compel the issue of a certificate by showing that plaintiff is only a trustee for the real owner.^ Where the act of incorporation provides, as does the ' Laws of 1873, chap. 151, § 2. People v. Parker, 10 How. 544. '■^ Matter of Biglin v. Friendship * Com. Bank of Buffalo v. Kort- Assn., 46 Hun, 223. right, 22 Wend. 348; Holbrook v. ^People V. Brandon, Sup. Ct. Sp. N. J. Zinc Co., 57 N. Y. 6t6. Term, Lawrence, J., Daily Reg. Dec. ' Cushtnan v. Thayer Mfg. Jeivelry II, 1889; citing Kortright \. Buffalo Co., 76 N. Y. 365. Com. Co., 20 Wend. 90; Matter ^Jackson v. Twenty-Third Street of Firemen's Ins. Co., 6 Hill, 243; Hy. G?., 88 N. Y. 520. THE RIGHTS OF STOCKHOLDERS. I9I Manufacturing Act, that no transfers shall be valid until en- tered on the books of the company, a vendor of stock con- tinues the nominal owner until the transfer is completed on the books;' and if transferred by him fraudulently to a bo)ia fide purchaser, such purchaser would get a good title, al- though the corporation might be liable to a prior vendee if it negligently allowed a transfer of the stock on its books without requiring a delivery of the certificate for cancella- tion ;° and the same is true where it transfers stock after notice of an adverse claim ;' and where the act of incorpora- tion does not contain a provision that a transfer can be made only on the books, an assignment of stock and payment of dividends to the assignee will constitute a valid transfer of such stock.* Right to Dividends — A stockholder has no legal right to any of the property or of the profits of a corporation until a division is made. It is immaterial from what source or during what time the funds divided were acquired by the corporation,^ and it is justified in continuing to pay divi- dends to the person in whose name the stock stands on its books, or to his legal representatives, until notified of the transfer;" but after notification of a transfer of the stock it is liable to the real owner, even though no transfer has been made on the books of the company.' Where a person claims to be a stockholder but is not recognized as such by the corporation, and he brings an action against the corporation for the conversion of his shares, he cannot, during the pendency of such an action, sue it for dividends.* ^Johnson v. Underhill, 52 N. Y. ^ Hyatt v. Allen, 56 N. Y. 553 ; 203. Jertnain v. Lake Shore i^ Mich. So. 2 A^. F. 6- N. H. R. R. Co. v. Ry. Co., 91 id. 4S3. Schuyler, 34 N. Y. 30. '^Brisbane v. Del., Lack, cr' W. ^ Hawes V. Gas Consumers Benefit R. R. Co., 94 N. Y. 204. Co., Com. Pleas, Genl. Term, 9 N.Y. ' Robinson v. Nafl Bank of New Supp. 490. Berne, 95 N. Y. 637. * Cutting V. Damerel, 8S N. Y. ** Hughes v. Vermont Copper Min- 410. ing Co., 72 N. Y. 207. 192 THE LAW OF CORPORATIONS. While, as a general rule, the officers of a corporation are the sole judges of the propriety of declaring dividends, and the courts will not interfere with a proper exercise of their discretion, yet in the case of dividends on preferred stock a different condition of affairs sometimes arises. Certificates of preferred stock usually contain provisions that dividends shall be paid on them at a certain rate from the first earnings of the company. This constitutes a contract of the com- pany to pay the dividend guaranteed, including all arrears of dividends before holders of the common stock are enti- tled to any, and this right may be enforced by an equitable action to compel the directors to make such a dividend.' If stock is sold after a dividend is declared but before it is payable, the dividend belongs to the owner of the stock at the time it is declared ;' and the same rule holds even though the dividend is declared payable at a future time at the option of an agent of the corporation.* Right to Examine Books. — As we have seen in a former chap- ter,* corporations are required to keep certain of their books open to the inspection of their stockholders at all reasonable times during business hours. In case of refusal mandamus will lie to compel such inspection," and an officer of a corpo- ration unreasonably refusing to allow a stockholder to ex- amine the stock transfer books, and to make extracts from them, is liable to the penalty prescribed in the statutes." The law will receive a hberal interpretation, however, and where there is no intention of excluding a stockholder from an examination of the books, the penalty will not be enforced simply on account of a technical violation of the law/ ' Boardman v . Lake Shore S^ Mich. '' Thus where a stockholder visited So. Ry. Co., 84 N. Y. 157. the office of a company during the •^ Lombard v. Case, 45 Barb. 95. temporary absence of the custodian " Hill V. Newichawanick Co., 8 of the books and was told to call the Hun, 459 ; aff'd, 71 N. Y. 593. next business day, and he did, when * Chap. IV, ante. ■ he examined them, it was held'Cn2X ^ People V. Throop. 12 Wend. 183 ; it was error to refuse to nonsuit the Matter of Sage, 70 N. Y. 220. plaintiff in an action to recover the 6 Coihealv. Brouwer, 5 N. Y. 562. penalty. Kelsey v. Pfaudler Process THE RIGHTS OF STOCKHOLDERS. I93 Wherever stockholders, in a company organized under the Manufacturing Act, owning five per cent, of the capital stock of a company with a capital not exceeding one hun- dred thousand dollars, or three per cent, of the capital stock of a company with a capital exceeding that amount, present a written request to the treasurer of such company that they desire a statement of its affairs, it is the duty of the treasurer to make a statement of the affairs of such com- pany under oath, embracing a particular account of all its assets and liabilities, in minute detail, and to deliver such statement to the person presenting such request within twenty days thereafter. At the same time he must place and keep on file in his ofifice, for six months thereafter, a copy of such statement, which, at all times during business hours, must be exhibited to any stockholder demanding an examination of it. Such a statement shall not be demanded, however, oftener than once in six months. If a treasurer of such a company neglects or refuses to comply with these requirements, he is liable to a penalty of fifty dollars, and a further sum of ten dollars for every twenty- four hours thereafter until such statement is furnished.' If no such statement has been demanded during the year preceding the annual meeting of the stockholders for the election of directors, it is the duty of the treasurer to pre- pare and exhibit a general statement of the assets and lia- bilities of the company at such meeting.* Any stockholder of a corporation organized under the Business Act,^ or a stockholder of a title guaranty com- pany," may at all reasonable times, either in person or by Co. 41 Hun, 20. Upon a subsequent of the right when it accrued. S. C. trial of this case, when it appeared 3 N. Y. Supp. 723. that the custodian of the books was ' Laws of 1854, chap. 201, and present at the office at the time the Laws of 1S62, chap. 472, § i. request to examine them was made, ** Laws of 1S62, chap. 472, § 2. a judgment for plaintiff was sus- ^ Laws of 1S75, chap. 611, § 16. tained. and it was held that the sub- ■• Laws of 18S5, chap. 538, § 16. sequent examination was no waiver 194 THE LAW OF CORPORATIONS. attorney, examine the records and books of account of such corporations. Except as provided by statute, the right on the part of a stockholder to demand an examination of the books of a company is not absolute, but is discretionary with the court, and will be granted only for some good and sufificient reason shown; and such discretion, when exercised, will not be re- viewed by the Court of Appeals.^ Rights at Elections. — Generally speaking, each share of stock standing on the books of a company is entitled to a vote at all elections ; and married women may vote, at elec- tions of directors or trustees, by proxy or otherwise, in any company organized under the laws of this state in which they are stockholders.^ In all cases where the right of voting upon any share of the stock of any incorporated company of this state is ques- tioned, it is the duty of the inspectors of the election to re- quire the transfer books of such company as evidence of stock held ; and all such shares as may appear standing thereon in the name of any person may be voted upon either in person or by proxy, subject to the provisions of the act of incorporation.^ The inspectors who may be appointed to conduct an election are required before entering on the duties of their appointment to take or subscribe an oath or affirmation to the effect that they will execute the duties of inspector with strict impartiality and according to the best of their ability." If at any time the election for directors is not held on the day designated by its act of incorporation, it is the duty of the president and directors to cause an election to be held within sixty days thereafter; and at such election no share may be voted on except by such persons as may ap- 1 People ex rel. HaUb v. Lake ^ Laws of 1S51, chap. 321, § i. S/iore &• Mich. So. R. R. Co., II ^ Rev. Stat., part I. chap, xviii. Hun, i; aff'd sub nom. Matter of title 4, §6. Sage, 70 N. Y. 220. ■* Id. § 7. THE RIGHTS OF STOCKHOLDERS. I95 pear on the transfer books of the company to have had the right to vote on the day when the election should have been held.' Upon the application of any one aggrieved by, or complain- ing of, any election or any proceeding, act or matter touch- ing the same, the Supreme Court, upon reasonable notice given to the adverse party or to those who are to be affect- ed thereby, may proceed in a summary way to hear the affidavits, proofs and allegations of the parties, or otherwise inquire into the matters or causes of complaint, and there- upon to establish the election so complained of, or to order a new election, or make such order and give such relief in the premises as right and justice may require. The court in such a case may either order an issue or issues to be made up in such manner and form as it may direct, in order to try the respective rights of the parties to the office or franchise in question, or may give leave to ex- hibit or direct the attorney-general to exhibit an informa- tion or informations in the nature of a quo warranto^ The Same. Moneyed Corporations. — At every election of directors of a moneyed corporation three persons must be chosen by the stockholders as inspectors at the next succeed- ing election.' The vacancies in the office of such inspectors are filled by the directors ; * but in no case may a director or officer be chosen as an inspector.^ Every such inspector before entering on the duties of his office must take and subscribe an oath that he will exe- cute the duties of his office with strict impartiality and ac- cording to the best of his ability.* At every election of directors the transfer books of the corporation must be produced to test the qualifications of the voters, and no person be permitted to vote directly or by proxy except those in whose names shares of stock of ' Rev. Stat., part I. chap, xviii. ■* Id. § 196. title 4. ^ 8. s i(j g jgy_ ' Id. § 5- " Id. § 19S. ^ Laws of 18S2, chap. 409, § 195. 196 THE LAW OF. CORPORATIONS. the corporation shall have stood for at least thirty days pre- vious to the election.' At such elections no persons can vote on any shares of stock belonging to or hypothecated to the corporation, nor on any shares hypothecated or pledged as collateral securi- ty to any other person or company ; " nor on any shares which have been transferred to him for the sole purpose of enabling him to vote thereon at the election then to be held ; nor upon any shares which he shall have previously con- tracted to sell or transfer after the election upon any con- dition, agreement or understanding in relation to his manner of voting at such election.^ Any person offering to vote may be challenged by any other person authorized to vote at the same election. To any person so challenged one of the inspectors must admin- ister the following oath : "You do swear (or af^rm as the case may be) that the, shares on which you now offer to vote do not belong and are not hypothecated to the (name the corporation for which the election is held), and that they are not hypothe- cated or belong to any other corporation or person whatso- ever ; that such shares have not been transferred to you for the purpose of enabling you to vote thereon at this election and that you have not contracted to sell or transfer them upon any condition, agreement or understanding in relation to your manner of voting at this election." * No person will be permitted to vote on the proxy of a stockholder unless he produce, annexed to his proxy, an afifidavit of such stokholder stating the same facts to which the oath of such stockholder might have been required upon a challenge had he offered to vote in person upon the shares mentioned in the proxy." If any person offering to vote upon a proxy is chal- 1 Laws of 1882, chap. 409, § 199. * Id. § 202. 2 Id. § 200. ^ Id. § 203. 3 Id. § 201. THE RIGHTS OF STOCKHOLDERS. 197 lenged by an elector the following oath must be adminis- tered to him by one of the inspectors: " You do swear (or affirm) that the facts stated in the affidavit annexed to the proxy upon which you now offer to vote are true according to your belief, and that you have made no contract or agreement whatever for the purchase of transfer of the shares or any portion of the shares men- tioned in such proxy." ' If any person duly challenged refuse to take the proper oath his vote must be rejected and not afterwards received at the same election ; if he take the oath his vote must be received.* If any election in any moneyed corporation is not held on the day appointed by law it is the duty of the directors to notify and cause such election to be held within sixty days after the day appointed ; and on the day so noti- fied no person will be admitted to vote except those Avho would have been entitled had the election taken place on the day when by law it ought to have been held.^ If any person conceive himself agrieved by an election or any proceeding concerning an election of directors or ofificers in any such corporation, he may apply to the Supreme Couft for redress giving a reasonable notice of his intended application to the party to be affected thereby.' Upon such application the court may proceed in a sum- mary way to hear the proofs and allegations of the parties or otherwise to inquire into the cause of complaint and thereupon to make such order and grant such relief as the cir- cumstances and justice of the case require. If the election complained of is set aside the court may order a new election at such time and place as it may appoint.* If it cannot otherwise arrive at a satisfactory result, the court may order an issue as between the parties to ' Laws of 1882, chap. 409, § 204. * Id. § 210. ^ Id. § 205. 6 Id. § 211. 3 Id. § 206. 198 THE LAW OF CORPORATIONS. be made up in such manner and form and to be tried in such court as it may select ; or may permit or direct the attorney-general to file an information in the nature of a quo warranto if the case be one in which that proceed- ing would be competent and effectual.' If any such issue is ordered, or information permitted or directed to be filed, the court may make such further orders in relation to the time and mode of pleading, the examina- tion of witnesses or the parties, the production of books and papers, and the time and place of trial or hearing, as in its judgment may seem effectual for expediting the proceed- ings, saving expense to the parties, and causing a final determination to be had with as little delay as the nature of the controversy will permit.'' The Same. Business Corporations. — The annual election of directors of corporations organized under the Business Act must be held at such time and place as is designated by the by-laws and public notice of such meetings must be pub- lished not less than ten days previous thereto in a news- paper published in the place in which the principal business office of the corporation is situated, if a newspaper be pub- lished therein, and otherwise, in the newspaper published nearest to such office. The election must be made by such of the stockholders as attend for that purpose either in person or by proxy. No person may vote upon the proxy of a stockholder in any such corporation after the lapse of eleven months from the date of such proxy, unless the stockholder specifies therein that it is to continue in force for a longer time. All elections must be by ballot, and each stockholder is entitled to as many votes as shall equal the number of his shares multiplied by the number of directors to be elected, and he may distribute his vote among those to ' Laws of 1882, chap. 409, § 212. '^ Id. § 213. THE RIGHTS OF STOCKHOLDERS. 199 be voted for as he sees fit. And the persons receiving the greatest number of votes shall be directors.' By this system of cumulative voting all the votes to which any stockholder is entitled multiplied by the whole number of directors to be elected may in his discretion be cast for one director or divided among any number. It is thus possible for a minority of the stockholders to elect such a portion of the directors as their proportion of stock in the corporation entitles them to. In case an election is not made on the day designated it may be held on any other day within three months there- after upon giving notice of such meeting to each stock- holder by mail at least five days before the time.'' Every person acting as an inspector of elections must, before entering upon the duties of his office, take and subscribe his oath or affirmation that he will discharge the duties of his office with fidelity, and that he will not re- ceive any vote but such as he believes to be legal. ' The Same. Title Guaranty Companies. — The act for the in- incorporation of title guaranty companies contains the same provisions regarding elections as are contained in the Business Act.^ The Same. Safe Deposit Companies. — The act for the in- corporation of safe deposit companies contains the pro- vision that no proxy shall be voted on after the lapse of eleven months unless the stockholder shall have specified therein that it is to continue in force for some lonsrer time.' The Same. Railroads. — In the elections of directors of railroads organized under chapter one-hundred-and-forty of Laws of 1850, each stockholder is entitled to one vote per- ' Laws of 1S75, chap. 611 § 26. specters of elections chosen by the ^ Id. § 27. stockholders in the same manner as ^ Id. ^ 28. directors are elected. •• Laws of 1SS5, chap. 538, § § 20, ^ Laws of 1S75, chap. 613, § 3 as 21, 23. This act also provides (§ amended by Laws of 1SS3, chap. 22), that there shall be three in- 338. 200 THE LAW OF CORPORATIONS. sonally or by proxy on every share held by him thirty days previous to any such election.' Before entering upon his duties each inspector of elec- tions at a meeting of stockholders of any railroad company of this state, must take and subscribe before some officer authorized to administer oaths an oath or affirmation that he will well and truly do and perform the duties of the office of an inspector at such election, according to the best of his ability, and must file the same in the office of the clerk of the county in which such election shall be held, together with a certificate of the result of the vote taken at such meeting." No person may vote or issue a proxy to any other person to vote at any meeting of stockholders or bondhold- ers of any railroad corporation in this state for the election of directors or for any other purpose upon any stock or bonds where the certificates are not in his possession or under his control, if he has ceased to retain the title to such stock or bonds as owner in his own right or in his capacity of executor, administrator or trustee, notwith- standing such stock or bonds may still stand in his name on the books of such corporation. No person having the right to vote upon stock or bonds shall sell his vote or, for any valuable consideration, issue a proxy to vote upon such stock or bonds to any person, and any one offering to vote upon stock or bonds registered or standing in his name may be required by any inspector of election to take and subscribe the following oath or affirma- tion : " I do solemnly swear (or affirm) that in voting at this election I have not either directly or impliedly received any promise or any sum of money or anything of value whatever to influence the giving of my vote or votes at this election; and that I have not sold or otherwise disposed ' Laws of 1850, chap. 140. § 5 as and Laws of 1873. chap. 710. amended by Laws of 1854, chap. 282 ^ Laws of 18S0, chap. 510, § i. THE RIGHTS OF STOCKHOLDERS. 201 of my interest in, or title to, any share or bontis in respect to which I offered to vote at this election, but that all such shares and bonds still remain in my possession or subject to my control." Any person offering to vote as agent, attorney or proxy for any other person may be required to take and subscribe to the following oath or affirmation : " I do solemnly swear (or affirm) that the title to the stock or bonds upon which I now offer to vote is, to the best of my knowledge and belief, truly and in good faith, vested in the persons in whose name they now stand, and that the said persons still retain control of the said shares and bonds and that I have not either directly or indirectly or impliedly given any promise or any sum of money or anything of value whatever to induce the giving of authority to vote upon such stock or bonds to me." The inspectors are authorized to administer these oaths which, with the proxies, must be filed in the office of the company.' A majority of the stockholders of a railroad company may change the time and place of its annual meeting to any other incorporated village or city in the State of New York, in which the executive officer of the company is located, to some day in the month of December preceding the date or time at which such election would otherwise have been held.'^ The Same. Generally. — No meeting of the stockholders of a corporation organized under the laws of this state for the election of directors or for the purpose of any other corpo- rate action can be held outside of the state.^ Nor can a valid election be held unless notice is given to the stock- holders in the manner prescribed by the by-laws of the cor- ' Laws of 1880, chap. 510, § 2. ^ Ormsby v. Vermont Copper Mining 2 Laws of 1885, chap. 498. See Co., 56 N. Y. 623. also Laws of 1881, chap. 317. 202 THE LAW OF CORPORATIONS. poration, or the act under which it is organized.' But where no particular form or time of notice is thus prescribed, any actual notice is sufficient. Thus a written notice deposited in the postofHce, will in the absence of proof showing that all stockholders did not in fact receive the notice so sent be presumed to have been received.^ Where no elections have been held, and there is no pro- vision in the charter or by-laws of a corporation for the officers holding over, the stockholders may meet on any regular day for the election of directors, and hold such election, although no notices of such meeting had been sent.' At all elections the right of a stockholder to vote is determined, subject to the provisions in its charter or by- laws, by the names appearing on the transfer books, and the inspectors cannot go beyond the names there appearing.* Most of the acts for the incorporation of companies, under the laws of this state, provide that executors, admin- istrators, guardians or trustees, shall represent the shares of stock in their hands at all meetings, and vote as stock- holders thereon ; but even in the absence of such a pro- vision they are entitled to vote upon the stock which they represent." The pledgee of stock, however, stands in a different position, and has no right to vote upon stock held by him in pledge, unless he has been expressly authorized to do so and to transfer the stock to his own name on the transfer books.' W/iere Directors ivrongfully hold over. — Whenever the directors named in articles of association of any corporation ' Matter of Long Island R. R. Co., = Matter of North Shore, etc., Ferry 19 Wend. 37; People v. Batchelor, 22 Co., 63 Barb. 556. N. Y. 128. '' McHenry \ . fewett, 26 Hun, 453. 2 People ex rel. Swinburne v. Al- This case was reversed on the ground bany Medical College, 26 Hun, 348 ; solely that an injunction would not aff'd 89 N. Y., 635. lie to restrain a pledgee from voting ^People V. Twaddell, 18 Hun, 427- on stock standing in his name. s. '^Matter of Barker, 6 Wend. 509.; c, 90 N. Y. 58. Strong V. Smith, 15 Hun, 222. THE RIGHTS OF STOCKHOLDERS. 203 organized under any general law of this state, neglect or refuse during the first year of the corporate existence to adopt the by-law required by law to enable stockholders to hold the annual election for directors, and where, by such neglect, the said directors hold over and continue to be directors after the expiration of the first year of the corporate existence, all acts and proceedings of the directors, when so holding over, done for and in the name of the company, and designed to charge upon the company any liability or obligation for the past ser- vices of any director so holding over, or for the past services of any officer or attorney or counsel appointed by them, such liability or obligation is considered fraudulent and void.* When directors of such a corporation are holding over by their wrongful neglect of duty beyond the term for which they were appointed or elected, and an action has been brought against the company by the procurement of any of them to enforce any claim or obligation declared void as above, and such action is in the interest or for the benefit of any director so holding over, and the company has by their connivance made default in such action or consented to the validity of the claim or obligation so sought to be enforced against the company, any stockholder of the com- pany may apply to the Supreme Court, by afifidavit, setting forth the facts, for a stay of proceedings in such action, and on proof of the facts in such further manner and upon such notice as the court may direct, the Supreme Court may stay such proceedings or set aside or vacate the same, or grant such other relief as may seem proper, and which will not injuriously affect an innocent party who, without notice of such wrong-doing and for a valuable consideration, has acquired rights under such proceedings.^ Stockholders may Call Meetings. — When the directors of a corporation neglect to adopt a by-law providing for the annual election of directors for sixty days after the first J Laws of 1S85, chap. 489, § i. « Id. § 2. 204 THE LAW OF CORPORATIONS. year of the corporate existence, the stockholders may elect directors in the place of those holding over. The stockholders entitled to vote for directors may meet after a previous notice in writing, given by them to all stockholders at least fifteen days before such meeting, of the time and place when and where such meeting will be held for the purpose of electing directors ; and any officer or other person having charge of the books of the corporation containing the names of the stockholders must allow the same to be examined by any stockholder or his attorney, for the purpose of giving such notice. The place of such meeting must be the principal office of the company, or in case it has no such office, at the place in the city where its principal business has been transacted, or in case such office or place is denied, then at some other place to be designated in such notice in the city or town where the principal office of such company is or was last located. At such meeting the stockholders must €lect two or more inspectors of election. If a majority of the votes cast shall be for one ticket for directors the per- sons so named and voted for as directors thereupon become the directors until the next annual election and until others are elected and qualified in their stead, and without reference to the time when they become stockholders. In the absence at such meeting of the books of the corpora- tion showing who were stockholders, each stockholder in order to be entitled to vote must present a statement in writing, signed and verified by him under oath, setting forth the number of shares of stock standing in his name on its books, and upon which he is entitled to vote, and which is then owned by him, and if known to him, he shall also state the whole number of shares of stock issued by the corpo- ration at the time when the election ought to have been held, and on filing such affidavit with the inspectors he will be entitled to vote on such stock. The inspectors must return and file such verified state- THE RIGHTS OF STOCKHOLDERS. 205 ments, together with the certificate of the results of the election, which must be verified by them, with the clerk of the county in which such election is held.' In addition to electing directors the stockholders at such a meeting may adopt a by-law providing for the annual meetings and election of directors. Such by-laws must be adopted in the same manner and by the same number of votes as is prescribed for the election of directors, and has the same effect as if it had been adopted by the directors of the company.^ ' Laws of 1885, chap. 489, § 3. '^ Id. § 4. 206 THE LAW OF CORPORATIONS. CHAPTER VII. THE LIABILITIES OF STOCKHOLDERS. Where the capital stock of a corporation has not been paid in full and the amount paid is insufficient to satisfy the claims of its creditors, each stockholder is liable on each share held by him to the extent of the amount necessary to complete such share as fixed by the charter of the company, or such proportion of that sum as may be required to satisfy the debts of the company.' In addition to this liability, which is general to all the corporations organized under the laws of this state, many of" the acts for the formation of corporations impose upon their stockholders certain special liabilities. Under the Manufacturing Act All the stockholders of Com- panies incorporated under this act, are severally individually liable to the creditors of the company to an amount equal to the amount of stock held by them respectively for all debts and contracts made by such company, until the whole amount of capital stock fixed and limited by such company has been paid in and a certificate thereof has been made and recorded in the office of the clerk of the county where the business of the company is carried on.^ Stock which has been issued for property purchased, how- ever, is not liable under this section.' Under this act, also, stockholders are jointly and severally individually liable for all debts that may be due and owing to all their " laborers, servants and apprentices" for services performed for such corporation.'' ' Rev. Stat., part i. chap, xviii. ^ Laws of 1S53, chap. 333. § 2. title 3, § 5. "^ Laws of 1848, chap. 40, § 18. ' Laws of 184S, chap. 40, § 10. THE LIABILITIES OF STOCKHOLDERS. 20/ No person, however, holding stock in any such company as executor, administrator, guardian or trustee, and no per- son holding such stock as collateral security, is personally subject to any liability as stockholder of such company; but the person pledging such stock is considered as holding the same and is liable as a stockholder accordingly, and the estates and funds in the hands of such executor, administra- tor, guardian or trustee, are liable in like manner and to the same extent as the testator or intestate or the ward or the person interested in such trust fund would have been if he had been living and competent to act and hold the same stock in his own name.' No stockholder is personally liable for the payment of any debt contracted by any company formed under this act Avhich is not to be paid within one year from the time the debt is contracted, nor unless a suit for the collection of such debt is brought against the company within one year after the debt becomes due ; and no suit may be brought against any stockholder for any debt of such company unless it is commenced within two years from the time he may have ceased to be a stockholder ; nor until an execution against the company has been returned unsatisfied in whole or in part." Under the Business Act. — Under this act the corporations are, as we have seen, of two classes, namely : full liability companies, and limited liability companies. In full liability companies all the stockholders are sever- all)- individually liable to the creditors of the company for all debts and liabilities of such compauy, and may be joined as defendants in any action against the compan}', but no execution can issue against any stockholder individually until execution has been issued against the company and has been returned unsatisfied ; and whenever a judgment is recovered against a stockholder individually, all the stockholders must ' Laws of 1S48, chap. 40, § 16, • Id. § 24. Handy v. Draper, 89 N. Y. 334. 208 THE LAW OF CORPORATIONS. contribute a proportionate share of the amount paid by such stockholder on such judgment, proportionate to the number of shares of stock owned by each of them, and such stock- holder will have a right of action against the other stock- holders in the corporation jointly or severally to recover from them the proper portion due by them of the amount so paid.' In limited liability companies all the stockholders are severally individually liable to the creditors of the company to an amount equal to the amount of stock held by them for all debts and contracts made by the company, until the whole amount of capital stock fixed and limited by such company has been paid in and a certificate thereof made and recorded. The term stockholder as here used applies not only to such, persons as appear by the books of the corporation to be such, but also to every equitable owner of stock, although the same may appear on such books in the name of another person, and also to every person who may have advanced the instalments of purchase money of any stock in the name of any person under twenty-one years of age, and while such person remains a minor to the extent of such advance ; and also, to every guardian or other trustee who has voluntarily invested any trust funds in such stock ; and no trust funds in the hands of such guardian or trustee are in anyway liable under the provisions of this act by reason of such invest- ment, nor is the person for w4iose benefit any such invest- ment may be made responsible in respect to this stock until thirty days after the time when he became competent and able to control and dispose of the same, but the guardian or other trustee making such investment will continue respon- sible as a stockholder until such responsibility devolves upon the person beneficially interested. In respect to stock held by a guardian or other trustee under a transfer of the same by ' Laws of 1875, chap. 611, § 34. THE LIABILITIES OF STOCKHOLDERS. 209 a third pei-son,or under positive directions by a third person for such investment, the person making such transfer or giv- ing such direction will be deemed a stockholder and his estate be responsible for the debts and liabilities chargeable on such stock. No execution can issue against any stockholder individu- ally until execution has been issued against the corporation and returned, unsatisfied ; and whenever a judgment is re- covered against a stockholder all the stockholders must con- tribute a proportionate share of the amount paid by such stockholder on such judgment, proportionate to the number of shares of stock owned by each of them ; and such stock- holder will have a right of action against the other stock- holders jointly or severally to recover from them the proportion due by them and each of them of the amount so paid.' The act contains a similar provision in regard to trustees of stock as is contained in the Manufacturing Act."" No stockholder is personally liable for the payment of any debt contracted by any corporation formed under this act which is not to be paid within two years from the time the debt is contracted, nor unless an action for the collec- tion of such debt be brought against such corporation within two years after the debt became due. No action can be brought for any such debt against any stockholder who has ceased to be a stockholder unless it be commenced within two years from the time he has ceased to be such stock- holder.= It is not necessary, under this act, that a judgment be first obtained against the company in order to maintain an action against a stockholder. An action maybe commenced and judgment obtained against a stockholder at any time pending an action against the company, but execution cannot ' Laws of 1S75, chap. 611, § 37. » i^ g 35. ' Id. ^ 23. 2IO THE LAW OF CORPORATIONS. issue on such judgment until execution has been returned un- satisfied against the company. The remedy against the stockholder is simply suspended until that is done.' Insurance Companies. — The general rule may probably safely be laid down that stockholders of insurance companies are not personally liable in any event for the debts of the company except to the extent of the instalments due and unpaid upon their stock, and the liability to the forfeiture of their shares, in whole or in part, for the failure to make good a d-eficit in the capital when the same is impaired." In the case of Chase v. Lord^ the question of the lia- bility of stockholders of insurance companies, organized under chapter three hundred and eight, of laws of 1849, u'^" til the whoJe amout of the capital raised by the company is paid in, was very fully discussed by the court, and it was held that such liability attached only to the corporators, and that, as the functions of the corporators ceased with the or- ganization of the company, they could not thereafter be held liable. It seems, therefore, that the only remedy given to a creditor of an insurance company against its stockholders, individually, where the whole capital has not been paid in, is found in that provision of the revised statutes, in relation to corporations, which obligates each stockholder to pay on each share of his stock the sum necessary to make it full paid, or such portion thereof as is required to pay the cor- porate debts, and that the liability of the stockholder is lim- ited by this provision. Banks. — The Banking Act provides that Vv-henever de- fault shall be made in the payment of any debt or liability contracted by any corporation or joint stock association, for banking purposes, issuing bank notes or any kind of ' VValtoji V. Coe, no N. Y. 109. Laws of 1853, chap. 463, § 17 as ^ Laws of 1849, chap. 308, § 13 as amended by Lawsof 1S79, chap. 161, amended by Laws of 1S64, chap. 425. § 2. Laws of 1S53 chap. 466, § 24. ^yyN. Y. i. THE LIABILITIES OF STOCKHOLDERS. 211 paper credits to circulate as money, the stockholders of such corporation or association shall be individually responsible, equally and ratably, for the amount of such debt or liability with interest to the extent of their respective shares of stock in any such corporation or association.' The law of the United States imposing a tax of ten per cent, on the circulation of state banks is practically pro- hibitory, and there are no banks at present organized under the state laws which issue bank notes or any kind of paper credits to circulate as money. The question arose, and was submitted to the attorney general by the Superintendent of the Banking Department, whether in view of such prohibition, the stockholders of state banks were liable as provided in the above section, or whether the liability attached only upon the issue of circu- lating notes. In an opinion filed in the Banking Department, Septem- ber 3rd, 1884, the attorney general decided that the stock- holders of state banks not issuing bank notes or paper credits intended to circulate as money are not liable to the creditors of those institutions.^ In his opinion he cites the unreported case of Matter of the Merchanfs Bank of Watcrtozvn, in which the same view of the question is taken. In that case, although the amount involved was large, no appeal was taken from the decision, and while a Special Term case it may undoubtedly be taken as a correct statement of the law. Safe Deposit Companies. — The stockholders of any corpo- ration, organized under the provisions of the act authorizing the formation of corporations for the safe keeping and guar- anteeing of personal property, are jointly and severally liable for all debts that may be due and owing by such corpora- tion to an amount equal to the par value of their stock in ' Laws of 1882, chap. 409, § 125. this opinion is given in full. ^ Paine's Banking Laws 182, where 212 THE LAW OF CORPORATIONS. such corporation over and above such stock, to be recovered of the stockholders, who were such when the debt was con- tracted, or loss or damage sustained, or of any subsequent stockholder. Any stockholder who may have paid any de- mand against such company either voluntarily or by com- pulsion may resort to the rest of the stockholders who are liable to contribution. The dissolution of such a corporation does not release or affect the liability of any stockholder which may have been incurred before such dissolution.' Trust Companies. — Whenever default is made in the pay- ment of any debt or liability contracted by any trust com- pany, organized under the general laws, the stockholders thereof are individually responsible, equally and ratably for the then existing debts of the corporation ; but no stock- holder is liable for such debts to an amount exceeding the par value of the stock held by him at the time of such de- fault ; and no person holding such stock as an executor, trustee, etc., or as collateral security is liable as a stock- holder, and the estate and funds in his hands only are liable." Railroads. — Each stockholder of any company formed under the act to authorize the formation of railroad cor- porations, is individually liable to the creditors of such com- pany to an amount equal to the amount unpaid on the stock held by him for all the debts and liabilities of such company, until the whole amount of the capital stock so held by him shall have been paid to the company ; and all the stock- holders are jointly and severally liable for all debts due or owing to any of its " laborers and servants other than con- tractors" for personal services for thirty days' service performed for such company, but are not liable to an action therefore before an execution has been returned un- ' Laws of 1S75, chap. 613, § 9. amended by Laws of 1889, chap. 558. '' Laws of 1SS7, chap. 546, § 29, as THE LIABILITIES OF STOCKHOLDERS. 213 satisfied in whole or in part against the corporation, and the amount due on such execution is the amount recoverable with costs against the stockholders. Before such laborer or servant can charge a stock- holder for such services, he must give him notice in writing within twenty days after the performance of the services that he intends to hold him liable, and must commence an action therefor within thirty days after the return of the execution ; and every stockholder against whom any such recovery is had may recover the same of the other stockholders in such corporation in ratable proportion to the amount of stock they respectively hold.' Bridge Companies. — The stockholders of bridge companies are liable to an amount equal to the amount of capital stock held by them to the creditors of such companies, un- til the whole amount of the capital stock is paid in and a certificate of such payment filed.' Building Companies. — -The stockholders of companies in- corporated for the purpose of erecting buildings, buying and selling lands, using elevators, etc., are jointly and severally liable to the creditors of the company to an amount equal to the amount of stock held by them respectively for all debts of the company until the whole amount of the capi- tal is paid in and the certificate thereof recorded ^; and they are also jointly and severally liable for the debts that may be due and owing to all their "laborers, servants and apprentices " for services performed for such corporation/ No stockholder is liable for the payment of any debt which is not to be paid within one year from the time the debt was contracted, nor unless a suit for its collection is brought against the company within one year after the debt becomes due ; nor can a suit be brought against a stockholder until an execution against the company has been returned unsatis- ' Laws of 1850, chap. 140, § 10. as ^ Laws of 1S53, chap. 117, § 10. amended by Laws of 1S54, chap. 282. ■* Id. § iS. '■^ Laws of 1848, chap. 259, vj 2. 214 THE LAW OF CORPORATIONS. fied, nor unless the suit is commenced within three months from the return of such execution.' Gas-Light Companies. — The stockholders of gas-light companies are individually liable to the creditors of such companies to an amount equal to the amount of stock held by them for all debts of the company until the whole amount of capital stock has been paid in and a certificate recorded^ ; and they are also jointly and severally individu ally liable for all debts that may be due and owing to all their " laborers, servants and apprentices " for services per- formed for such corporation.^ No stockholder is personally liable for the payment of any such debt of the company which is not to be paid within one year from the time the debt is contracted, nor unless a suit for its collection is brought against the com- pany within one year after the debt becomes due ; and no suit can be brought against a stockholder unless it is com- menced within two years from the time he has ceased to be a stockholder in such company, nor until an execution against the company has been returned unsatisfied.* Guano Companies. — The stockholders of companies incor- porated for the purpose of mining guano are liable to the creditors of the company to an amount equal to the stock subscribed by them until the whole amount of the capital has been paid in' ; and they are jointly and severally indi- vidually liable for all debts that may be due and owing to all their " laborers, servants and apprentices " for services performed for such corporation." No stockholder is personally liable for the payment of any debt if he has ceased to be a stockholder in such com- pany, unless a suit for the same has been commenced within two years from the time he has ceased to be a stockholder, ^ Laws of 1853, chap. 117, j? 24. •• Id. § 17. 2 Laws of 1S4S, chap. 37, § 10. = Laws of 1S57, chap. 546, § 11. 3 Id. S 15. Ud. § i3. THE LIABILITIES OF STOCKHOLDERS. 21 5 nor until an execution against the company has been returned unsatisfied,' Hotel Companies. — Stockholders of hotel companies are •jointly, severally and individually liable to the creditors of, or those holding claims against such company to an amount equal to the amount of stock held by them, for all the debts and liabilities of the company ; but such stockholder is not liable to an action therefor before an execution has been returned unsatisfied against the company, and then the amount due on such execution is the amount recoverable with costs against the stockholder.^ Persons holding stock as executor or trustee or pledgee are not personally liable but only to the extent of the estate in their hands.' Navigation Companies. — The stockholders of navigation companies are severally, individually liable to the creditors of such companies to an amount equal to the amount of stock held by them until the whole amount of capital stock has been paid in and the certificate recorded^ ; and they are jointly and severally individually liable for all the debts that may be due and owing to all their " laborers and operatives " for services performed for such corporation.^ No stockholdf^r is personally liable for the payment of any debt contracted by such corporation unless a suit for its collection is brought against the corporation within six years after the debt becomes due, nor until an execution has been returned unsatisfied against the company/' The term stockholder as used in this act applies not only to such persons as appear on the books of the corpora- tion to be such, but also to every equitable owner of stock although the same may appear on such books in the name of another person ; and also to every person who has ad- vanced the instalments for purchase money of any stock in ' Laws of 1S57, chap. 546, § 20. ■• Laws of 1S52, chap. 22S, § 6. ''■ Laws of 1874, chap. 143, § 13. * Id. § 5. 3 Id. § 10. ^ Id. §8. 2l6 THE LAW OF CORPORATIONS. the name of any person under twenty-one years of age and while such person remains a minor to the extent of such advance ; and also to every guardian or other trustee who has voluntarily invested any trust funds in such stock ; and no trust funds in the hands of such guardian or trustee are in any way liable by reason of such investment ; nor is the person for whose benefit any such investment is made re- sponsible in respect to such stock until thirty days after the time when he shall become competent and able to control and dispose of the same ; but the guardian or other trustee mak- ing such investment continues responsible as a stockholder until such responsibility devolves upon the person benefi- cially interested ; and in respect to stock held by a guar- dian or other trustee under a transfer by a third person or under directions by a third person for such investment, the person making such transfer or giving such directions is deemed a stockholder and his estate, if he be deceased, is responsible for all debts and liabilities chargeable on such stock.' Inland Navigation Companies. — The stockholders of in- land navigation companies are jointly and several!}' liable to the creditors of such companies to an amount equal to the amount of stock held by them respectively for all debts and contracts made by these companies, and for all claims and demands against them until the whole amount of cap- ital stock is paid in and a certificate thereof made and recorded.' They are also jointly and severally individually liable for all debts that may be due and owing to all " labor- ers and servants" of such company for services performed ; but no action can be brought for any such debt until it has been due and unpaid thirty days.' No stockholder is in any case personally liable for the payment of any debt contracted by, or claim or demand against, such company unless an action for its collection is ' Laws of 1S52, chap. 22S, § g. ^ Id. § 18. 2 Laws of 1S54, chap. 232, § 10. THE LIABILITIES OF STOCKHOLDERS. 2iy brought against the company within one year aftei it has become due, nor until an execution against the property of the company has been returned unsatisfied.' The act also contains a provision that no person holding stock as executor, administrator or trustee shall be person- ally subject to any liability as stockholder.'' Park Associations. — The stockholders of park associations are individually liable to an amount equal to the amount of the capital stock held by them for all debts contracted by the directors or agents of such companies until the whole amount of capital stock is paid in and a certificate of pay- ment recorded.^ Pipe-Line Companies. — Stockholders of pipe-line com panics are individually liable to the creditors of such com- panies to an amount equal to the amount unpaid on the stock held by them until the whole amount of the capital stock has been paid in ; and they are jointly and severally liable for debts due or owing to any of the " laborers and ser- vants, other than contractors," for personal services for thirty days' services performed for such company ; but are not liable to an action therefor before an execution has been returned unsatisfied against the company, and the amount due on such execution is the amount that ma)- be recovered with costs against such stockholder by such laborer or ser- vant.'' No person holding stock as executor or administrator or trustee is personally liable as such stockholder/ Stage-CoacJi Companies. — The stockholders of stage-coach companies are jointly and severallj' individually liable to the creditors of such companies for all the debts and liabilities, but are not liable to an action therefor before an execution is returned unsatisfied against the corporation, and then the ' Laws of 1S54, chap. 232, § 12. Laws of 1S72. chap. 24S, p 3. ' Id. § 16. ■» Laws of 187S, chap. 203, § li. 3 Laws of 1S61, chap. 149, § 2, and '' Id. g 12. 2l8 THE LAW OF CORPORATIONS. amount due on such execution is the amount recoverable with costs against such stockholders.' No person holding stock as executor, administrator, trustee or pledgee is personally subject to any liability as a stockholder of such company.'^ TelegrapJi Companies. — The act for the incorporation of telegraph companies provides that the stockholders shall be jointly and severally personally liable for the payment of all debts and demands against such association which shall be contracted, or which shall become due, during the time of their holding such stock, but such liability shall not exceed twenty-five per cent, in amount the amount of stock held by him ; and it further provides that such stockholder shall not be proceeded against until judgment and execution unsatis- fied had been returned against the company, unless such association had been dissolved.'' By an amendment to this act, however, it is provided that the liability of any stockholder shall apply only to the amount due and unpaid on his stock.'* Thus the liability of stock- holders of telegraph companies is now limited to the general liability of the amount due and unpaid on such stockholder's subscriptions. Turnpike Companies. — The stockholders of turnpike and plank-road companies are liable, in their individual capacity, for the payment of the debts of such companies to an amount equal to the amount of stock they severally have subscribed for or hold over and above such stock to be recovered of the stockholder who is such when the debt was contracted, or of any subsequent stockholder. Any stockholder who has paid any demand against such company, either voluntarily or by compulsion, has a right to resort to the rest of the stock- holders who are liable to contribution. The dissolution of any such company does not release or affect the liability of ' Laws of 1867, chap. 974, ^ 10. ^ Laws of 1S4S, chap. 265, p 10. 2 Id. § II. * Laws of 1S53, chap. 471, § 4- THE LIABILITIES OF STOCKHOLDERS. 219 any stockholder which may have been incurred before such dissolution.' The law provides a summary method of enforcing the individual liability of stockholders in such companies after an execution against the property of such corporation has been returned unsatisfied. An action may be brought by any creditor on behalf of himself and of other creditors of such corporation against all the stockholders and any former stockholder for the purpose of enforcing their respective in- dividual liabilities. In such an action the court may enforce the payment of all arrears due from, and owing by, any stockholder, and also ascertain all the debts of the corporation which the stock- holders are individually liable to pay, and assess and appor- tion the total amount of such indebtedness, and may apply the same to the payment and extinguishment of the debts of the corporation which may be established and proved in such action to be debts for which the stockholders are liable individually." Liability on Unpaid Stock. — The Capital stock of a corpora- tion is, as we have seen, the fund available to creditors in case of insolvency, and all stockholders are liable on each share to the amount necessary to complete such share as fixed by charter of the company. In order to incur the liability one must be a subscriber to the stock or a stockholder in the company. It is not, however, necessary in order to make one liable as a stock- holder, that he actually have a certificate of stock issued in his name. If he has acted as a stockholder or as an officer of the company in such a manner as to hold himself out to those dealing with the company as a stockholder, it is suf- ficient to make him liable, even though he has never paid any instalment on the stock, nor has had a certificate issued ' Laws of 1S47, chap. 210, ^ 44. « Laws of 1S55, chap. 390. 220 THE LAW OF CORPORATIONS. to him.' So, too, one to whom stock has been apportioned is a stockholder although no certificate has been issued and the apportionment was made for him to an agent who sub- scribed at his request.^ A creditor bringing an action for unpaid subscriptions has a double remedy. He may maintain an action after exhausting his remedy against the corporation to reach the liability of any stockholder, and be subrogated to the rights of the company without joining other stockholders or credi- tors ; or he may, after the return of an execution unsatisfied against the compan}% maintain an action in the nature of a creditor's bill on behalf of himself and other creditors who may choose to come in and make all the stockholders parties to the action." The right to collect the subscriptions is a right belonging to the company, and where an action has been commenced prior to the appointment of a receiver it may be continued for the benefit of the receiver.'' It is not necessary that shares be allotted to the sub- scriber before bringing an action upon the subscription ; " and where subscribers sign a paper stating that they thereby associate themselves together to form a corporation for the purposes therein stated, a promise to take and pay for shares set opposite their respective names is implied, and becomes binding upon such subscribers although no cash payment is made." As a general rule, a legal and effectual formation of a corporation is a condition precedent to the obligation of a subscriber,' although such organization may be waived on ' Eaton V. Aspinwall, 19 N. Y. 119; Tracy v. First N'atl. Bank of Selma, Burr V. JVi/cox, 22 id. 551; Bttffalo, 37 id. 523; Plmnix IVarihoiising Co. etc., R. R. Co. V. Cary\ 26 id. 75; v. Badger, 67 id. 294. Wheeler v. Millar. 90 id. 353. * Buffalo, etc., R. R. Co. v. Dudley, - Burr V. Wilcox, 22 N. Y. 551. 14 N. Y. 336. '^ Bartlctt V. Dre'i<, 57 N. Y. 5S7; ^ Lake Ontario, etc., R. R. Co. v. Wheeler v. Millar, 90 id. 353. Mason, 16 N. Y. 451. * Rankine v. Elliott, 16 N. Y. 377; "^ Dorris v. Sweeney, 60 N. Y. 463. THE LIABILITIES OF STOCKHOLDERS. 221 the part of the subscriber by deaHng with the company as a regularly organized corporation.' And while a change in the charter of a company, or the act under which it organized, will not as a general rule release the subscriber," yet if there is a change in the objects for which it is organized and a material departure from the original purpose, the subscriber is not bound. "* Where a stockholder whose stock has not been fully paid in in good faith makes an absolute and valid transfer of his stock to another, he is not liable for debts made after such transfer.' That a mortgage of the property of a corporation is fore- closed, and its property and franchises sold, is no defence to an action brought to recover instalments due on the stock ; * nor is the power of the company to causetheshares to be for- feited for non-payment of instalments, as this is simply a cumulative remedy, given to the corporation." But Avhen shares have been actually forfeited for non-payment of sub- scription the subscriber ceases to be a stockholder, and is no longer liable either to the company or to its creditors for unpaid instalments.' Where the articles of incorporation provide that at the time of subscribing every subscriber shall pay ten per cent, on the amount subscribed by him, and that no subscription shall be received or taken without such payment, the pay- ment is a condition precedent to the obligation ;' and in an action by the corporation against a subscriber to recover ' Buffalo &t', 25 N. Y. 20S; Beachv. Smith, ^ Kincaid v. Dwinelle, 59 N. Y. 30 id. 116; N. Y. &= Oswego Mid. R. 548. R. Co. V. Frt« Horn, 57 id. 473. * Cochran v. Weichers, Court of - Pfohlw. Simpson, 74 N. Y. 137. Appeals, 23 No. East. Rep. 803. 3 Cornitig v. McCullough, i N. Y. « Wiles v. Siiydam, 64 N. Y. 173. THE LIABILITIES OF STOCKHOLDERS. 223 for the failure to file a report or for filing a false report is no bar to an action to charge the same person on his liabili- ty as a stockholder under this section.' Where the statute provides certain conditions prece- dent to enforcing the liability of the stockholders, such as a provision that the debt must be one payable within a year from the time it was contracted; that suit against the company must have been brought within a time specified; that an execution against the company must have been re- turned unsatisfied ; they must all be performed, unless such performance is rendered useless or impossible by the disso- lution or insolvency of the company, before an action can be maintained against a stockholder.- The cause of action then accrues, and the statute of limitations begins to run against a stockholder from that time.^ The provision is not for the benefit of all creditors. It applies only to those who bring themselves within its terms, and is for their benefit alone.* It is an individual liability of stockholders directly to such of the creditors as have complied with the requisite conditions precedent, and it follows that it is not a liability in favor of the corporation itself, or for the benefit of all its creditors, and unlike the liability on unpaid instalments, it cannot therefore be vested in, or enforced by, a receiver of the corporation.^ The right of a creditor to enforce such a liability is a several and a distinct right, and not a joint right of the cred- itors generally, and he may therefore sue alone to enforce it, although there are other creditors similarly situated ; and he may bring this action against one stockholder or all." On the other hand in a proper case, and to prevent a multiplicity of actions, a court of equity will restrain sepa- ' Douglass v. Ireland, "j^^-^ ■ 100. ■* Cuykendallv. Coming, 88 N. Y. - Shelliiigton v. Howland, 53 N. Y. 129, 371; Kincaid v. Dunnelle, 59 id. ^ Farns worth v. Wood, 91 N, Y. 548; Handy v. Draper, 89 id, 334. 30S. 2 Knox V. Baldwm, 80 N. Y. 610; " Weeks v. Love, 50 N. Y. 56S; Handy v. Draper, 89 id. 334. Mathez v. Neidig, 72 id. 100. 224 THE LAW OF CORPORATIONS. rate and individual actions at law, in the same or other courts, where there are many such actions pending against stock- holders, and bring all the litigation into one suit.' Where the property of a corporation has been divided among its stockholders before all its debts have been paid, a judgment creditor, after the return of an execution un- satisfied, may maintain an action against any individual stockholder to reach any funds of the corporation that have been received by him, and it is immaterial whether he re- ceive them by fair agreement with his associates or by wrongful act. Such a creditor is not obliged to bring an ac- tion against all the stockholders to enforce their liability, but may pursue the remedy against any one who has property of the corporation which ought to be applied in payment of its debts. '^ A statute which imposes upon the stockholders of a cor- poration a personal liability for the corporate debts is in dero- gation of the common law, and will be construed strictly and not extended beyond its literal terms.^ It follows that all the facts necessary to establish a creditor's cause of action must be alleged and proved. It must be shown that the stockholder holds an amount of stock in the company equal to the amount of the debt; and that the debt was one ex- isting while the defendant was a stockholder, as well as the other necessary facts in regard to an action against a cor- poration and a return of an execution unsatisfied.^ While all of the above allegations are essential as proof of the performance of the conditions precedent without ' Pfold V. Simpson, 74 N. Y. 137. thus tra nsferred is still liable to be ■^ Bartlett v. Drew, 57 N. Y. 5S7; taken on execution as the property Hastings v. Dreio, 76 id. 9. And of the former corporation. Booth v. where the managing members of an Biiiice, 33 N. Y. 139. embarrassed corporation unite in '^ Lozory v. Intnaft, 46 N. Y. iig; forming a new one, and transfer to Chase v. Lord, 77 id. i. it the property of the former for the ■* Chambers v. Lewis, 28 N. Y. 454; purpose of hindering, delaying and Wheeler v. Millar, 90 N. Y. 353. defrauding its creditors, the property THE LIABILITIES OF STOCKHOLDERS. 22$ which a judgment against a stockholder, enforcing his per- sonal liabilit}^ cannot be recovered, such proofs are available only for this purpose, and the cause of action must be proved anew against the stockholder.' Where, however, a creditor of a corporation claims directly through the corporation for a liability of the stockholder to the corporation for unpaid instalments of his stock, it has been held that the record of a judgment against the corporation was competent evidence of plaintiff's status as a creditor, and of the amount due, and that such evidence was binding and conclusive against the stockholder.* Where the requirements as to the payment of stock have been fully complied with, a stockholder's liability is ended so far as the amount of stock thus fixed and limited is con- cerned ; but in case of an increase of the capital, the liability again attaches to the extent of such increase, and stock- holders purchasing or owning the new stock are liable to the extent of the stock so held until the statute is complied with.^ As the words "fixed and limited" are not confined to the original amount of stock but extend to anj- increase, although the question has not been directly adjudicated upon in the Court of Appeals, it is probable that the same reasoning would ripply to a reduction of the capital stock, and that when such reduction had been made, and the cap- ital as thus "fixed and limited " had been paid in, and a cer- tificate filed, the liability of a stockholder would thus be terminated.' In a recovery against a stockholder interest will usually be allowed only from the time of the commencement of the suit ' Miller v. IVhite, 50 N. Y. 137; Stephens v. Fox, S3 id. 313. McMahon v. Macy, 51 id. 155; Kin- •* Veeder v. Altidgett, 95 N. Y. 295. caid V. Dxi'inelle, 59 id. 54S' Wheeler •* Randall \. Havemeyer, 49 Super., V. Miliar, 24 Hun, 541. Aff'd. 90 (J..&S.)52o; Sutherland v. Oleott,^'^ N. Y. 353- N. Y 93. - Hastings v. Drexu, 76 N. Y. 9; 226 THE LAW OF CORPORATIONS. against him ; ' but where the entire principal and interest of the debt does not exceed the Hmit of the Habihty of a stock- holder, interest may be allowed from the time the debt be- came due from the corporation.^ Where a stockholder has been held liable under this pro- vision and has paid a debt of the corporation he can enforce contribution from the other stockholders. It is held that the liability is the same in effect as if every stockholder had executed a separate bond binding himself to pay the debts upon the conditions specified in the act. In such a case equity compels contribution.^ A Stockholder's Defences. — That a stockholder is himself a creditor of the company is generally a good defence to the extent of the indebtedness of the corporation to him ; '^ but, as is said in WJicclcr v. Millar^" the stockholder must really be a creditor of the company ; he must stand in a rela- tion to it which in equity and justice is as strong as that of the assailant. If he himself is indebted to the company for unpaid instalments on his stock, he must first pay his in- debtedness, and if the company still owe him, to the extent of that balance he would have an equitable defence. To an action at law it might be a good defence on the part of a stockholder that the plaintiff was also a stockholder, on the ground that the separate liabilities of stockholders could not be adjusted in such an action. But if the stock- holder as a creditor of the company is precluded from bring- ing such an action against a fellow-stockholder, it is probable that he would be entitled to the remedy of con- tribution in an action properly brought for that purpose.' "^ Burr V. Wilcox, 22 N. Y. 551; il////ar, go id. 353. Where, however, Shellmgton v. Howland, 53 id. 371;- the stockholders are made liable in Handy v. Draper, 89 id. 334. any event for all the debts of the cor- ^ Wheeler v. Millar, 90 id. 353. poration, it is obvious that such a "^ A spin-wall \. Sacchi, 57 N. Y. defence is not available. See Matter 331. of Empire City Bank, 18 N. Y. 199; ■* Garrison v. Howe, 17 N. Y. 458; Matter of HoUister Bank, 27 id. 393. Mathez v. N'eidig, 72 id. 100; Agate * 90 N. Y. 353, 369. V. Sands, 73 id. 620; Wheeler v. ^ Mathez v. Neidig, 72 N. Y. 100, THE LIABILITIES OF STOCKHOLDERS. 227 Holders of stock issued for property purchased under the Manufacturing Act are not Hable under this statute.' If however, fraudulent over-valuation be shown, and that the stock greatly exceeded in amount the value of the property for which it was issued, and that the trustees issued it with knowledge of the real value of the property, such facts are sufficient to sustain a finding of fraudulent intent which will render the stockholders liable.^ These are questions of fact to be submitted to a jury and their verdict is generally con- clusive as to such intent.' Even where the common device is resorted to of issuing stock for property purchased, as paid-up stock, and of return- ing a portion of it to the company as a working capital, it is not conclusive of a fraudulent over-valuation, even where no estimate of the value of such property is made, but the question of the intent of the trustees in issuing the stock, and whether it was for the purpose of evading the statute is a question for the jury to determine.'' Where the capital has been issued for property, a stock- holder to whom the stock has been delivered for an adequate consideration by the corporation cannot be compelled to pay the difference between the par value of the stock and the value of the property for which it was originally issued, for Andreivs v. Murray, 33 Barb. 354; Richardson v. Abendrotk, 43 id. 162; Woodruff^, etc., Iron Works v. Chit- tenden, 4 Bosw. 406; Deniing v. Pzdeston, 33 N. Y. Super. (J . & S.) 231. 1 Laws of 1853, chap. 333, § 2; Bonnell\. Gr is wo Id, 80 N. Y. 128. - Schenck v. Andrews, 57 N. Y. 133; Boynton v. Andrews, 63 id. 93; Douglass V. Ireland, 73 id. lOO. ^ Lake Superior Iron Co. v. Drexel, go N. Y. 87; Blake v. Griswold, 103 id. 429. * National Tube Works Co. v. Gil- fillan, 46 Hun, 248; Knowles v. Duffy, 40 id. 485. It was so held in this case in the Supreme Court, First Department, reversing a judgment in favor of plaintiff entered on a trial before a referee on the ground that the facts were not sufficient to es- tablish a fraudulent over-valuation and intent to evade the statute. Upon the same state of facts, how- ever, the General Term of the Second Department affirmed a judg- ment against the same defendant. See Thurston v. Duffy, 38 Hun, 327- 228 THE LAW OF CORPORATIONS. the benefit of the creditors of the company, where the same has been received by him in good faith.' A stockholder is not Hable for debts falHng due before he became a stockholder/ although he may be on instal- ments of a debt becaming due while he is a stockholder, although the debt was contracted before he became one.^ The liability of stockholders cannot be revived or ex- tended by any renewal or extension of the indebtedness which the creditors may make with the corporation. Thus where, by the acceptance of a note, the time of payment of an original indebtedness is extended, and the plaintiff does not bring an action against the corporation within one year from the time the original debt became due, it was held that a stockholder was not liable.' It is no defence to an action of this kind that the time to file a certificate of payment of stock had not expired, as the liability attaches at once upon incurring the debt.^ But where the statute requires that the action shall be com- menced within a certain time after one has ceased to be a stockholder, it is a good defence to an action seeking to charge him with the liability for the corporate debts that before that time a judgment had been rendered against the corporation sequestrating its property and appointing a permanent receiver, and that the corporation had not since transacted any business, and that the receiver had taken possession of its property and distributed the proceeds among its creditors pursuant to an order of the court. In such a case it was held that the stockholder ceased to be such at the date of such judgment.^ ' Van Cott V. Van Brunt, 82 N. Y. aff'd on opinion below, 71 Y. Y. 535. 597; Jagger Iron Co. v. Walker, -jb '^Johnson v. UnderJiill, 52 N. Y. N. Y. 521; Hardinan v. Sage, 47 203; Phillips V. 7 herassoti. 11 Hun, Hun, 230. 141. 5 A'ing V. Diinca7i, 38 Hiin, 461. ^ McAIaster v. Davidson, 29 Hun, '' Hollingshead v. Woodward, 107 542. N. Y. 96. •• Parrolt v. Colby, 6 Hun, 55 ; THE LIABILI'lIES OF STOCKHOLDERS. 229 Liability to Laborers, etc. — The question as to what per- sons constitute the class of " laborers, servants and appren- . tices," as contained in the statute, was discussed in the case of Wakefield v. Fargo' and Judge Danforth, in giving the opinion of the Court, thus states the true rule of construc- tion : " The clause in question creates a privileged class into which none but the humblest employees are admitted, and the distinction, which in practical life is easily discernable between president, director, officer, agent and laborer, at once disappears in the face of such a judgment as we have before us. Clearly a distinction is made by the statute. The stockholder must pay, not debts due to all employees of the company, but those due to ' laborers, servants and apprentices,' and n :>t all debts due to them, but only such as are due for ' services' performed for such corporation. It is plain, we think, that the services referred to are menial or manual services,— that he who performs them must be of a class whose members usually look to the reward of a day's labor, or service, for immediate or present support, from whom the company does not expect credit, and to whom its future ability to pay is of no consequence ; one who is re- sponsible for no independent action, but who does a day's work, or a stated job, under the direction of a superior." After stating Blackstone's definition of the different classes of servants, he says : " The word used is no doubt broad enough, and might, without exaggeration, represent all per- sons connected with the administration or furtherance of the affairs of a corporation ; in this instance, from the one who dips, or bottles the water, to tl>e president, but this would manifestly be too general. ' Laborer or apprentice,' are words of limited meaning, and refer to a particular class of persons employed for a defined and low grade of service per- formed, as before suggested, without responsibility for the acts of others, themselves directed to the accomplishment of an appointed task, under the supervision of another. They ' 90 N. Y. 213. 230 THE LAW OF CORPORATIONS. necessarily exclude persons of higher dignity, and require that one who seeks his pay as servant should be of no higher grade than those enumerated as laborers or of lesser quality. A statute which treats of persons of an inferior rank cannot by any general words be so extended as to embrace a superior ; the class first mentioned is to be taken as the most comprehensive. ' Spccialia generalibiis derogant /' " It was accordingly held, in that case, that one who was em- ployed at a yearly salary as a bookkeeper and general mana- ger was not a " servant" of the corporation within the mean- ing of the statute. It is not sufificient that the services involve some manual labor, if these are incidental to the general employment. It has, therefore, been held that the secretary of a company does not come within the provisions of the statute ; ' nor a con- sulting engineer;' nor a bookkeeper and general manager ; ' nor a general manager ; ' nor a general agent ;' nor a sales- man selling goods on salary and on commissions ;" nor a con- tractor.' Where, however, manual labor comprises the general element of a person's employment, it has been held that he could enforce the liability of stockholders under this section, even though he might incidentally perform some services of a higher character. ^ In many of the earlier cases the distiction given above has been overlooked, and the decisions, given in such cases, could not be safely followed at the present time." A cause of action accruing to a laborer under this pro- 1 Coffin V. Reynolds, 37 N. Y. 640. * Dean v. De Wolf, 16 Hun, 1S6, ■2 Ericsson v. Brown, 38 Barb. 390. aff'd82 N.Y. 626; Krauscr v. Rtcckel, 3 Wakefield v. Fargo, 90 N.Y. 213. 17 id. 463- In a late case it has been held that '^ People v. Remington, 45 Hun, 329. one rendering services strictly as a ' Aikin v. Wasson, 24 N. Y. 482. bookkeeper came within the provis- « S/iori v. Medberry, 29 Hun, 39. ions of the statute. Chapman v. « See Williamson v. Wadsworth, 49 Chtimar, Sup. Ct. Genl. Term, 7 N. Barb. 294; Hovey v. Ten Broeck, 3 Y. Supp. 230. Robt. 316. ■1 Hill V. Spencer, 61 N. Y. 274. THE LIABILITIES OF STOCKHOLDERS. 231 vision may be enforced by his assignee ; ' but not probably by a laborer who is himself a stockholder, as he and the stockholder whom he seeks to charge are copartners so far as such liability is concerned, and are equally liable.^ ' Kincaid v. D-winelle, 59 N. Y. 548; Krauser v. Ruckel, 17 Hun, 463; Fikherv. Brayton, id. 429. "- Richardson v. Abendroth, 43 Barb. 162. By Laws of iSSg, chap. 3S1, it was provided that every manufactur- ing, mining or quarrying, mercantile, railroad, street railway, canal, steam- boat, telegraph and telephone cor- poration, and every incorporated ex- press company and water company, not municipal, must pay the wages of their employees in cash. Laws of 1S90, chap. 33s, contain the fol- lowing provisions in regard to the weekly payment of wages by certain corporations : " Section i. Every manufactur- ing, mining or quarrying, lumbering, mercantile, railroad, surface, street, electric and elevated railway (except steam surface railroads), steamboat, telegraph, telephone and municipal corporation, and every incorporated express company and water company shall pay weekly, each and every employee engaged in its business, the wages earned by such employee to within six days of the date of such payment: provided, however, that if at any time of payment any employee shall be absent from his regular place of labor, he shall be entitled to said payment at any time thereafter upon demand. "Sec. 2. Any corporation violating any of the provisions of this act shall be liable to a penalty not exceeding fifty dollars and not less than ten dollars for each violation, to be paid to the people of the state and which may be recovered in a civil action : provided an action for such violation is commenced within thirty days from the date thereof. The factory in- spectors of this state, their assistants or deputies, may bring an action in the name of the people of the state as plaintiff against any corporation which neglects to comply with the provisions of this act for a period of two weeks, after having been notified in writing by such inspectors, assist- ants or deputies, that such action will be brought. On the trial of such ac- tion, such corporation shall not be allowed to set up any defence for a failure to pay weekly any employee engaged in its business the wages earned by such employee to within six days of the date of such payment other than a valid assignment of such wages or a valid set-off against the same, or the absence of such employee from his regular place of labor at the time of payment, or an actual tender to such employee at the time of pay- ment of the wages so earned by him, or a breach of contract by such em- ployee, or a denial of the employment. No assignment of future wages, pay- able weekly, under the provisions of this act shall be valid if made to the corporation from whom such wages are to become due, or to any person on behalf of such corporation, or if made or procured to be made to any person for the purpose of relieving such corporation from the obligation to pay weekly under the provisions of this act. Nor shall any of said cor- porations require any agreement from any employee to accept wages at other periods than as provided in section i of this act as a condition of employment. "Sec. 3. The provisions of sections 263 and 3S4 of the Code of Civil Pro- cedure shall apply to and govern any proceedings brought to enforce the provisions of this act, and it is hereby made the duty of the attorney-general of this state to appear in behalf of such proceedings brought hereunder by the factory inspectors of this state, their assistants or deputies. " Sec. 4. This act shall take effect on the first day of July, eighteen hundred and ninety." 2\2 THE LAW OF CORPORATIONS. CHAPTER VIII. LEGAL ACTIONS AND PROCEEDINGS. The right to sue and be sued in the courts of this state is one conferred, with certain restrictions, upon all corpora- tions.' The practice governing such actions is generally regulated by the Code of Civil Procedure.' An action may be maintained by a foreign corporation in like manner and subject to the same regulations as where the action is brought by a domestic corporation, except as otherwise especially prescribed by law. But a foreign cor- poration cannot maintain an action founded upon an act or upon a liability or obligation express or implied, arising out of, or made and entered into in consideration of, an act which the laws of the state forbid a corporation or associa- tion of individuals to do, without express authority of law.' A foreign corporation may enforce any remedy given to it by the statutes of the state to the same extent and in the same manner as a citizen of the state, even where such a course may give it an advantage which it might not be able to secure in the courts of the state where it has its domicile.' ' Rev. Stat., part i. chap, xviii. in the same manner as a natural title 3, § I. person. ^ Corporations may be proceeded Where a fine is imposed upon a against criminally, upon information corporation on conviction, it may be against the corporation, and upon the collected by the sheriff in the same return of the summons the magistrate manner as upon an execution in a must investigate the charges in the civil action. same manner as in the case of a nat- Code of Criminal Procedure, ural person, so far as such proceed- § ^ 675-682. ings are applicable ; and if he return ^ Code Civ. Proc, ^ 1779. a certificate that there is sufficient ^ Hibernia Nafl Bank v. Lacombe, cause to believe the corporation 84 N. Y. 367 ; Diamond Match Co. guilty of the offence charged, the v. Roeber, 106 id. 473. grand jury may proceed and indict it LEGAL ACTIONS AND PROCEEDINGS. 233 And it may assign its cause of action to a resident of this state, in order to obtain a remedy available to a resident, which it, as a non-resident, could not acquire.' Such assign- ment, however, must be made before an action is com- menced by the foreign corporation. It cannot have the retroactive effect of creating a right to enforce a cause of action which did not exist in favor of the assignor when the suit was commenced.'^ An action against a foreign corporation may be main- tained by a resident of the state or by a domestic corpora- tion for any cause of action, irrespective of where the cause of action arises, or of whether the corporation have a place of business or any property within the state." An exception, apparent, however, rather than real, lies in the case of a purely statutory cause of action, given by the laws of this state, such as the right of the personal representatives of a deceased person to bring an action for causing his death. In such a case no recovery can be had where the death was caused beyond the limits of the state, unless it is proved that similar statutes exist in the state where the death was caused ; and it is the same whether defendant is a foreign or a domestic corporation." An action against a foreign corporation may be main- tained by another foreign corporation or by a non-resident in one of the following cases only : 1. Where the action is brought to recover damages for the breach of a contract made within the state, or relating to property situated within the state at the time of making thereof. 2. Where it is brought to recover real property situated ^ Mc Bride v. The Farmt'7-s' Bank, N.Y. 63; Pope v. Terre Haute Card;' 26 N. Y. 450; Petersen v. Che»iical Mfg. Co., S7 id. 137. Bank, 32 id. 20. •» VVkitford \. Panama K. K. Co.. ^ Ervin v. Oregon Ky. ^^ A'av.Co., 23 N. Y. 465 ; Leonard v. Columbia 28 Hun, 26c). Steam Nav, Co., 84 id. 48 ; Parker v. ^ Code Civ. Proc, § 1780 ; Palmer Stroud. 98 id. 379. V. P/ianix Mutual Lije Ins. Co., 84 234 THE LAW OF CORPORATIONS. within the state or a chattel which is replevied within the state. 3. Where the cause of action arose within the state, except where the object of the action is to affect the title to real property situated without the state.' A foreign corporation can be sued by another foreign corporation or a non-resident only in the cases above stated f although where the court has jurisdiction of the subject- matter of the action, appearance by attorney, and answering generally in the action, will confer jurisdiction upon the court. ^ A domestic corporation is defined by the Code as a cor- poration created by or under the laws of the state, or located in the state, and created by or under the laws of the United States, or by or pursuant to the laws in force in the colony of New York before the 19th day of April in the year 1775. Every other corporation is a foreign corporation. ^ A corporation is a citizen of the state under whose, laws it is incorporated, and has no legal existence beyond the bounds of the sovereignty by which it is created, and pos- sesses in another jurisdiction only those rights which the comity of states confers upon it." It has been held in this state that a national bank organ- ized and doing business in the state is a domestic corpora- tion f and so is a corporation consolidated under the laws of this state from several foreign corporations.' The principles upon which foreign corporations may sue and be sued in the courts of this state were discussed in the • Code Civ. Proc, § 1780. ^ Code Civ.Proc.,g 3343,subdiv.i8. '^Robinson v. Oceanic Steam Nav. ^Merrick v. Van Santvoord, ^i,'^. Co., 112 N. Y. 315 ; Ervin v. Oregon Y. 20S ; Stevens v. Phcenix Ins. Co., Ry. &' Nav. Co., 28 Hun, 269 ; £>h- 41 id. 149 ; People v. Fire Ass'n of quesne v. Penn Bank, 35 id. 390. Phila., 92 id. 311. 3 McCormick v. Penn. Cent. R. R. « Market iVafl Bank v. Paci/ic Cb., 49 N. Y. 303 ; Attorney-General Nat' I Bank, Sup. Ct., Sp. Term, 2 V. Guardian Mutual Life Ins. Co., Civ. Proc. Rep. 330. 77 id. 272. '' Matter of Sage, 70 N. Y. 220. LEGAL ACTIONS AND PROCEEDINGS. 235 case of Plimpton v. Bigcloiv,' and it was said by Andrews, J., in giving the opinion of the court, that " suits by or against foreign corporations are not maintained on the theory that the corporation htigant is here in person, or that the corporate entity attends its of^cers in their migra- tions from one state to another, or that it is itself present wherever its property may be or its business may be transacted. The jurisdiction rests upon the ground that as a corporation must act by agents, it may, through its agents, subject itself to the jurisdiction of a foreign tribunal Where a foreign corporation sends its agents into another state or transacts its business there, availing itself of the protection of the laws of such state, there is no just reason why it should not be deemed to have subjected itself, through its agents, to the jurisdic- tion of the courts of that state, and be held to respond to an action brought against it therein, upon process served on its representatives." Jurisdiction of the Courts. Of the Supreme Coiirt. — The Supreme Court has general jurisdiction, in law and equity, over all actions by and against domestic and foreign cor- porations.^ Same. Of Superior City Courts.— T\iQ Superior City Courts, which are the Court of Common Pleas for the City and County of New York, the Superior Court of the City of New York, the Superior Court of Buffalo and the City Court of Brooklyn,' have jurisdiction in an action affecting real property, where the real property to which it relates is situated within the city where the court is located ; or in an action for any other cause, where the cause of action arose within that city; or where the defendant is a resident of that city ; or where the action is to recover damages for an injury to real property, or a chattel real, or for the breach '93N. Y. 592. 3 Id. §33^3, subd^_ j_ "■ Code Civil Proc. §, 217. 236 THE LAW OF CORPORATIONS. of a contract express or implied, relative to real property, or a chattel real, where the real property is situated within that city, or \yhere the defendant is a resident of that city ; or in an action to recover a chattel, or to foreclose or enforce a lien upon personal property, or to recover damages for an injury to personal property, where the property to which the action relates is situated within that city at the time when the action is commenced! If the property consists of one or more shares of the capital stock of a domestic cor- poration, whose principal place of business is located or established within that city, or of a debt due from, or money, or a thing in action, in the possession or under the control of, such a corporation, it is deemed to be situated within that cit^^ They also have jurisdiction in an action brought by a resi- dent of that city against a foreign corporation either (one) to recover damages for the breach of a contract express or implied, or a sum of money payable by the terms of a con- tract express or implied, where the contract was made, executed or delivered within the state or where the cause of action arose within the state ; or (two) where a warrant of attachment, granted in the action, has been actually levied within that city upon the property of the corpora- tion ; or (three) where the summons is served by the delivery of a copy thereof within that city to an officer of the cor- poration as prescribed by law. They also have jurisdiction in an action for the sale or other disposition of the property, or the voluntary dissolu- tion of a domestic corporation, whose principal place of business is located or established within that city ; or for the sale or other disposition of the real property, situated within that city, of a domestic corporation, wherever it is located.' For the purpose of determining the jurisdiction of a ' Code Civ. Proc, § 263. LEGAL ACTIONS AND PROCEEDLNGS. 237 Superior City Court, in one of the cases above specified, a domestic corporation, whose principal place of business is established by or pursuant to a statute, or by its articles of association, or is actually located within the city where the court is located, is deemed a resident of that city; and per- sonal service of a summons made within that cit)-, as pre- scribed in the Code, or personal service of a mandate whereby a special proceeding is commenced made within that city as prescribed in the Code for personal service of a summons, is sufficient service thereof upon a domestic corporation, wher- ever it is located.' Where a Superior City Court has jurisdiction of an action or special proceeding, it possesses the same jurisdiction, au- thority and power as is possessed by the Supreme Court in a like case ; and it ma\' render an)- judgment or grant either party any relief which the Supreme Court might render or grant in a like case, and may enforce its mandates in the same manner as the Supreme Court.' Same. Of Superior Court of Buffalo. — In addition to the jurisdiction given to the Superior City Courts generally, the Superior Court of Buffalo is expressly given jurisdiction in an action against a domestic corporation whicli transacts its general business in that city, or has an office or agency in that city for the transaction of business ; or against a foreign corporation which has property in that city, or an agency, therein.^ Same. Of City Court of Nczo York. — The City Court of New York has jurisdiction in an action against a foreign or domestic corporation, where the complaint demands judgment for a sum of money only, or to recover one or more chattels, with or witliout damages for the taking or deten- tion thereof,^ subject to the limits of its moneyed jurisdic- tion.' A summons from this court can only be served per- sonally with the limits of the City of New York.® ' Code Civ. Proc, § 264. ''■ Id. ^ 267. ^ Id. ^ 292. 'Id. §315. -Md. §316. « Id. §333. 238 THE LAW OF CORPORATIONS. Same. Of County Courts. — For the purpose of determin- ing the jurisdiction of a County Court a domestic corpora- tion whose principal place of business is established by or pursuant to a statute, or by its articles of association, or is actually located within the county, is deemed a resident of the county, and a personal service of a summons made within the county, or personal service of a mandate whereby a special proceeding is commenced, made within the county as prescribed for personal service of a summons, is sufificient service upon a domestic corporation wherever it is located.' Same. Of City Court of Yonkcrs. — The jurisdiction of the City Court of Yonkers extends to an action against a foreign or domestic corporation wherein the complaint de- mands judgment for a sum of money only, or to an action to recover a chattel," but subject to the limits of its moneyed jurisdiction.^ A summons from this court can be served at any place within the County of Westchester, but not else- where.^ Same. Of Courts of Justices and District Courts of New York. — Subject to the limits of its jurisdiction a corporation may sue or be sued in a Justice's Court,' or in a District Court of the City of New York where it has an ofifice in that city," or in the Municipal Court of the City of Rochester. ' Same. Of Courts of Inferior Jurisdiction Generally. — The jurisdiction of the superior city courts, or other courts of inferior jurisdiction, is local and confined to causes of ac- tion in which the property affected is within the limits of the territorial jurisdiction of the court, or where the cause of action arose within such limits, or to cases in which the defendant resides, within the jurisdiction of the court ; and such a court has no jurisdiction of an action against a cor- poration where the cause of action arises, and the business 1 Code Civ. Proc.> § 341. See ^ Id. § 3205. infra. ^ Id. g 2S65. ■ Id. § 3203. ^ Id. § 3215. 3 Id. § 3204. ' Id. § 3226. LEGAL ACTIONS AND PROCEEDINGS. 239 of the corporation is transacted, outside of the limits of the city in which such court is located,' It is not necessary to raise the question of jurisdiction by answer, but it may be taken at any time, and the court will, when its attention is called to the fact, dismiss the action ; nor can the court in such a case acquire jurisdiction by consent of the parties.^ Service of Summons. — Personal service of the summons upon a defendant, being a domestic corporation, must be made by delivering a copy thereof, within the state, to the president or other head of the corporation, the secretary or clerk to the corporation, the cashier, the treasurer, or a director or managing agent.^ Personal service of the summons upon a defendant, be- ing a foreign corporation, must be made by delivering a copy thereof within the state, as follows : 1. To the president, treasurer or secretary, or, if the corporation lacks either of those ofTficers, to the officer per- forming corresponding functions under another name. 2. To a person designated for the purpose by a writing under the seal of the corporation and the signature of its president, vice-president, or other acting head, accompanied with the written consent of the person designated and filed in the office of the secretary of state. The designation must specify a place within the state, as the office or resi- dence of the person designated ; and if it is within a city, the street and street number, if any, or other suitable designation of the particular locality. It remains in force until the filing in the same office, of the written revocation thereof, or of the consent executed in like manner ; the per- son designated may from time to time change the place specified as his office or residence to some other place with- in the state by a writing executed by him and filed in like manner. The secretary of state ma\- require the execution * Landers v. Staten Island R. R. Ins. Co. go N. Y. 526; Robinson v. Co. 53 N. Y. 450. Oceanic Steam Naf. Co. 112 id. 315. "^ Davidsbnrghx. Knickerbocker Life ^ Code Civ. Proc, § 431. 240 THE LAW OF CORPORATIONS. • of any instruments so specified to be authenticated as he deems proper, and he may refuse to file it without such au- thentication. An exempHfied copy of a designation so filed accompanied with a certificate that it has not been revoked," is presumptive evidence of the execution thereof, and conclu- sive evidence of the authority of the officer executing it. 3. If such a designation is not in force, or if neither the person designated nor an officer specified in sub-division first can be found with due diligence, and the corporation has property within the state, or the cause of action arose therein, to the cashier, a director or a managing agent, of the corporation within the state.' Authorities upon the subject of bringing actions against foreign corporations are collated and discussed in the case of Gibbs v. The Queen Insurance Company!^ and it was there held that, when a foreign corporation has designated an agent in compliance with the provisions of the laws of this state upon whom process may be served, it thereby sub- mits itself to the jurisdiction of the courts of this state, having authority to act, and, by service of a summons upon a person so designated, the court acquires jurisdiction and may ren- der a judgment valid and capable of being enforced upon any property of the defendant Avithin its jurisdiction. In an action in the Supreme Court, where the summons is served by delivering a copy within the state to the presi- dent, secretary or treasurer of a corporation, it is not es- sential that the officer should be here in his official capacity, or enuaged in the business of the corporation, or that the cause of action should have arisen within the state, and a judgment against a foreign corporation, in an action so com- menced, will be valid for every purpose within this state, and can be enforced against any of its property at any time found within the state.' ' Code Civ. Proc, § 432. Co. 70 N. Y. 223; Pope v. Terre 2 63 N. Y. 114. Haute Car ^ Mfg. Co. S7 id. 137. ^ Hilier v. Burlington, etc., R. R. LEGAL ACTIONS AND rROCEEDINGS. 24I If the summons is not served upon any of the officers above named, and there is no person within the state desig- nated for the purpose of accepting a service of summons, it may be served upon a cashier, a director or a managing agent of the corporation within the state, provided that the cause of action arose in the state,' or that the corpora- tion has property within the state.'"' The Code does not specify the extent of the agency required to bind a corpo- ration by service of process, but the agent must be of sufifi- cient character and rank to make it reasonably certain that the defendant will be apprised of the service made/ Thus where it appears that the agent is of inferior rank, having no close relations with the company sought to be served, service of a summons upon such an agent or servant will be set aside on motion, and an appearance, for that purpose only, will not confer jurisdiction/ Same. Justices Courts. — A summons out of Justice's Court may be served upon a corporation by delivering a copy thereof to an ofificer or person to whom a copy of the summons in an action brought against the corporation in the Supreme Court might be delivered, or to any director or trustee of the corporation by whatever ofificial title he is called.^ Where the defendant to be served is a domestic railroad corporation, and no officer thereof resides in the county to whom a copy of the summons may be delivered as above prescribed, it may be personally served by delivering a copy thereof to a local superintendent of repairs, freight agent, agent to sell tickets, or station-keeper of the corpo- ration, residing in the county, unless, at least thirty days be- fore it was issued, the corporation has filed in the office of ' Childsv. Harns. Mfg. Co. 104 ^ Sterettv. Denver and Hio Grande N. Y. 477. A'. Co. 17 Hun, 316; Rcddington v. ■■* Barnes v. Mobile ^ N. IV. R. Mariposa Land ^^ AI. Co. rg id. R. Co. 12 Hun, 126. 405. " Palmer v. Pennsylvania Co. 35 ^ Code Civ. Proc. § 2879. Hun, 369. Affirmed 99 N. Y. 679. 242 THE LAW OF CORPORATIONS. the clerk of the county a written instrument designating a person residing in the county upon whom process issued by a justice of the peace against it may be served ; in which case the summons may be personally served by delivering a copy to the person so designated." Where the defendant to be served is a corporation doing business in the state as an express company, and no person resides in the county to whom a copy of the summons may be delivered as prescribed above, it may be served by de- livering a copy thereof to any local or general agent, agent to receive freight or parcels, route agent or messenger of the defendant residing in the county, unless at least thirty days before it was issued, the defendant has made a desig- nation similar to that provided for railroad corporations above.' Where a person has been so designated, and the desig- nation has been revoked, or it appears by afifidavit, or return of the constable to whom a summons has been duly deliv- ered for service, that the person is dead, or has ceased to re- ,side within the county, or that he cannot after due diligence be found within the county so as to deliver a copy of the summons to him, it may be served as if the designation had not been made. Such a designation may be revoked by a writing executed and filed in like manner as required for the purpose of making the designation.^ Service by Publication. — An order directing the service of a summons upon a defendant without the state, or by publi- cation, may be made where the defendant to be served is a foreign corporation ; or, being a domestic corporation, where an attempt was made to commence the action against the defendant before the expiration of the limitation appli- cable thereto, and the limitation would have expired within sixty days next preceding the application if the time had not been extended by the attempt to commence the action." 1 Code Civil Proc, § 2SS0. ^ ij. g 2S82. 2 Id. § 2881. Md. § 43S. LEGAL ACTIONS AND PROCEEDINGS. 243 The order must be founded upon a verified complaint, showing a sufficient cause of action against the defendant to be served, and proof by affidavit of the additional facts re- quired to obtain it; and, where the application is made upon the ground that the defendant is a foreign corpora- tion, that the plaintiff has been or will be unable, with due diligence, to make personal service of the summons.' Pleadings. — In an action brought by or against a corpo- ration, the complaint must aver that the plaintiff or the de- fendant, as the case may be, is a corporation ; must state whether it is a domestic corporation, or a foreign corpor- ation, and if the latter, the state, country, or government by or under whose laws it was created ; but the plaintiff need not set forth, or specially refer to any act or proceeding by or under which the corporation was created." A complaint which states only that plaintiff or defendant is a foreign corporation, without alleging the state or country under whose laws it was created, is not sufficient ; and a de- murrer thereto will be sustained ;' although if it does not appear by the face of the complaint that the plaintiff is a corporation, the objection must be taken by answer, and not by demurrer, as it will not be assumed in aid of a demurrer that plaintiff is a corporation ;' and where one deals with an association bearing a corporate name, and contracts with it in such name, he is thereby estopped from disputing its leo-al incorporation.^ In an action brought by or against a corporation the plaintiff need not prove upon the trial the existence of the corporation, unless the answer is verified and contains an ' Code Civ. Pro., §439. • Sup. Ct., Sp. Term, 10 id. 176. Md. § 1775. * Irving Natl. Bank v. Corbett, 3 Clegg V.Chicago Newspaper Union, Sup. Ct., Sp. Term, 10 Abb. X. C, Sup. Ct., Sp. Term, S Civ. Pro. Rep., S5; PhctnixBank v. Donncll, 40 N. 401; First N^afl Bank of Northaiiip- Y. 410. ton V. Doying, Com. Pleas, Gen'i '■> Commercial Bank of Keokuk v. Term, 11 id. 61; contra, see Hafner Pfeiffcr, loS N. V. 242. Sir' Schoen Fnrniture Co. v. Grtcnwie, 244 THE LAW OF CORPORATIONS. affirmative allegation that the plaintiff or defendant, as the case may be, is not a corporation.' As to what constitutes an " affirmative allegation" suffi- cient to raise the issue of the existence of a corporation, within the meaning of the Code, does not seem to be fully settled. • A denial of knowledge or information sufficient to form a belief is not such an affirmative allegation;^ nor, probably, is a general denial." As to whether an affirmative allegation, upon information and belief that plaintiff or de- fendant is not a corporation, is sufficient to raise the issue, has not been definitely decided." In an action or special proceeding brought by or against a corporation, the defendant is deemed to have waived any mistake in the statement of the corporate name, unless the misnomer is pleaded in the answer or other pleading in the defendant's behalf.' The objection is waived unless 1 Code Civ. Proc, § 1776. ^ Concordia Savings S^ Aid Assn. V. Read, 93 N. Y. 474; Matter of Petition Pf N. Y. L. & W. R. R. Co., 99 id. 12. ** Concordia Savings &^ Aid Ass'n. V. Read, 93 N. Y. 474; Commercial Bank of Keokuk v. Pfeiffer, 108 id. 242. ■* East River Bank v. Rogers, 7 Bosw., 493; Bengston v. Thiftgvalla Steamship Co., 3 Civ. Pro. Rep., 263; Affd. 31 Hun, 96. Neither of the above cases holds directly that an affirmative allegation by defendant, upon information and belief, that plaintiff is not a corporation, is in- safHcient to put plaintiff to his proof of the fact. The first case was an allegation that defendant " is in- formed and believes," etc., which is hardly the equivalent of an affirm- ative allegation upon information and belief that plaintiff is not a cor- poration. Moreover, as appears by the head-note of that case made by the learned Chief Justice of the court, the case could have been upheld on the ground that defendant, having contracted with plaintiff as a corpo- ration, was estopped from denying that it was one. Commercial Batik of Keokuk v. Pfeiffer, loS N. Y. 242. In the last of the cases above cited, the denial was on information and belief that defendant was ' ' a for- eign corporation as is alleged in the complaint," obviously a negative pregnant, and an allegation upon in- formation and belief as to a fact that was presumably within the knowl- edge of the party pleading. As the incorporation of a plaintiff is rarely within the personal knowl- edge of a defendant, it would seem the fact should be put in issue by the only allegation which, in most cases, a defendant can truthfully make. See Bennett v. Leeds Mfg. Co., no N. Y. 150. ^ Code Civ. Proc, § 1777. LEGAL ACTIONS AND rROCEEUINGS. 245 pleaded, and this as well when the corporation suffers a default as when it appears and answers.' Verification of Pleadings. — The verification of a pleading by a domestic corporation must be made by an officer thereof;' and this must appear in the verification. Thus, in a recent case, it was held that the verification of an answer of a domestic corporation by one who simply affirms that he is a " General Manager " thereof,,stating nothing in regard to his duties, was defective and insufficient.' In another case a verification was held defective, when it was made by one who stated in the affidavit that he was the former presi- dent of the defendant, and that all the officers, including de- ponent, had tendered their resignations, and that no other officers had yet been elected or chosen in their places.' Where the party is a foreign corporation the verification may be made by the agent of, or attorney for, the party.' Where the pleading of a domestic corporation is verified by an officer, it is held to be a verification by a part}-, and it is not, therefore, necessary to set forth the grounds of belief as to all matters not stated upon knowledge, nor why the verification is not made by the party." Cannot Plead Usury. — A corporation cannot interpose the defence of usury in an action, and this prohibition ap- plies equally to foreign and domestic corporations,' and also to any endorser or other surety upon a note made by such a corporation." ' Whittlesey v. Frantz,ii\ N.Y. 456. City Ct., Sp. Term., 4 N.Y. Supp.,99. '^ Code Civ. Proc, § 525. ^ Code Civ. Proc, ^ 525. "" Aleton &= Sons v. I sham Wagon ^ American Insulator Co.v. Bankers' Co., Sup. Ct., Sp.Term,4 N.Y. Supp., and Merchants' Tel. Co., Com. Pleas, 215. In view of the fact that the Gen. Term, 7 Civ. Pro. Rep., 443. term "general manager" has so well- 'Laws of 1S50, chap. 172; South- defined meaning, and is recognized ern Life Ins. Co. v. Packer, 17 N. in some of the statutes and in one Y. 51; Btitterivorth v. O'Brien, 23 case (that of title guaranty compa- id. 275; Belmont Branch Bank v. nies, ante, p. 57) as an officer required Hodge, 35 id. 65. to be appointed, the correctness of * Rosa v. Bntterfteld. 33 N. Y. 665; this decision may be questioned. Union Nat. Bank v. Wheeler, 60 id. '' Kelley v. Woman Piiblishing Co., 612; Stewart v. Bramhall. 74 id. 85. 246 THE LAW OF CORPORATIONS. Statute of Limitations. — The statute of limitations cannot be pleaded by a moneyed corporation in an action to enforce the payment of a bill, note, or other evidence of debt issued by such a corporation, or issued, or put in circulation as money;' nor can the statute of limitations be pleaded by a foreign corporation sued in this state. Such a corporation is in the same position as a natural person absent from the state.' This rule is carried so far that it has been held that a foreign corporation cannot claim the benefit of the statute of limitations even though it had con- tinuously operated a railway within the state, and had a large amount of property within the state, and a man- aeing- agent resident therein.' An exception, however, to this rule is made in the case of an action by an administrator against a foreign cor- poration to recover damages for causing a death within the state. Such an action, it is held, must be commenced with- in two years after the decedent's death." An attempt to commence an action in a court of record is equivalent to the commencement thereof within the meaning of the provision of the statute of limitations, when the summons is delivered with the intent that it shall actually be served to the sheriff of the county in which the corporation defendant is established by law, or wherein its general business is, or was last transacted, or wherein it keeps or last kept an office for the transaction of business.^ Preparations for Trial.— A foreign corporation suing in the courts of this state may be compelled to give security for costs the same as any other non-resident." In an action against a foreign or domestic corporation ' Code. Civ. Proc, § 393- '' Code Civ. Proc, § 1902; Zon- '■* Okoti V. Tto£-a Railroad Co. 20 dinggan v. A^ew York &= A'. H, R. R. N. Y. 210. Co., Supr. Ct., Sp. Term, 12 Abb. 3 Rathlmn v. Xorthcrn Cent. Ry. N. C, 273. Co., 50 N. Y. 656; Board/nan v. Lake ° Code Civ. Proc, § 399. Shore Mick. So. Ry. Co., 84 id. I57- ' Id. § 326S. LEGAL ACTIONS AND PROCEEDINGS. 247 to recover damages for the non-pa}'ment of a promissory note, or other evidence of debt for the absolute payment of money upon demand, or at a particular time, an order extending the time to answer or demur will not be granted except by the court upon notice to the plaintiff's attorney;' and an action of this kind is entitled to a prefer- ence on the calendar.'' In such an action, unless defendant serves with a copy of his answer or demurrer a copy of an order of a judge direct- ing that the issues presented by the pleadings be tried, the plaintiff may take judgment, as in the case of default in pleading, at the expiration of twenty days after service of a copy of the complaint either personally with the summons or upon defendant's attorney pursuant to his demand there- for ; or if the service of the summons was otherwise than personal, at the expiration of twenty days after this service is complete.^ This section applies equally to a demurrer or to an answer.' But it is only instruments which admit on their face an existing debt payable absolutely that come with- in its provisions and not a conditional contract, like a policy of life insurance. ° Nor does it apply where the corporation is an indorser upon a note f nor where a cause of action on an instrument for the absolute payment of money is joined with another cause of action of a different nature.' The production upon a trial of a book or paper belong- ing to or under the control of a corporation may be com- pelled in like manner as if it were in the hands or under the control of a natural person. For that purpose a sub- poena duces tecum, or an order of the court must be directed ' Code Civ. Proc, § 177S. Life Ins. Co., SS N. Y. 424. - Id. § 79i,subdv. 8. ^Shorerv. Times Print .^ Pub. Co., '^ Id. § 177S. 23 North East Rep., 979. ^ Foi-d V. Binghamton Hydraulic ' Bradley v. Albenuxrle Fertilizing Power Co., 54 Hun, 451. Co.. Ciiy Ct., Sp. Term, 2 Civ. Pro. ^ N. Y. Life Ins. Co. v. Universal Rep., 50. 248 THE LAW OF CORPORATIONS. to the president or other head of the corporation, or to the officer thereof in whose custody the book or paper is.' In such a case the subpoena or order is deemed to be suf^ciently" obeyed if the book or paper is produced by sub- ordinate officer or employee of the corporation, who pos- sesses the requisite knowledge to identif}' it and to testify respecting the purposes for which it is used. If the personal attendance of a particular officer of the corporation is required a subpoena without a d^iccs tcauii clause must also be-served upon him.' Where it is desired to take the deposition of a corpora- tion before trial the affidavit must state the names of the officers or directors thereof, or any of them, whose testi- mony is necessary and material, or the books and papers, as to the contents of which an examination or inspection is de- sired. And the order to be made in respect there to must direct the examination of such persons, and the production of such books and papers." Evidence. — When it is necessary to prove the incorpora- tion of a party plaintiff or defendant, it is enough to prove the existence of a corporation de facto without proving for- mal compliance with the requirements of the law or charter in respect to perfecting its organization if the opposing party has had dealings with it in its corporate name." The statutes generally provide that a certified copy of the certificate of organization of a domestic corpora- shall be prima facie evidence of its existence as such. In regard to corporations organized under the laws of any other state, territory, or the Dominion of Canada, a copy of the certificate of organization or incorporation, or any other certificate certified or exemplified by any officer or officers in such state or territory or dominion, is prima facie evi- dence of the due formation, creation, existence, organiza- tion, or capacity, of any such corporation or of a corporation ' Code Civ. Proc, § 86S. " Bank of Keokuk v. Pfeiffer, 108 "" Id. ^ 869. N. Y. 272. ' Id. 872, subdv. 7. LEGAL ACTIONS AND PROCEEDINGS. 249 claiming so to be, and such certificate duly exemplified, or a duly exemplified copy thereof, will be received in all actions and proceedings in this state, in or before all courts and officers, with the same force and effect, in all respects, as such prima facie evidence, as in such other state, territory or dominion.' Courts will take judicial notice of the usages of business of certain corporations, such as railroads, telegraph companies, banks, etc." It is held in this state that the by-laws of a corporation are admissible in evidence for the purpose of showing the power of its officers, and that it is immaterial whether the opposing party has had actual notice of such by-laws, as every one dealing with the corporation is chargeable with no- tice of the purpose for which it was formed, and is bound to know^ the powers and extent of the authorit}' of its agents.' Where a party wishes to prove an act or transaction of a foreign corporation the book or books of the corporation may be used for that purpose as presumptive evidence, whether any or all of the parties are or arc not members of the corporation.* If an original book is not produced at the trial a copy thereof or an entry therein may be used with like effect as the original, providing that the party in- tending to use the copy gives the adverse party at least ten days' notice of its intention, specifying briefly the nature of the evidence proposed to be given; but this does not apply where the foreign corporation is a party to the action and seeks to prove its own act or transaction in its own behalf.^ The copy must be verified by the deposition taken as pre- scribed by law, or the oral testimony, taken at the trial, of the person who made it, or of a person who has examined it and compared it with the original book, or the entry therein. The witness must testify that the copy produced ^ Laws of 1877. chap. 311, § i. 39; aff'd, 46 N. Y. CSi ; De Bost v. '^ Eaton y Cole //. A". B. A'. Co., 94 id. 278. 5 Id. ^ 930. ^ Dabneyv. Stephens, \o Abb. N. S. 250 THE LAW OF CORPORATIONS. is correct; that he made it or compared it with the original ; and that he then knew that the original book so copied or containing the entry was the book of the corporation; or that it was then acknowledged to him to be such by an offi- cer or receiver of the corporation, or a person having the custody thereof, naming the person who made the acknowl- edgment; and he must specify where and in whose custody the original was then kept.' The admission of a member of an aggregate corporation who- is not a party will not be received as evidence against the corporation unless it was made concerning, and while engaged in, a transaction in which he was the authorized agent of the corporation.'' The declarations of an officer of a corporation which is a party to an action are not admissible as evidence to bind the corporation without proof that the officer was authorized to make such declarations. Evidence simply that he was an officer of the corporation is not sufficient.^ Provisional Remedies. AttacJiDieuts. — A warrant of attach- ment in a proper case may be granted where the defendant is a foreign corporation or if a domestic corporation, when it has removed or is about to remove property from the state with intent to defraud its creditors, or has assigned, disposed of, or secreted, or is about to assign, dispose of, or secrete, property with a like intent.' Under a warrant of attachment against a foreign corpora- tion, other than a corporation created by or under the laws of the United States, the sheriff may levy upon the sum re- maining unpaid upon a subscription to the capital stock of the corporation made by a person within the county ; or upon one or more shares of stock therein held by such a person, or transferred by him for the purpose of avoiding payment thereof.^ ' Code Civ. Proc, § 931. der v. Cmddwell, S3 id. 480. ■^ Id. § 839. ■* Code Civ. Proc, § 636. 3 Niagara Falls Susp. Bridge Co. Md. § 646. V. Backman, 66 N. Y. 261; Alexan- LEGAL ACTIONS AND PROCEEDINGS. 251 The rifihts or shares which the defendant has in the stock of a corporation together with the interests and profits thereon, may be levied upon, and the sheriff's certificate of the sale thereof entitles the purchaser to the same rights and privileges with respect thereto which the defendant liad when they were so attached.' The attachment may also be levied upon a cause of ac- tion arising upon contract, including a bond, promissory note or other instrument for the payment of money only, negotiable or otherwise, whether past due, or yet to become due, executed by a foreign or domestic corporation, either within or without the state, which belongs to the defendant and is found within the county. The levy of the attach- ment thereupon is deemed a levy upon, and a seizure and attachment of, the debt represented thereby.' A levy under a warrant of attachment made upon a right or share in the stock of a corporation, or interest or profits thereon, must be made by leaving a certified copy of the warrant and a notice showing the property attached, with the president, or other head of the corporation, or the secretary, cashier, or managing agent thereof." Upon the application of a sheriff holding a warrant of at- tachment, the president or other head of a corporation, or the secretary, cashier, or managing agent thereof, must fur- nish to the sheriff a certificate under his hand specifying the rights or number of shares of the defendant in the stock of the corporation with all dividends declared, or incumbrances thereon.^ The property of a foreign corporation within this state is liable to attachment to the same extent as is the property of any other other non-resident, even though a receiver of such corporation had previously been appointed in another state ; and the title acquired by a receiver, subsequently ap- ' Code Civ. Proc, § 647. Md. ^ 649. * Id. I 648. ■• Id. § 650. 252 THE LAW OF CORPORATIONS. pointed here, is subject to any lien that may have been ac- quired by an attaching creditor.' The bonds of a foreign corporation placed in the hands of an agent resident in this state for purposes of sale do not acquire any validity until delivered by the company, or with its consent and such property is not liable to seizure under attachment against the corporation.' Nor can shares owned by a non-resident in the stock of a foreign corporation be reached and levied upon by virtue of an attachment, al- though the ofificers of the corporation are within the state, engaged in carrying on the corporate business here. In such a case the stock is regarded as being present for the purpose of judicial proceedings only at the place of residence of the owner, or of the corporation, and where an attempt has been made to levy upon such shares, by leaving a certified copy of the attachment with the secretary of the corpora- tion, the non-resident defendant may move to have the levy set aside and vacated." National banks form an exception to the class of foreign corporations whose property may be attached. It has been held in a recent case, following the decision of the Supreme Court of the United States, that property of a national bank, whose domicile was in another state, cannot be at- tached in this state.* Injunction. — A corporation may be restrained by an in- junction in the same manner and to the same extent as nat- ural persons ; ' and in an action brought by the attorney- ' Dunlop V. Patterson Fire Ins. Co. . 12 Hun, 627: affd, 74 N. Y. 145; Hibernia Nat. Bank v. Lacombe, 84 N. Y. 367; Woerishofferv. North Riv- er Construction Co., gg id. 3g8, affg. s. c, 7 Civ. Pro. Rep. 113. '•^ Coddiugton v. Gilbert, 17 N. Y. 48g. ^ Plimpton V. Bigelotv, g3 N. Y. 592. * Bank of Montreal v. Fidelity Nat. Bank, i N. Y. Supp. 85 2; affd. 112 NY. 667, following Pacific Nat. Bankx. Mixter, 124 U. S. 721, and overruling Robinson v. Nat. Bank of Newberne, Si N. Y,, 385. See also Nat. Shoe &= Leather Bank v. Me- chanics' Nat. Bank, 8g id. 440, and Raynor v. Pacific N^ai. Bank, g3 id. 371- 5 Mayor, etc, v. A^. V. & Staten Island Ferry Co., 64 N. Y. 622. LEGAL ACTIONS AND PROCEEDINGS. 253 general to restrain persons from acting as a corporation within the state, without being duly incorporated, or from exercising any corporate rights, privileges or franchises not granted to them by the laws of the state, an injunction may be granted.' Among the cases in which an injunction against a corpo- ration has been issued, it has been held that a corporation might be restrained from completing an unlawful sale of all its property;' from the payment of an unearned dividend ;* from issuing bonds as part of a fraudulent design to increase stock, and from converting the bonds so issued into stock ^ from effecting a consolidation with another corporation ; ' and in one case where it was shown that the cost of building branch lines and bridges would amount to a very large sum and without immediate or future advantage to the company an injunction was issued to restrain such acts." An injunction may issue in an action brought for the dissolution of a corporation, to restrain the corporation and its officers from collecting and receiving, or paying out any of the money or property or effects of the corporation dur- ing the pendency of the action;' or in an action by the people brought by the attorney-general to annul a corpora- tion ; ' and such injunction may restrain creditors of the cor- poration from bringing actions against the defendant or from taking any further proceedings in actions previously commenced/ An injunction order suspending the general and ordinary business of a corporation, or suspending from office or restraining from the performance of his duties a trustee, di- rector, or other officer thereof, can be granted only by the ' Code Civ. Proc, § 1955. ^ Blatchford v. Ross, 54 Barb. 42. ^ Abbott V. American Hard Rubber '' Ivfs v. Smith, Sup. Ct., Sp. Term, Co., 33 Barb. 57S. 3 N. Y. Supp. 645. * Carpenter v. Neza York^ N. H. "^ Code Civ. Proc, § 1787. R. R. Co., 5 Abb. Pr. 277. * Id. § 1S02. ■» Belmont v. Erie Raikvay Co., ^2 ' Id. § 1S06. Barb. 637. 254 THE LAW OF CORPORATIONS. court, upon notice of the application therefor to the proper officer of the corporation or to the trustee, director, or other officer enjoined; if such an injunction order is made other- wise than is thus prescribed it is void ; ' and this is so even though the general and ordinary business of the corporation- be illegal.' Service of an injunction order upon a corporation may be made in the manner prescribed for making personal ser- vice of a summons upon a corporation. Where it is granted bythe court it must be served by delivering a certified copy thereof; where it is granted by a judge it must be served by showing the original order and delivering a copy thereof/ A director, trustee, or other officer of a corporation upon w^hom a notice of application for an injunction affecting its property or business is served, who fails to disclose to the other directors or officers the fact of such service, and the time and place of such application, is guilty of a misde- meanor." Receivers. — A receiver of the property of a corporation can be appointed only by the court and in one of the follow- ing cases : 1. In an action brought as prescribed in Articles II., III., and IV. of Title Second of Chapter Fourteenth of the Code for the supervision, dissolution, or annulling of a corpora- tion. 2. An action brought for the foreclosure of a mortgage upon the property of which the receiver is appointed, where the mortgage debt or the interest thereupon has remained unpaid at least thirty days after it was payable, and after payment thereof was duly demanded of the proper officer of the corporation ; and where either the income of the property is specifically mortgaged or the property itself is probably insufficient to pay the mortgage debt. » Code Civ. Proc, § 1809. " Code Civ. Proc. § 610. - City of AT. Y.v.Stari?l.S\l^?^T. * Penal Code, § 612. Ct., General Term. 2 N.Y. Supp. 346. LEGAL ACTIONS AND PROCEEDINGS. 255 3. An action Jarought by the attorney-general or by a stockholder to preserve the assets of a corporation having no officer empowered to hold the same. 4. A special proceeding for the voluntary dissolution of a corporation. Where the receiver is appointed in an action, otherwise than by or pursuant to a final judgment, notice of the appli- cation for his appointment must be given to the proper officer of the corporation.' In an action brought to secure the dissolution of a cor- poration, or to enforce the individual liability of the officers, a receiver may be appointed at any stage of the action.' In proceedings for the voluntary dissolution of a corpora- tion, if it appears to the satisfaction of the court that the corporation is insolvent, it may, on motion of the petitioners, on notice to the attorney-general, or on motion of the at- torney-general, on notice to the corporation, appoint a temporary receiver of the property. The court may also, in its discretion, at any stage of the proceedings, grant an injunction restraining the creditors of the corporation from bringing any action against it, or from taking any further proceedings in such an action theretofor commenced.' A receiver of a life insurance company will not be ap- pointed, if such company has actual funds invested accord- ing to law, of a net cash value equal to its outstanding lia. bilities and the required reserve on policies and claims not mature." Every application made for tjie appointment of a re- ceiver of a corporation must be made at a Special Term of a court held in and for the judicial district in which the principal business office of the corporation was located at the ' Code Civ. Proc, § iSio. of receivers of banks (Laws of 18S2, ^ Id. § 178S. chap. 409, §^ 1 31-135), are omitted as ^ Id. § 2423. applicable only to banks issuing bills ■• Laws of 1887, chap. 32S. Cer- to circulate as money ; ante, p. 211. tain provisions as to the appointment 256 THE LAW OF CORPORATIONS. commencement of the action wherein such receiver is ap- pointed, or in and for a county adjoining such district ; and any order appointing a receiver otherwise made is void.' This, however, relates only to statutory receivers appointed to wind up corporations and distribute their assets, and not to receivers appointed in actions for the foreclosure of a mortgage, to hold the property and receive the profits thereof until the entry of a final judgment. In such an action the order appointing the receiver may be made in any county where the action may be tried.'' A copy of all motions and all motion papers and a copy of any other application to the court, together with a copy of the order or judgment to be proposed thereon to the court, in every action or proceeding for the dissolution of a corporation, or a distribution of its assets, must be served on the attorney-general in the same manner as provided by law for the service of papers on attorneys who have ap- peared in actions, whether the applications would but for this law be ex parte, or upon notice ; and it is provided that no order or judgment granted shall vary in any material re- spect from the relief specified in such copy or order, unless the attorney-general appears on the return day and is heard in relation thereto ; and any order or judgment ^ranted in such an action or proceeding without such ser- vice of papers upon the attorney-general is void.' Where the application is brought before the court on an order to show cause, a copy of such order and the order proposed to be entered must be served upon the attorney- general, but it is not necessary to serve upon him a notice of the application for the order requiring cause to be shown.^ Unless these provisions are strictly complied with, an 1 Laws of 1883, chap. 378, § i. ^ Laws of 1883, chap. 37S, § 8. - U. S. Trust Co.v. N. Y. W. S. &= * G reason v. Goodwillie- Wyman Co. B. R. Co., loi N. Y. 478. 38 Hun, 138. LEGAL ACTIONS AND PROCEEDINGS. 257 order appointing a receiver of a corporation in such a case is void and should be vacated.' Judgment and Execution. — If defendant is a foreign corpora- tion, and the summons was served without the state or otherwise than personally, in case of default in pleading, the court must require the plaintiff or his agent or attorney to be examined on oath respecting any payments to the plain- tiff, or to any one for his use on account of his demand ; and before rendering judgment, the court may, in its discretion, require the plaintiff to file an undertaking to abide the order of the court touching the restitution of any property in case the defendant or its representative applies, and is admitted to defend the action and succeeds in its defence.' A judg- ment will not be rendered for a sum of money only upon an application so made, except in an action in which an attach- ment can issue. Where the defendant is a foreign corporation and has not appeared in such an action, the plaintiff, in the applica- tion for judgment, must procure and file the following papers : 1. Proof by affidavit that a warrant of attachment granted in the action has been levied upon property of the defendant. 2. A description of the property so attached, verified by affidavit, with a statement of the value thereof accord- ing to the inventory. 3. The undertaking referred to above, if one has been required.^ Where the defendant is a foreign corporation, and has not appeared in the action, and the summons was served without the state, or by publication, pursuant to an order obtained for that purpose, the judgment can be enforced only against the property which has been levied upon by ' Whitney v. N. Y. &^ Atlantic ^ Code Civ. Proc, § 1216. 7^. J^. Co., 32 Hun, 164. Md. § 1217. 258 THE LAW OF CORPORATIONS. virtue of the warrant of attachment at the time when the judgment is entered ;' and the execution must require the sherifT to satisfy the judgment out of the personal property attached, and if that is insufficient, out of the real prop- erty attached." A corporation cannot be examined in proceedings sup- plemental to execution concerning its property ;' nor can a judgment creditor maintain an action against a corpora- tion created by or under the laws of this state, to compel the discovery of any thing in action, or other property be- longing to the judgment debtor.' But a judgment credi- tor may maintain an action against a domestic corporation, to procure a judgment sequestrating the property of the corporation and providing for a distribution thereof." Where a judgment against a foreign corporation has been obtained upon a summ.ons served otherwise than per- sonally, such a judgment, being founded upon an attach" ment of its property, is a proceeding /;/ rem against the property attached, and is not a judgment upon which a judgment creditor's action can be founded ;^ but where a judgment had been obtained in an action, after personal service of the summons, or appearance by the corporation in such a manner as to confer jurisdiction, there seems nothing to prex'ent the judgment creditor, after execution has been returned unsatisfied, maintaining an action against such a corporation for the discovery of property belonging to it, as the prohibition contained in section one thousand eight hundred and seventy-nine of the Code applies only to domestic corporations created by or under the laws of this state. 1 Code Civ. Proc, § 707. of one of its officers. Id. §| 2441 - Id. § 1370. and 2444. =* Id. §2463. This does not apply ^ Id. i^ 1879. however, where a corporation has ^ jj_ ^ 17S4. property of a judgment debtor. In * Thomas v. Merchants' Bank, 9 such a case it may be examined and Paige, 2i6. compelled to answer under the oath CHAPTER IX. TAXATION. Art. I. Municipal Taxation- Art. II. State Ta.xation. With but few exceptions ' the property of domestic corporations is taxable the same as that of individuals resi- dent in the state ; ' and it is no reason for exemption, under the provision of the Revised Statutes that all moneyed or stock corporations deriving an income or profit from their capital or otherwise shall be liable to taxation on their capi- tal, that the income of such a corporation is not equal to its expenditures.^ Article I. Municipal Taxation. Real Estate. — The real estate of allin corporated companies, liable to taxation, is assessable in the town or ward in which it is situated, in the same manner as the real estate of indi- ' The personal property of gas- light companies may be exempted from taxation for a period not ex- ceeding three years from their organ- ization (Laws of 1S4S, chap. 37, § 18, as amended by Laws of 1S71, chap. 95); and corporations owning vessels engaged in foreign commerce, all of who.se vessels are employed between foreign ports and ports of the United Stales, are exempted from all taxa- tion in this state, for state and local purposes, upon their capital stock, franchises and earnings for the period of fifteen years. (Laws of 1S81, chap. 433.) A corporation organized for the purpose of furnishing a city with water does not thereby become a governmental agency and thus es- cape taxation. People ex rel. Mills Water Works Co. v. Forrest, 97 N. Y. 97. • - Rev. Stat., part i. chap. xiii. title I, § I. Hd. title 4., § i; People ex rel. Com. Ins. Co. v. Supervisors, 18 Wend. 605. 259 260 THE LAW OF CORPORATIONS. viduals.' As real estate, are included such portions of tele- graph, telephone or electric light lines as lie in any town or ward ; ^ and the lines and road-beds of railroads,"* including the structures of elevated railways ; ' and the road-bed and railway laid upon or under any street ; ^ and a pier ; " and a toll-bridge ; ' and structures or buildings on the land of another/ Personal Property.— The personal property of a corporation is construed to include such portion of the capital of com- panies, liable to taxation on their capital, as is not invested in real estate." This is assessable in the town or ward where the principal ofifice or place for transacting the financial concerns of the company is located ; or if such company have no principal office or place for transacting its financial concerns, then in the town or ward where the operations of such company are carried on. '" This, however, does not apply to the personal property of fire and marine insurance companies. These are exempt from all assessment or taxation except the tax payable to the state." For the purposes of taxation, the designation in a certi- ficate of incorporation of the place in which the principal office is located is conclusive as to the location in which the personal property of the corporation can be taxed ; and this is probably true, even where its principal office is located, ' Rev. Stat., part i. chap. xiii. * Smith v. The Mayor, 68 N. Y. title 2, §6; Hudson River Bridge 552. Co. V. Patterson, 74 N. Y. 365. ' Hudson River Bridge Co. v. Pal- '^ Laws of 1886, chap. 659, § i. terson, 74 N. Y. 365. ^ People tyixt\. Dunkirk, etc., R.R. * People ex rel. Van Nest v. Co. V. Cassity, 46 N. Y. 46; Buffalo, Cotnmrs., 80 N. Y. 573 ; People ex etc., R. R. Co. V. Supervisors , 48 id. rel. Midler v. Assessors, 93 id. 308. g3. ^ Rev. Stat., part i. chap. xiii. '' People ex rel. N. Y. Elevated title i, § 3. R. R. Co. V. Commrs., 82 N. Y. 459. '" Id. title 2, g 6- = People ex rel. N. Y. dr' Harlem " Laws of 1S86, chap. 679, § 4. R. R. Co. V. Commrs., loi N. Y. 322. TAXATION. 26r by its certificate, with a view to avoid taxation, in one place, while the principal business of the company is carried on in another,' The method of arriving at the value of personal property of a corporation for purposes of taxation, is to ascertain the actual value of the capital stock, whether above or below par, and deduct from that the assessed value of its real es- tate, and all shares of stock in other corporations which are taxable on their capital under the laws of this state, actual- ly owned by such company, and the remainder will be the personal property subject to taxation.* The system of taxation of the personal property of cor- porations cannot be more clearly or more concisely stated than in the following language of Judge Earl, in the case of People ex rel. Knickerbocker Fire Insurance Co. v. Coleman^ He there says : " The law does not prescribe how the actual value of the capital stock of a corporation is to be ascertained. That is left to the judgment of the assessors, and in appraising the actual value they have a right to re- sort to all the tests and measures of value which men ordinarily adopt for business purposes in estimating and measuring values of property. They may take into account the business of the corporation, its property, the value of its actual assets, the amount and nature of its present and contingent liabilities, the amount of its dividends and the market value of its shares of stock in the hands of individ- uals. They may resort to any or all of these as to them seems best, and they are not confined to one of them. They may take that test which they think will be most likely to give them the actual value of the stock, and they may dis- • Western Transportation Co. v. People ex rel. Twenty-third Street Scheu, 19 N. Y. 40S ; Oszvego Starch ^- ^- Co. v. Commrs., 95 N. Y. 554 ; Factory v. Dolloimy, 21 id. 449 ; ^'"P^' ^"^ ''^'- ^«"«'«" ^^- ^- ^^• Union Steamboat Co. v. Buffalo, S2 ^'- Commrs.. 104 id. 240. id. 351. ' 107 N. Y. 541. - Laws of 1857, chap. 456, § 3; 262 THE LAW OF CORPORATIONS. regard all the others. They are not bound to seek for all the evidence which bears upon value ; that would be im- practicable. The law commits the matter to their judg- ment and when they have exercised that, it is subject to no review or correction except as prescribed by law. " One mode of arriving at the actual value of the capital stock of a corporation is to take what is sometimes called the book value, which is reached by estimating all the assets as they appear upon the corporate books, and deducting all the liabilities and other matters required to be deducted by law, and taking the balance as the measure of value for as- sessment. This seems to be a proper method for arriving at the value of the capital stock in the case of a corporation which is about to discontinue business, wind up its affairs and distribute its assets among its shareholders. But it cannot always, or usually, be a fair or correct method of assessment in the case of a going corporation whose assets are to remain at the risk of its business. In the case of an insurance company, the actual value of its capital stock must usually be less than the book value, and the same must frequently be true of other corporations which are en- gaged in business attended with many hazards and fluctua- tions. In the case of a corporation the value of whose capi- tal stock is largely made up of its franchise, good will and business advantages, the book value of its capital stock will be less than the actual value. Hence it would not be just for assessors always, or even generally, to take the book value of the capital stock of going corporations as the meas- ure of value for the purpose of assessment. " So the market value of the shares of capital stock may sometimes be above and sometimes below the actual value. Such value may be greatly enhanced or depressed for spec- ulative purposes without any change in the actual value. But the market value of any stock which is listed at the stock exchange in New York, and largely dealt in from day TAXATION. 263 to day for a series of months will usually furnish the best measure of value for all purposes. The competition of sellers and buyers, most of them careful and vigilant to take account of everything affecting value of stock in which they deal, and each mindful of his own interests, and seeking for some personal gain and advantage, will almost universally, if time sufficient be taken, furnish the true measure of the actual value of stock. But there is no law which compels assessors to resort to market value to find the actual value of capital stock. That standard is sometimes illusory and untrustworthy. The buyers or sellers may be too few and the transactions not sufficiently numerous to furnish a real test of value." The value of the franchise of a corporation is a proper subject of estimation and forms an important element in determining the value of its capital stock.' The indebtedness of a corporation should be considered in estimating the value of the stock, but when that value has been once fixed, the indebtedness will not then be de- ducted from the capital in order to ascertain the amount of personal property subject to taxation.'' Nor does it follow from the fact that the whole amount of the capital of a company was expended in real estate, that that there is no personal property subject to taxation. If the actual value of the capital stock is greater than the as- sessable value of its real estate, the difference between these amounts will be the value of the personal property to be taxed.^ Where a corporation has real estate situated out of the state the amount to be deducted on account of such real estate should be measured by its actual value, which maybe based upon the assessed value of such real estate w^here it is - Pcopl! ex rel. Panama R. R. Co. Melting Co. v. Asten, loo N. Y. 597. V. Cominrs., 104 N. Y. 240. * Ibid. People ex rel. Butchers' Hide & 264 THE LAW OF CORPORATIONS. located, or, in the absence of other and better evidence, the price paid for it may be taken as representing such value.' The fact that the capital of a company, organized under the laws of this state, is represented by personal property located beyond the limits of the state, is no reason for its exemption from taxation." Where a corporation owns a building or other structure on leased land, the value of such building or structure only, and not that of the land upon which it is located, is assess- able as real estate of the corporation, to be deducted from the value of its capital stock in order to ascertain its per- sonal property subject to taxation.^ Statements Required. — The president, cashier, secretary, treasurer or other proper officer of every moneyed corpora- tion is required, on or before the first day of July in each year, to make and deliver to the assessors of the town or w^ard in which such company is liable to be taxed a written statement specifying : 1. The real estate, if any, owned by such company, the town or wards in which the same is situated, and the sums actually paid therefor ; 2. The capital stock actually paid in and secured to be paid in, excepting therefrom the sums paid for real estate, and the amount of such capital stock held by the state and by any incorporated literary or charitable institution ; 3. The town or ward in which the principal office or place of transacting the financial business of such company is situated ; or if there be no such principal office, the town or ward in which its operations are carried on, or in which it is liable to be taxed.' Such statements are not conclu- ' People ex rel. T-ci'tnly-third Street 541 ; People ex rel. Zulia Steam Nav. R. R. Co. V. Comm7-s.,C)i X. Y. 554 ; Co. v Com/nrs., 51 Hun, 312. People ex rel. Panama R. R. Co. v. ^ People ex rel. Van Nest v. Commrs., 104 id. 240 ; People ^yi rel. Coiiunrs., 80 N. Y. 573 ; People ex Fairfield Chemical Co. v. Coleitian, rel. Miiller v. Assessors, 93 id. 308. 115 id. 178. '' Rev. Stat., parti, chap. xiii. title ^ People ex rel. Pacific Mail 4. 8 2. Steamship Co. v. Commrs., 64 N. Y. TAXATION. 265 sive upon the assessors, but are intended simply as an aid to them in forming their judgment, and the omission to fur- nish such a statement will not relieve a company from tax- ation.' Foreign Corporations. — Foreign corporations are taxed on all sums invested in any manner in business conducted in this state, in the same manner that the personal estate of domestic corporations is taxed. The assessment must be made in the town or ward where the principal ofBce or place of business of such a company is located, without regard to the location of its property.'' Shares of Stock. — It is a general rule that the owner or holder of stock in any incorporated company liable to taxa- tion on its capital stock shall not be taxed as an individual for such stock,' And the same rule applies to shares of stock of foreign corporations, as the presumption is that such corporations are taxed upon their capital in the states of their domicile.' The stockholders of banks, however, both state and national, are assessed and taxed on the value of their shares of stock in the city, town or ward where such bank is located, whether such stockholder resides in that place or not.° In the assessment of such shares each stockholder Is allowed all the deductions and exceptions allowed by law in assessing the value of other taxable personal property owned by individual citizens of this state, and the assessments and taxations cannot be at a greater rate than is made or as- ' People &y.rt\. Manhattan Fire Ins. ^ Rev. Stat., parti, chap. xiii. title Co.v. Cominrs., 76 N. Y. 64; People i, ^ 7. ex rel. Mutual Union Tel. Co. v. ■* People ex re! . Trowbridge v . Contmrs., gg id. 254. Coviiiirs., 4 Hun. 5g5, affd, 62 N. Y, '■^ Laws of 1S55, chap. 37; British 630. Com. Life Ins. Co. v. Cominrs , i ^ Laws of 18S2, chap. 40g, §§ 318, Keyes, 303; i Abb. App. Dec. igg; 319; Matter of Appln. of McMahon People e.x rel. Parker Mills v. v. Palmer, 102 N. Y. 176; Mercantile Conttnrs., 23 N. Y. 242; People ex jVatl. Bank v. The Mayor, 121 U. rel. Bay State Shoe and Leather Co. v. S. 13S. McLean, So id. 254. 266 THE LAW OF CORPORATIONS. sessed upon other moneyed capital in the hands of indi- vidual citizens of the state. There must also be deducted from the value of such shares the same proportion of such value as the assessed value of the real estate of the bank, in which such shares are held, bears to the whole amount of its capital.' The assessors must ascertain the value of such shares, taking into consideration everything that gives them value, — the surplus, and the circumstances of the bank, its franchises, and the advantages and dis- advantages under which it exists." They must then deduct from the actual value of each share a sum bearing the same proportion to such value as the assessed value of the real estate'of the bank bears to the actual value of all the capital stock. ^ When the owner of stock in any bank does not reside in the place where the bank is located the collector and county treasurer respectively have the same power as to collecting the tax to be assessed, that they have by law when the per- son assessed has removed from the town, ward, or county in which the assessment is made ;' and the managing officer or officers of such bank must retain so much of any dividend or dividends belonging to such stockholder as may be nec- essary to pay any taxes assessed until it is made to appear to such ofificers that they have been paid/ Article II. State Taxation. In 1880 a very important act was passed providing for a tax for the use of the state upon certain corporations, joint-stock companies and associations." The whole act was ' Laws of 1882, chap. 409, § 312. Bank v. Cofumrs., 6g N. Y. 91. •^ People ex rel. Gallatin A-atl. Bank * Laws of 1882, chap. 409, § 314. V. Commrs., 67 N. Y. 516. » Id. § 315. ' People ex rel. Tradesmen' s Natl. ^ Laws of 1S80, chap. 542. TAXATION. 267 amended in 1881,' and it has been subjected to such frequent and radical changes since, as to render valueless many of the decisions construing it. This law is said, in one of the cases cited below, to con- stitute a new system for collecting from these corporations, which come within its provisions, so much of the burdens laid upon them as inure exclusively to the use of the state, by a tax on their franchises alone, and is the first time, in the history of the state taxation that an attempt has been made, by a general scheme, to impose taxes exclusively upon the franchises and business of corporations organized under its laws, and it exacts their payment as a condition of the exercise of the privileges granted them by the state. Corporations that are liable to taxation under its pro- visions, are exempt from all other assessment and taxation for state purposes, except upon their real estate. It leaves them, however, subject to the same obligations, so far as relates to local taxation, as before." Companies Subject to the Tax. — Every corporation organized pursuant to law in this state, or in any other state or country, and doing business in this state, except only savings banks and institutions for savings, life-insurance companies, banks, foreign insurance companies, manufacturing or mining cor- porations, or companies wholly engaged in carrying on manufacture, or mining ores within this state, and agricul- tural and horticultural societies or associations, which ex- ceptions, however, shall not include gas companies, trust ' Laws of 1881, chap. 361. - Laws of 18S0, chap. 542, § 8, as amended by Laws of 1881, chap. 361; People ex rel. Westchester Fire Ivs. Co. V. Davenport, 91 N. Y. 574: People V. Home Ins. Co., q2 id. 328. The words "for state purposes" were added to section eight by the amendment of 1881, but this was held, in the cases cited, simply de- claratory of the law as it previously existed. The constitutionality of this law has been sustained in nu- merous cases. People v. //owe Ins. Co., 92 N. Y. 328; People v. EqtiitabU Trust Co., 96 id. 3S7; People v. The Gold and Stock Tel. Co., 98 id. 67; People V. Horn Silver Alining Co., 105 id. 76. 268 THE LAW OF CORPORATIONS. companies/ electric, or steam-heat, lighting and power com- panies, is liable to a tax upon its franchise or business, to be paid annually into the city treasury. If the dividend or dividends made or declared by such corporation during any year ending with the first day of November amounts to six or more than six per cent upon the par value of its capital stock, then the tax is at the rate of one-quarter mill upon the capital stock for each one per cent, of dividends. If no dividend has been made or declared, or if the dividends do not amount to six per cent, upon the par value of its capital stock, then the tax is at the rate of one and a half mills upon each dollar of the valuation of the capital stock. In case any such corporation has more than one kind of capital stock, as, for instance, common and preferred stock, and uj^on one of such stocks a dividend amounting to six or more than six per cent, upon its par value has been made or declared, and upon the other no dividend has been made or declared, or if made amounts to less than six per cent, upon its par value, then the tax is at the rate of one- quarter mill for each one per cent, dividend made or de- clared upon the capital stock upon which the dividends amount to six or more per cent., and in addition thereto a tax at the rate of one and one-half mills upon each dollar of the valuation of the capital stock upon which no dividend was declared, or upon which the dividend did not amount to six per cent.° The amount of capital stock taken as the basis for the above tax is the amount employed within this state." It is the duty of the treasurer or other officer having charge of any corporation upon which such a tax is imposed, ' As to trust companies, see also ^ Id. § ii, added by Laws of 1882, Laws of 1882, chap. 409, § 324. chap. 151, and as amended by Laws '^ Laws of 1880, chap. 542, § 3, as of 1885, chap. 501. amended by Laws of i8Sg, chap. 353. TAXATION. 269 to transmit the amount of such tax to the treasury of the state within fifteen days after the first day of January in each year.' Determining Valuation. — It is the duty of the president or treasurer of every such company to report in writing to the comptroller annually, on or before the fifteenth day of No- vember, stating specifically the amount of capital paid in, the date, amount and rate per cent of each and every dividend declared during the year ending with the first day of that month ; and in case no dividend is made or declared upon either the common or preferred stock of such company during the year, or in case such dividends amount to less than six per cent, upon the par value of its stock, the treasurer and secretary, after being sworn or affirmed to perform the duty with fidelity according to the best of their knowledge and be- lief, must, between the first and fifteenth days of November, estimate and appraise the capital stock of such company at its actual value in cash, not less, however, than the average price which such stock has sold for during the year, and they must forward to the comptroller a certificate thereof, accompanied by a copy of their oath or affirmation, signed by them and duly attested. If the comptroller is not satisfied with the valuation so made and returned, he may make a valuation himself, and settle an account upon the valuation so made by him for the taxes, penalties and interest due to the state. Any such corporation which is dissatisfied with the ac- count so settled may, within ten days, appeal therefrom to a board consisting of the secretary of state, the attorney-gen- eral and state treasurer, which board, on such appeal, may affirm or correct the account so stated by the comptroller, and the decision of such board will be final. Such appeal will not stay proceedings unless the full amount of the taxes, penal- ties and interest as due on such account, settled by the comp- ' Laws of 1880, chap. 542, § 4, as amended by Laws of iSSi, chap. 361. 270 THE LAW OF CORPORATIONS. troller, be deposited with the state treasurer.' In making to the comptroller such report or certificate of estimation and appraisal, the amount of capital stock employed within this state must be stated specifically, and the comptroller may ascertain, fix and determine the amount of capital so employed, and settle an account for the taxes and penalties due to the state thereon.^ Penalties. — If such of^cers neglect or refuse to furnish the comptroller witli such report at the time required, or if the certificate of appraisement and oath, or af^firmation, as the case may be, or to pay the tax imposed on such corporation within fifteen days after the first of January, it is the duty of the comptroller to add ten per cent, to the tax of such corporation for each and every year for which such report or certificate was not furnished, and for which such tax has not been paid. This percentage will be assessed and col- lected with the tax in the usual manner of assessing and collecting such taxes. If such officers intentionally fail to comply with the above provisions for one year it is the duty of the comptroller to report the fact to the governor, who, if satisfied that such failure was intentional, will thereupon direct the attorney- general to take proceedings in the name of the people of the state to declare the charter or privileges of such corporation forfeited and at an end, and for such failure duly found the charter and privileges of every such corporation will cease, end, and be determined.^ Construction of the Act. — That provision of the act, which excepts manufacturing corporations from the tax, is not lim- ited to corporations organized under the Manufacturing Act, but includes all corporations under whatever act incorporated, ' Laws of iSSo, chap. 542, § i, chap. 151, and as amended by Laws as amended by Laws of iSSi, chap. of 1SS5, chap. 501. ,5j_ ^ Id. § 2, as amended by Laws of 2 Id. Si II, added by Laws of 18S2, 18S1, chap. 361. TAXATION. 271 whose chief and principal business is the manufacture and sale of artificial products.' On the other hand, a corporation is not exempt from the tax simply because it was organized under the Manufactur- ing. Act, and it A\as, accordingly, held in People v. Knicker- bocker Ice Co' that a corporation formed for the purpose of collecting, storing and preserving ice, of preparing it for market, of transporting it and of vending the same, and whose business was confined to the purposes thus expressed, w^as not a manufacturing corporation, and so was not exempt from the tax upon its franchise. So it was held, in another case, that a company, incorporated for the purpose of " con- structing, using and providing one or more dry docks, or wet docks, or other conveniences and structures for building, raising, repairing or re-coppering vessels or steamers of every description," was not a " manufacturing corporation" within the meaning of this law.' It is not always easy to determine what is suf^cient presence within the state to bring a corporation within the law as a company "doing business in this state." In one case where a company, organized under the laws of Utah, for the purpose of carrying on the business of mining, mined its ore in that territory, which was manufactured into base bullion and then was shipped to New York, where it was refined and sold and the proceeds deposited, some portion being loaned, and other portions paid out for the company's purposes in that city, and its president, secretary and treas- urer had their offices in New York, and the directors held their annual meetings there ; it was held that such a sub- stantial part of the regular business of the corporation was > Nassau Gas-Light Co. v. City of the exemptions of other manufactur- Brooklyn, 8g N. Y. 409. So far as ing companies; but the principles of gaslight companies are concerned, the decision are not affected, this case is overruled by amendments '' 99 N. Y. iSi. to section three of the act which ex- ^ Peoples. N'. Y. Floating Dry- Dock pressly exclude gas companies from Co., 92 N. Y. 4S7. 272 THE LAW OF CORPORATIONS. carried on within the state as to bring it within the provisions of the act.' In the case of People v. The American Bell Telephone Co.,'' it was held that that corporation which was organized under the laws of Massachusetts and engaged in manufactur- ing telephones under its patents and licensing their use by others, and which leased its instruments and licensed their use in New York to local corporations, and which had no office in New York other than such local companies, and received from them as compensation for the use of such instruments, at its office in Boston, a royalty payable monthly,, was not " doing business in this state" within the meaning of this law. Insurance Companies.— It is the duty of the president, sec- retary or other proper officer of insurance companies, organ- ized under any law of this state, with the exception of life insurance companies and fire and marine insurance compa- nies organized under the laws of this state or of foreign countries,' to make a report in writing to the comptroller annually, upon the first day of August in each year, setting forth the entire amount of premiums received on business done in this state by such company during the year ending with the preceding thirtieth day of June, whether the said premiums were in money, or in the form of notes, credits or any other substitutes for money. And every such company must pay into the state treasury, upon that day, a tax as a tax on its corporate franchise or business, at the rate of eicrht-tenths of one per cent, upon the gross amount of such premiums. 1 People V. Horn Silver Mining mining corporations, or companies Co., 105 N. Y. 76. wholly engaged in carrying on manu- •^ 117 N. Y. 241. The amendment facturing, or mining ores within the to section three (Laws of 1SS9, chap. state," etc. 353) changes the phraseology of the "' The taxes of fire and marine in- exception of " manufacturing or min- surance companies are now regulated ing corporations, carrying on manu- by Laws of 1886, chap. 679 {post facture or mining ore within this p. 27S). state" to that of " manufacturing or TAXATION. 273 Every such company organized under the laws of any other state or country, must pay into the treasury on the first day of August in each year a tax of eight-tenths of one per cent, upon their gross premiums received by them, upon business transacted in this state during the year ending with the preceding thirtieth day of June, whether such premiums were in money, or in the form of notes, credits, or any other substitutes for money. And every such company, or the agents and officers thereof, in this state, must make a report in writing to the comptroller annually, upon the first day of August in each year, setting forth the entire amount of premiums received during such period. Such reports must be made under oath or afifirmation. It is the duty of the comptroller of the state to add ten per cent, to the account of any company which neglects or refuses for a period of thirty days to make such report, or to pay into the state treasury such tax.' Railway, Expres.s and Telegraph Companies, etc. — In addition to the taxes above provided for, every corporation formed for railway, canal, steamboat, ferry, express, navigation or transportation purposes, and every elevated railway com- pany and every other corporation organized under any law of this state, or of any other state, or country, doing busi- ness in this state, and renting, operating or leasing to or from, another corporation, joint-stock company or associa- tion, any railroad, canal, steamboat, ferry, express, naviga- tion, pipe line, or transportation route or line, or elevated railway or other device for the transportation of freight or passengers, or in any way engaged in the business of tran.s- porting freights, or passengers, and every telegraph com- pany, or telephone company incorporated under the laws of this or any other state, and doing business in this state, and every express company or association, palace-car or sleeping- car company or association doing business in this state, ' Laws of iSSo, chap. 542, § 5, as amended by Laws of iSSi, chap. 361, 274 THE LAW OF CORPORATIONS. must pay to the state treasurer, for the use of the state, as a tax upon its corporate franchise or business in this state, a tax at the rate of five-tenths of one per cent upon the gross earnings in this state, of such corporation or company, or association, for tolls, transportation, telegraph, telephone, or express business transacted in this state.' Such tax must be paid annually on the first day of August. It is the duty of the president, secretary, or other proper officer of such corporations, to transmit to the comp- troller, on the first day of August in each year, a statement, under oath or affirmation, of the amount of the gross earn- ings of such company, derived from all sources, during the year ending with the preceding thirtieth day of June, to- gether with the amount of tax imposed thereon. And if any such corporation neglects or refuses for a period of thirty days after any tax imposed as above becomes due, to make returns or to pay the same, the amount thereof, wath the addition of ten per cent, will be collected as other taxes are recoverable by law^ from such corporations.^ Corporations subject to the provisions of this act are liable for the tax, although the company has been in exist- ence for less than a year. The burden is imposed on account of the future business of such company, and it is not limited to past transactions." The tax is based upon the business of such a corporation done within this state, and not upon its whole capital.' It was accordingly held that the tax upon premiums received in the business of a company referred only to business done 1 Laws of l8So, chap. 542, § 6, as Horn Silver Mining Co. (105 N. Y. amended by Laws of 1S81 , chap. 361. 76), in which it was held that a foreign - Id. § 7, as amended by Laws of mining company doing business in iSSi, chap. 361. this state was liable to the tax upon '^ People \. Spring Valley Hydraulic its whole capital, was prior to the Gold Co., 92 N. Y. 383. amendment of 1S85, which limits the 4 People V. Equitable Trust Co., 96 tax to "capital stock employed with- N. Y. 387. The case oi People v. in this state." TAXATION. 2/5 within the state.' And a telephone company is not liable to taxation on its whole capital stock, because it is a stock- holder in local corporations doing business here.^ The amount of dividends made or declared during the year arc the measure of the annual value of the franchises upon which the tax is to be paid. If a corporation earning more than six per cent, should withhold its dividends and pay less than that amount, and accumulate its earnings to in- crease the value of its capital, it would not thereby escape taxation, for it would then be taxable according to the actual value of its capital stock, and that value would be increased by the amount of surplus thus accumulated. But if, for the purpose of evading the taxes, it should divide less than its actual earnings in any one year, and thus create a sur- plus, which it subsequently divided, such dividend would be the statutory measure of the value of the franchises which the corporation had enjoyed for the previous ycar.^ Penalties. — If any corporation neglect or refuse to pay this tax, it may be sued for in the name of the people of the state, and recovered in any court of competent juris- diction, in an action to be brought b}' the attorney-general at the instance of the comptroller.^ But in such an action no interest can be recovered as damages, as no other penalty for default in payment will be allowed than that imposed by the statute.' If any corporation, liable to make reports or certificates of estimate and appraisal to the comptroller, as above pro- vided, neglects or refuses to make such report within the time prescribed, or makes such report or certificate as may be unsatisfactory to the comptroller, the latter may examine the books and reports of such company and fix and deter- ' People V. N'ational Fire Ins. Co., •* Laws of iSSo, chap. 542, ^ q, as 27 Hun, iSS. ametuled by Laws of iSSi, chap. - People V. American Bell Tel.. Co., 361. 117 N. Y. 241. ^ People v. Gold and Stock Tel. Co., « People V. Albany Ins. Co., 92 N. 9S N. Y. 67. Y. 458. 276 THE LAW OF CORPORATIONS. mine the amount of tax and penalty due thereon, either from such books and records, or from any other data in his possession, which may be satisfactory to him. And he may settle an account for such tax and penalty, together with the expenses of the examination.' If he deem it necessary to examine any person as a wit- ness upon any matter relating to the amount of capital stock of such corporation, or to use, examine or inspect any book, account, voucher or document in possession of any offi-cer of such corporation, or of any other person, or under his control, relating to such capital stock and tax, he may issue a subpoena commanding such person to. appear before him or some person designated as commissioner by an appointment in writing filed in the office of the comptroller, at the place where the principal office of such corporation is situated within the state, and at the time specified in such subpoena, to be examined as a witness. And the subpoena may con- tain a clause requiring such person to produce on such ex- amination all books, papers and documents in his possession, or under his control, relating to the capital stock of such corporation, and the amount thereof employed within this state. The comptroller or the commissioner so designated may administer oaths to all such persons and examine them on oath in relation to any matter which may in anywise be material in determining the amount of tax to be paid. And any person neglecting or refusing to obey such subpoena, or refusing to testify or to answer any proper or pertinent question, shall be deemed in contempt, and may, upon mo- tion of the comptroller and upon application to a justice of the Supreme Court, be punished therefor for contempt.'' Accounts settled by the comptroller bear interest from a ' Laws of 18S1, chap. 361, § 12, "^ Id. § 13, added by Laws of 1882, added by Laws of 18S2, chap. 151, chap. 151, and as amended by Laws and as amended by Laws of iSSs, of 1SS5, chap. 501. chap. 501. TAXATION. 277 date thirty days after sending notice of settlement and until full payment is made.' And it is the duty of the comptrol- ler after making such settlement to send a notice thereof to such corporation. ° No writ of certiorari to review the decision of the comp- troller will be granted unless application is m.ade within thirty days after the service of the above notice, and not then, unless the papers upon which the motion is made, in- cluding the notice of motion, have been served upon the comptroller at least eight days before such motion, nor un- less the corporation ap*plying therefor has previously depos- ited with the state treasurer, the full amount of taxes, penalties and charges so settled and adjusted by the comp- troller, and filed with him an undertaking approved by one of the justices of the Supreme Court, to tiie effect that if the writ is vacated and the determination of the comptroller sustained, the applicant will make payment of all costs and charges which may accrue against it, including costs on all appeals.^ If an appeal has been taken, or if no deposit has been made within the time prescribed, the comptroller may issue his warrant, directed to the sheriff of any county in the state, commanding him to levy upon any property of such com- pany. And such warrant will be a lien upon and bind the personal estate of such corporation from the time an actual levy is made.'' The comptroller may, at any time, revise and readjust any account previously settled, whenever it may appear to him that such tax has been illegally paid, or that it had been so made as to include taxes which could not have been law- fully demanded.'^ And such re-settlement may be reviewed both upon the law and upon the facts upon certiorari by ' Laws of 1S81, chap. 161, § 15, chap. 501. added by Laws of 1885, chap. 501. •• Id. 5^ iS, added by 'Laws of 1885, - Id. § 16, added by Laws of 1885, chap. 501 chap. 501. ■'■ Id. § 19, added by Laws of 1S89, ^ Id. § 17, added by Laws of 1SS5, chap. 463. 2/8 THE LAW OF CORPORATIONS. the Supreme Court, at the instance either of the parties mak- ing such apphcation, or of the attorney-general in the name and in behalf of the people of the state.' Any person having knowledge of the evasion of taxation by any company liable thereto may report such fact to the comptroller together with such information as may be in his possession as may relate to the recovery of such taxes. And whenever in the opinion of the attorney-general or comptroller the interests of the state require it, either of them is authorized to employ the person reporting such in- -formation, to assist in the collecting and preparing of evi- dence and in the prosecution and trial of suits for such taxes, and may agree to pay such person for such services a sum not exceeding ten per cent, of the amount so collected.^ Fire and Marine Insurance Companies. — Every fire and ma- rine insurance company, incorporated under the laws of this state, or incorporated under the laws of any foreign country, and doing business in this state, is required on or before the first day of August in each year to pay to the treasurer of the state a tax on its corporate franchises for business in this state a sum equal to one-half of one per cent, upon the gross amount of premiums received by such company dur- ing the year ending the preceding thirtieth day of June, on business done in this state by such company, whether such premiums were in money, or in the form of notes, credits, or any other substitute for money :^ and before the time of such payment must make a return to the comptrol- ler signed and sworn to by its president, secretary or man- ager, giving the total amount of premiums received by such company during the year so ending.'' If any of^cer of any such company refuses or wilfully neglects to make and ex- ecute such a return he will be deemed guilty of a misde- ' Laws of iSSr, chap. 361, § 20, ^ Laws of 1886, chap. 679, § I. added by Laws of i88g, chap. 463. * Id. § 2. ' Laws of 18S6, chap. 266, § I. TAXATION. 279 meanor, and if he makes a wilfully false statement therein, will be subject to the pains and penalties of perjury. All taxes not paid by such company when due, may be collected by actions brought in the Supreme Court in the name of the people of the state by the attorney-general, at the instance of the comptroller, and in such action the court may issue an injunction restraining the further prose- cution of the business of the corporation until such tax to- gether with interest and costs are paid, and until the return is made.' The real estate of such companies is still liable to assess- ment and taxation where situated for all purposes ; but the personal property, franchises and business of such com- panies, incorporated under the laws of this state or of any other state or country, and doing business in this state, and the shares of stock of such company are exempt from all as- sessments or taxation, except as above provided, and with the exception of the fire department tax of two per cent." Banks. — Every corporation organized under the laws of any other state or country, and which receives deposits, loans money, sells bills of exchange or issues its credit, or is in any other manner engaged in the business of banking in this state, is required annually on or before the first day of February, to pay to the comptroller a state tax, as a tax on its business in this state, at the rate of one-half of one per cent, on the average of all sums of money received on de- posit, and of all sums received on account of such business, or used or employed in such business, in this state during the year ending the preceding thirty-first day of December." Every such corporation must make a return to the comp- troller in writincr, on or before the first dav of February in each year, setting forth the amount of the state tax to and ' Laws of iSS5, chap. 679, ^ 3. ta.xes on their franchises in support • Id. § 4. In addition to these of the fire departments in the sev- taxes, however, fire insurance com- eral towns and cities of the state. panies are subject to certain local ^ Laws of 1SS2, chap. 409, § 321, 2So THE LAW OF CORPORATIONS. for which it is hable, and of the average of deposit in, and of moneys received and used in or on account of such busi- ness in this state respectively on which such tax is based. This return must be verified by oath or affirmation, and for any neglect or failure to make such return, or to pay such tax, a penalty of ten per cent, on the amount of the tax will be imposed, and which may be recovered, together with the tax, in an action brought in the name of the people in any court of competent jurisdiction, by the attorney-general, at the instance of the comptroller.' The managers or agents of any such company must keep at all times in the office where its principal business is trans- acted in this state a full and accurate account of the moneys used or employed in its business and of its deposits, which account will be subject to the inspection of the comptroller or of any clerk designated by him to inspect the same during the business hours of any day on which business ma}- be legally transacted.^ Any moneyed or stock corporation deriving income or profit from its capital must add to the dividends declared upon any stock owned by the state or by any literary or charitable socict}- or institution a sum equal to the assess- ment for taxes paid upon an equal amount of the stock of such corporation not exempt from taxation ; " and the pro- visions of the revised statutes, whereby certain stocks are exempt from taxation, are for the benefit of the state or the institutions so exempt, and not for the benefit of such cor- porations." 1 Laws of 1882, chap. 409, § 322, as of 1SS9, chap. I2. amended by Laws of 1S89, chap. 12. =* Id. § 325. " Id. § 323, as amended by Laws * Id. § 326. CHAPTER X. DISSOLUTION. Art. I. Voluntary Dissolution. Art. II. Involuntary Dissolution. Art. III. Receivers. There is no general power in a court of equity to dis- solve a corporation. The proceedings are wholly statutory, and must be conducted in strict accordance with the methods provided by law.' Thus although the abandonment or in- solvency of the corporation may sometimes work a practical dissolution, yet it will not operate as a legal dissolution f nor will a resolution of the directors of a corporation that it be dissolved and go into liquidation, and that its business cease and franchises be surrendered, be sufficient to consti- tute a legal dissolution of the corporation.^ Article I. Voluntary Dissolution. If a majority of the directors, trustees or other officers having the management of the concerns of a corporation created by or under the laws of this state, discover that its stock, effects and other property are not sufficient to pay all just demands for which it is liable, or to afford a reason- ble security to those who may deal with it ; or if for any reason they deem it beneficial to the interests of the stock- ' Verplanck v. Mercantile Ins. Co., less Paper, etc., Co., 7 Hun, 557. I Edw. ch. 84; Dcnike v. N. Y. &= ■ New England Iron Co. v. Gill>ert Rosendale Lime and Cement Co., 80 El. R. Co., 91 N. Y. 153. N. Y. 599; U. S. Trust Co. V. N. Y., ^ Lake Ontario Natl. Bank v. On- West Shore and B. R. Co., loi id. ondaga County Bank, 7 Hun, 549. 47S; Chamberlain v. Rochester Seam- 281 282 THE LAW OF CORPORATIONS. holders that the corporation be dissolved, they may present a petition to the supreme court, or to a superior city court of the city where the principal office of the corporation is located, praying for a final order dissolving the corporation.' If a corporation, created under a general statute of the state for the formation of corporations, has an even number of trustees or directors who are equally divided respecting the management of its affairs, and the entire stock of the corporation at that time is owned by the trustees or direc- tors, or is so divided that one-half is owned or controlled by persons favoring the course of one-half of the trustees or directors, and one-half by persons favoring the course of the other half of them, the trustees or directors, or one or more of them, may present a petition to the court for its dissolu- tion. This, however, does not apply to a savings-bank, a trust company and safe-deposit company, or a corporation formed to rent safes in burglar and fire proof vaults, or for the construction or operation of a railroad, or for aiding in the construction thereof, or for carrying on the business of banking or insurance, or intended to derive a profit from the loan or use of money."'' Contents of the Petition. — The petition must show that the case comes within one or the other of the provisions above given, and must state the reasons which induce the peti- tioner or petitioners to desire the dissolution of the corpora- tion. A schedule must be annexed to the petition contain- ing the following matters, as far as such petitioners know or have the means of knowing the same : 1. A full and true account of all the creditors of the corporation, and of all unsatisfied engagements entered into by and subsisting against the corporation. 2. A statement of the name and place of residence of each creditor, and of each person with whom such an engage- ment was made and to whom it is to be performed, if known ; or if either is not known, a statement of that fact. ' Code Civ. Proc. § 2419. ^d. § 2420. DISSOLUTION. 283 3. A statement of the sum owing to each creditor or other persons specified in the last subdivision, and the nature of each debt, demand or other engagement. 4. A statement of the true cause and consideration of the indebtedness to each creditor. 5. A full, just and true^inventory of all the property of the corporation, and of all the books, vouchers and securi- ties relating thereto. 6. A statement of each encumbrance upon the property of the corporation by judgment, mortgage, pledge or other- wise. 7. A full, just and true account of the capital stock of the corporation, specifying the name of each stockholder, his residence, if it is known, or if it is not known, stating that fact, the number of shares belonging to him, the amount paid in upon his share, and the amount still due thereupon.' An afifidavit made by each of the petitioners to the effect that the matters of fact stated in the petition and the sched- ule are just and true so far as the afifiant knows, or has the means of knowing the same, must be annexed to the peti- tion and schedule.'' While this statute will be strictly construed, and no in- tendment will be made in behalf of the petitioners beyond what naturally arises from the contents of the petition and the schedules, yet a mere technical and accidental omission in the inventory of some item of property, or of some book relating to property, showing no lack of good faith, or evi- dence of a fraudulent purpose, will not defeat the proceed- ing, but can be cured by evidence at the hearing before the referee.' The petition must show that the dissolution would be beneficial to the interests of the stockholders, and a petition ' Code Civ. Proc. g 2421. Mining Co., 4 N. Y. Supp. 174; 51 - Id. § 2422. Hun, 640. ^ Matter of Santa Eulalia Silver 284 THE LAW OF CORPORATIONS. which fails to set forth such facts is not sufificient to warrant a court in granting it.' Where it is addressed to the su- preme court, the papers must be presented at a term of that court held within the judicial district embracing the county where the principal office of the corporation is located. Proceedings upon Application. — Where a corporation, created under a general statute, has an even number of trustees or directors, who are equally divided respecting the manage- ment of its affairs, and one-half of the stock is owned by those who are in favor of dissolution and one-half by those who are opposed, the court may, in its discretion, en- tertain or dismiss the application. If the court entertains the application, in such a case, or if a majority of the stock holders deem it beneficial to the interests of the stock- holders that the corporation should be dissolved, it may make an order requiring all persons interested in the cor- poration to show cause before it, or before a referee des- ignated in the order, at a time and place therein specified, not less than three months after the granting of the order, why the corporation should not be dissolved. The order must be entered and the papers must be filed within ten days after the order is made with the clerk of the court, or in the Supreme Court, with the clerk of the county where the principal office of the corporation is located. If it is made to appear to the satisfaction of the court that the corporation is insolvent, the court may, at any stage of the proceedings, before final order on motion of the petitioners on notice to the attorney-general, or on motion of the attorney-general on notice to the corpora- tion, appoint a temporary receiver of the property of the corporation, who will have all the powers and be subject to all the duties of receivers appointed in an action for the dis- solution of the corporation, brought by the attorney-gen- eral, or by a creditor or stockholder as prescribed in sec- tion seventeen hundred and eighty-eight of the Code. ■ Matter of Pyrolusite Manganese Co., 2g Hun, 429. DISSOLUTION. 285 The court may also, in its discretion, at any stage in the proceeding, after such appointment, and upon Hke motion and notice, confer upon such temporary receiver the powers and authority, and subject him to the duties and HabiUties of a permanent receiver, or as much thereof as it thinks proper, except that he shall not make any final distribution among the creditors and stockholders before final order in the proceedings, unless he is specially directed so to do by the court. If such receiver be appointed the court may, in its dis- cretion, on like motion and notice, with or without security, at any stage of the proceeding before final order, grant an injunction restraining the creditors of the corporation from bringing any action against it for the recovery of a sum of money, or from taking any further proceedings in such an action previously commenced, and such injunction will have the same effect and be subject to the same provisions of law as if each creditor, upon whom it is served, was named therein!' A copy of the order must be published, as prescribed therein, at least once in each of the three weeks immedi- ately preceding the time fixed therein for showing cause in the newspapers printed in Albany, in which legal notices are required to be published, and also in one or more news- papers specified in the order, published in the city or county wherein the order is entered." A copy of the order must also be served upon each of the persons specified in the schedule as a creditor or stockholder of the corporation, or as a person to whom an engagement of the corporation is to be performed, other than a person whose residence is stated to be unknown or to be without the United States. Such service must be made either personally at least twenty days before the time appointed for the hearing, or by depositing a copy of the order at least forty days before the time so ap- ' Code Civ- Proc. J^ 2423. ^ Id. § 2424. 286 THE LAW OF CORPORATIONS. pointed, in the post-office, enclosed in a post-paid wrapper, addressed to the person to be served at his residence as stated in the schedule.' At the time and place specified in the order, or at the time and place to which the hearing is adjourned, the court or the referee will hear the allegations and proofs of the parties and determine the facts. If a referee was not designated in the order to show cause, the court may, in its discretion, appoint a referee when, or after, the order is returnable. The decision of the court or the report of the referee must be in writing, and must be made and filed with all con- venient speed. It must contain .a statement of the effects, credits and other property, and of the debts and other en- gagements of the corporation, and of all other matters per- taining to its affairs f and a report or decision omitting such a statement is defective, and will not be sustained.' The court or referee is entitled to use upon the hearing the original petition and all schedules annexed thereto, and the clerk must transmit them accordingly upon the wTitten order of the judge or of the referee. In that case they must be returned with the decision or report.' The order to show cause made after the presentation of the petition is in the nature of a process for bringing persons interested before the court, and the statutory pro- visions in regard to it must be strictly complied with. Thus, it was held that an order to show cause why the prayer of the petition should not be granted, there being no provision made therein for service of a copy of the petition, was not sufficient.^ Where the hearing is before a referee, a motion for a final order must be made to the court upon notice to each person who has made himself a party to the proceeding, by ' Code Civ. Proc. § 2425. ^ Code Civ. Proc. g 2427. 2 Id. § 2426. * People V, Seneca Lake Grape ana, * Matter of E. M. Boynton Saw and Wine Co., 52 Hun, 174. File Co., 34 Hun, 369. DISSOLUTION. 287 filing with the clerk before the close of the hearing a notice of his appearance in person or by attorney, specifying a post-office within the state wliere such notice may be served. And such notice may be served in the manner pre- scribed for the service of a paper upon an attorney in an action. Where the hearing was before the court, a motion for a final order may be made immediately, or at such time and upon such notice as the court prescribes.' Upon an application for a final order, if it appears to the court in a case where the majority of the directors favor dissolution, that the corporation is insolvent, or in any other case that for any reason a dissolution of the corporation will be beneficial to the interests of the stockholders and not injurious to the public interests, the court will make a final order dissolving the corporation, and appointing one or more receivers of the corporation, and upon the entry of the order the corporation is dissolved ; and it may, in its dis- cretion, appoint a director, trustee or other ofificer, or a stockholder of the corporation, a receiver of its property.' It does not seem to be mandatory upon the court in such a case to dissolve a corporation, but it will look to the interests of the stockholders, and determine for itself whether a dissolution v/ill be beneficial to them.^ Transfers Prohibited. — A sale, assignment, mortage, con- veyance, or other transfer of any property of the corporation made after the filing of a petition, as above prescribed, in payment of, or as security for, an existing or prior debt, or for any other consideration, or a judgment thereafter ren- dered against the corporation by confession or upon the acceptance of an offer, is absolutely void as against the re- ceiver appointed in the special proceedings and as against the creditors of the corporation.' But this is not intended to prevent a corporation collecting debts due it, or from ' Code Civ. Proc. § 2428. change. Com. Pleas Sp. Term. 2 N. Y. '-' Id. 2429. Supp. 257. ^ In re Importers'' and Grocers' Ex- * Code Civ. Proc. § 2430. 288 THE LAW OF CORPORATIONS. paying or cancelling notes or choses in action becoming due thereafter, but was intended to prohibit transactions designed to favor one or more creditors or to give them a preference over others.' And such a proceeding will not prevent a corporation enforcing a claim due to it after the proceeding is commenced." Article II. Involuntary Dissolution. Action to Procure Dissolution. — An action to procure a judg- ment dissolving a corporation created by or under the laws of this state, and forfeiting its corporate rights, privileges and franchises, may be maintained — 1. Where the corporation has remained insolvent for at least one year. 2. Where it has neglected or refused for at least one year to pay and discharge its notes or other evidences of debt. 3. Where it has suspended its ordinary and lawful busi- ness for at least one year. 4. If it has banking powers, or power to make loans on pledges or deposits, or to make insurance, where it becomes insolvent or unable to pay its debts, or has violated any pro- vision of the act by or under which it was incorporated, or of any other act binding upon it.^ Such an action may be maintained by the attorney- gen- eral in the name and in behalf of the people ; whenever a creditor or stockholder of any corporation submits to the attorney-general a written statement of facts verified by oath, showing grounds for an action, as above stated, and the attorney-general omits for sixty days after this submis- sion to commence an action, then and not otherwise such creditor or stockholder may apply to the proper court for ' Sands V. Hill, 55 N. Y. iS; In re 31 Hun, 329. Waterbury, 8 Paige, 3S0. " Code Civ. Proc. § 1785. * Kingsley v. First National Bank, DISSOLUTION. 289 leave to commence such an action, and on obtaining leave may maintain the same accordingly.' The Code provides two systems of procedure against coi"- porations. Under the one system the action may be com- menced without leave of the court and tried as an equitable action. Under the other system the action can be com- menced only with such leave." It is not a bar to such an action that proceedings for the voluntary dissolution of the corporation have already been commenced.^ It is sufficient in such an action if it is alleged in the complaint that the debts of the company have remained "un- satisfied for many years, and that it is without means of pay- ment, and has become insolvent and unable to pay its debts, and has remained insolvent for one year, together with the necessary facts to substantiate the general allegations as above stated.^ May grant an Injunction in sncJi an Action. — The court may, upon proof of the facts authorizing the action to be maintained, grant an injunction order restraining the corpo- ration, its trustees, directors, managers and other ofificers, from collecting or receiving any debt or demand, and from paying out or in any way transferring or delivering to any person any money, property or effects of the corporation, during the pendency of the action, except by express per- mission of the court. And it may also restrain the corpo- ration from exercising any of its corporate rights, privileges or franchises during the pendency of the action, except by such permission. Such an injunction can be granted, how- ever, only by the court. ^ j\Iay appoint a Receiver. — The court may also, at an}' stage of such an action, appoint one or more receivers of the property of the corporation. A receiver so appointed ' Code Civ. Proc. § 17S6. ' SuKuds ^ . A'orthcrn Light Oil Co., '' Hcrriugv.N.Y. , Lake Erie ^W. Sup. Ct. Gen. Term, 17 Abb. N. R.R. Co., 105 N. Y. 340. C. 115 ; Medbury v. Rochester Frear ^ People V. Seneca Lake Grape 6^ Stone Co., 19 Hun, 498. Wine Co., 52 Hun, 174. '■' Code Civ, Proc. g 1787. 290 THE LAW OF CORPORATIONS. before final judgment is a temporary receiver until final judgment is entered, and as such has power to collect and receive the debts, demands and other property of the corpo- ration, to preserve the property and the proceeds of the debts and demands collected, to sell or otherwise dispose of the property as directed by the court, to collect, receive and preserve the proceeds thereof, and to maintain any action or special proceeding for either of those purposes. He must qualify as prescribed by law for the qualification of a per- manent receiver. But unless additional powers are specially conferred upon him, he has no others than the above and those which are incidental to the exercise thereof. A receiver appointed by or pursuant to a final judgment in an action, or a temporary receiver who is continued by the final judgment, is a permanent receiver, and has all the powers and authority conferred and is subject to all the duties and liabilities imposed upon a receiver appointed upon the voluntary dissolution of a corporation.' A temporary receiver appointed as above is in all respects subject to the control of the court, and it may by the order or interlocutory judgment appointing him or by an order subsequently made in the action, or by the final judgment, confer upon him the powers and authority and subject him to the duties and liabilities of a permanent receiver, or so much thereof as it thinks proper, except that he may not make any distribution among the creditors or stockholders before final judgment, unless he is specially directed so to do by the court." And such court may forbid any interfer- ence by way of levy and seizure by attachment or execution of the property in his possession.^ A creditor cannot maintain such an action until he has obtained judgment against the corporation.' And the court 1 Code Civ. Proc. § 17SS. * Byrne v. N. V. Brick ^ Cement '' Id. § 17S9. Co., Sup. Ct. Genl. Term, 16 Wk. ^ Woerishoffer v. A^orth River Dig. 139. Constructio7i Co., 99 N. Y. 39S. DISSOLUTION. 291 has no power to appoint a receiver of the property of a cor- poration in an action brought by a creditor at large on behalf of himself and others similarly situated.' A judgment creditor who has no lien upon the property of a corporation is not entitled to notice of application for the appointment of a receiver.^ Action for Sequestration of Property of a Corporation. — An action that partakes of many of the characteristics of an action to dissolve a corporation, and one controlled by many of the provisions regulating such actions, and which suspends the ordinary business of a corporation but does not necessarily affect its corporate franchises, is the action for the seques- tration of the property of a corporation brought against it by a judgment creditor. ^ The Code provides that where a final judgment for a sum of money has been rendered against a corporation created by or under the laws of this state, and an execution issued thereupon to the sheriff of the county where the corporation transacts its general business or where its princi- pal ofiice is located, has been returned wholly or parti}' un- satisfied, a judgment creditor may maintain an action to procure a judgment sequestrating the property of the cor- poration and for the distribution thereof.^ In such an action the court may grant an injunction order restraining the corporation and its trustees, directors, 'managers and other officers from collecting or receiving any debt or demand, and from paying out or in any way trans- ferring or delivering to any person, any money, property or effects of the corporation during the pendency of the action, except by express permission of the court ; ' and it may at any stage of such an action appoint one or more receivers of ' Lehigh Coal &' Navigation Co. v. Pringle v. Woolworth, 90 id. 502. Central R. R. of N'. J., 43 Hun, 546. Hollingshead \. Woodward, 35 Hun, '^ Morrison v. Menhaden Co., 37 410. Hun, 522. •* Code Civ. Proc. § 1784. 3 Mann v. Penfz, 3 N. Y. 415 ; ^d. § 17S7. Kincaid v. Divinelle, 59 id. 54S ; 292 THE LAW OF CORPORATIONS. the property of the corporation, and such receivers have the power of, and are subject to, the provisions regulating re- ceivers appointed in actions for the dissolution of corpora- tions.' If in such an action, based upon a judgment obtained against a corporation by default, a receiver is appointed and the default is subsequently opened and the corporation allowed to come in and defend, the order appointing a re- ceiver in the action for sequestration should be vacated and set aside as there is no longer any adjudication that anything is due from the corporation, and this is so although the judgment and execution have been allowed to stand as security upon opening the default." Officers and Stockholders may be made Parties. — Where either of the above actions has been brought by a creditor of a corporation, and the stockholders, directors, trustees or other officers or any of them are made liable by law in any event or contingency for the payment of the debt, the per- sons so made liable may be made parties defendant by the original or by a supplemental complaint, and their liability may be declared and enforced by the judgment in the action.^ Where they are not made parties defendant the plaintiff may maintain a separate action against them to procure a judgment declaring, apportioning and enforcing their liability." In either of such cases the court will, when it is necessary, cause an account to be taken of the property and of the debts of the corporation, and the liability of the defendants will be apportioned accordingly. But if it af^rmatively appears that the corporation is insolvent and has no prop- erty to satisfy its creditors, the court may, without taking such an account, ascertain and determine the amount of each defendant's liability, and enforce the same accordingly." ' Code Civ. Proc. ^ 17S8. ^ Code Civ. Proc. § 1790. '■^ Radbourn v. Utica, Ithaca b' E. * Id. § 1791. R. Co., 2S Hun, 369. * Id. § 1792. DISSOLUTION. 293 What the Judgment must Provide. — A final judgment in an action for the dissolution of a corporation brought as above, or for the sequestration of its property, separately or in con- junction with its stockholders, directors, trustees or other officers, must provide for a just and fair distribution of the property of the corporation, and of the proceeds thereof, 'among its fair and honest creditors in the order and in the proportions prescribed by law in case of the voluntary dis- solution of a corporation.' Where the stockholders are parties to the action, if the property of the corporation is not sufficient to discharge its debts, the interlocutory or final judgment, as the case re- quires, must adjudge that each stockholder pay into court the amount due and remaining unpaid on the shares of stock held by him, or so much thereof as is necessary to satisfy the debts of the corporation.'^ If it appears that the property of the corporation, and the sums collected or collectible from the stockholders upon their stock subscriptions are or will be insufficient to pay the debts of the corporation, the court must ascertain the several sums for which the directors, trustees or other officers or the stockholders of the corporation, being parties to the action, are liable, and must adjudge that the same be paid into court to be applied in such proportions and in such order as justice requires to the payment of the debts of the corpora- tion.'' Where, in such an action, stockholders were in posses- sion of assets of the corporation which were necessary to pay the debts and expenses, and which they had no right to retain, and such facts were so determined by a referee before whom they appeared without questioning his right to deter- mine the amount of assets which they should restore, it was ' Code Civ. Proc. ^ 1793. existence of particular corporations, 2 Id. g 1794. nor the manner of enforcing the lia- 3 Id. § 1795. The above provi- bility of their stockholders. Id. § sions do not affect any special pro- 1796. visions affecting the cessation of the 294 THE LAW OF CORPORATIONS. held that although such judgment entered upon the report of the referee went beyond the legitimate and regular pur- poses of the action, yet as they might have been brought in by a supplementary complaint, by their voluntary appear- ances they had rendered this unnecessary, and the court had power to make a final determination of the question, and that they then could not be heard to complain.' Judicial Supervision of Corporations. — An action may be main- tained against one or more trustees, directors, managers, or other officers of a corporation to procure a judgment for the following purposes, or so much thereof as the case requires: 1. Compelling the defendants to account for their official conduct in the management and disposition of the funds and property committed to their charge. 2. Compelling them to pay to the corporation which they represent, or to its creditors, any money and the value of any property which they have acquired to themselves, or transferred to others, or lost, or wasted by a violation of their duties. 3. Suspending a defendant from exercising his office where it appears that he has abused his trust. 4. Removing a defendant from his office upon proof or conviction of misconduct, and directing a new election to be held by the body or board duly authorized to hold the same, in order to supply the vacancy created by the re- moval ; or where there is no such body or board, or where all the members thereof are removed, directing the removal to be reported to the Governor, who may, with the advice and consent of the Senate, fill the vacancies. 5. Setting aside an alienation of property made by one or more trustees, directors, managers, or other officers of a corporation contrary to a provision of law, or for a purpose foreign to the lawful business and objects of the corporation, where the alienee knew^ the purpose of the alienation. 6. Restraining and preventing such an alienation where ' People V. Hydrostatic Paper Co., SS N. Y. 623. DISSOLUTION. 295 it is threatened, or where there is good reason to apprehend that it will be made.' Such an action may be -brought by the attorney-general in behalf of the people of the state, or, except where it is brought for the purposes specified in subdivisions third and fourth as given above, by a creditor of the corporation, or by a trustee, director, manager, or other officer of the cor- poration having a general superintendence of its concerns.'' But such an action does not divest any visitorial power over a corporation which is vested by statute in the corporate body or a public officer.^ Such an action cannot be maintained by the attorney general where it is brought solely for the purpose of enforc- ing or protecting private rights, as the state has no interest in the property of private business corporations, and with- out showing that the action is for the public benefit and not for that of private individuals, it cannot be maintained.' Action to Annul a Corporation — The attorney-general, when- ever he is so directed by the legislature, must bring an action against a corporation created by or under the laws of the state to procure a judgment vacating or annulling the act of incorporation or any act renewing the corporation, or con- tinuing its corporate existence, upon the ground that the act was procured upon a fraudulent suggestion or the conceal- ment of a material fact made by or with the knowledge and consent of any of the persons incorporated. ° But the fact that the attorney-general is instructed by the legislature to bring such an action does not determine its validity, and the court may dismiss the complaint, or make such other dis- posal of the case as it may deem proper.^ ' Code Civ. Proc. ^ 1781. Supp. 845. See also People v. Brook- * Id. i$ 1782. lyn, etc., R., Co., 89 N. Y. 75; People 3 Id. § 17S3. V. Loive, 117 N. Y. 175. ■» People V. Ballard, Sup. Ct. Genl. * Code Civ. Proc. § 1797. Term, 8 N. Y. Supp. 918. See S. C. ® Attorney-Genl. v. Bank of Niag- Sp. Term, and authorities cited in ara, Hopk. Ch. 354. opinion of Ingraham, J., 3 N. Y. 296 THE LAW OF CORPORATIONS. Upon leave being granted by the court, the attorney- general may bring an action against a corporation created by or under the laws of the state, to procure a judgment va- cating the charter or annulling the existence of the corpora- tion upon the ground that it has either — 1. Offended against any provision of an act by or under which it was created, altered, or renewed, or an act amend- ing the same, and applicable to the corporation ; or, 2. Violated any provision of law whereby it has forfeited it charter, or become liable to be dissolved by the abuse of its power ; or, 3. Forfeited its privileges or franchises by a failure to exercise its powers ; or 4. Done or omitted any act which amounts to a surrender of its corporate rights, privileges and franchises ; or, 5. Exercised a privilege or franchise not conferred upon it by law.' The court upon application for leave to bring such an action will not inquire whether bringing the proposed action is a wise administrative act, but only whether the attorney- general alleges 2^ prima facie case, or a case of such gravity that it should be judicially determined." And it is not sufficient foundation for a judgment against a corporation in such an action forfeiting its franchises that there is merely a breach of the letter of some requirement of the law under which it is organized, but there must be a breach of the intent and the meaning of the law. It was held, therefore, that the fact that a turnpike company was re- quired by the act under which it was incorporated to keep its road in the same condition required in its original con- struction, was not brought within the provisions of the act on account of a technical breach of the provision, but it ' Code Civ. Proc. § 179S. eral. Sup. Ct. Genl. Term, 3 N. Y. '"* In re Applic. of Attorney-Gcn- Supp. 464. DISSOLUTION. 297 must be shown that there was such a want of repair as would render the road dangerous or inconvenient to travellers.' In a recent and very important case' it was held that the action of the trustees and stockholders of a company in transferring its capital stock to persons in control of a com- bination of all the corporations engaged in business of the same nature, and thereby placing the control of its business in the hands of such persons, was such an abandonment of the authority to manage its affairs, vested in it by statute, as would sustain an action brought by the attorney-general against it to annul its charter. By such a course it was held that it had violated the law, and forfeited its charter, and should be dissolved for such abuse of its powers. A party which would be directly affected by the dissolu- tion of a corporation is entitled to notice of the application, and if his interest is sufficient, to be made a party defendant to the action. This was so held v/here an action was brought by the attorney-general to vacate the charter of a railroad company which had leased a portion of its road to another company, and the lessee, upon its application, was made a party to the action.^ Before granting leave to bring such an action the court may, in its discretion, require such previous notice of the application as it thinks proper to be given to the corpora- tion or any officer thereof, and may hear the corporation in opposition thereto.' But whether or not notice of such application shall be given rests entirely in the discretion of the court, and its failure to require any notice to be given does not render an order subsequently made in the action invalid.^ ^ People V. Willicunsbtirgh Tur7i. 22 Abb. N. C. 164: 16 Civ. Proc. pike, etc., Co., 47 N. Y. 586. Rep. i ; 19 St. Rep. S53. 2 People V. North River Sugar Pe- * People v. Albany . of , A. D. 189—. ) . [L. S.] . , Notary Public. " Exhibit A," referred to in the foregoing report : List of Subscribers to the capital stock of " The \iiame in full.'\ Names. Residence. No. of Shares. " Exhibit B," referred to in the foregoing report: Notice. A meeting of the subscribers to the capital stock of "The (26) [name iti full] will be held at (27) in the city of (28) on (29) at (30) o'clock in the (31) noon, for the adoption of By-laws for said corporation, and the election of Directors to manage the concerns of the company for the first year. Dated . Commissioners. State of New York, ) (City and) County v ss: OF (32) , ) (33) being duly sworn, deposes and says that on the (34) he deposited in the post-ofifice in the city APPENDIX D. 373 of (35) printed [or writteii] copies of the above notice, each notice having been first securely enclosed in an envelope, and said envelopes having been respectively ad- dressed to each subscriber at his last known place of resi- dence, and the proper postage on each of said envelopes having been prepaid. Sworn to before me this ) day of - — — -, A. D. 189 — . f , Notary Public. " Exhibit C," referred to in the foregoing report: State of New York, " ) (City and) County of (36) , } ^^- ■' ^^^ (37) J the Inspectors for the first annual elec- tion of (38) \jiaine in fiill\ being severally duly sworn, do de- pose and say, and each for himself deposes and says : That, at such election held at (39) in the City of (40) on the (41) , the following-named stockholders were elected Directors to manage the affairs of the said company for the first year of its existence, each Director having re- ceived the number of votes set opposite to his name, to wit : (42) received (43) votes ; &c. Sworn to before me, this day of , A, D. 189—. , Notary Public. , Inspectors. V. By-Laws. By Laws of (0 Adopted (2) Article I. DIRECTORS. Section i. The stock, property and concerns of the (3) shall, except when otherwise provided, be managed and controlled by a Board of Directors (4) in num- ber, who shall respectively be stockholders in said company to the extent of (5) shares, and who shall hold their 374 THE LAW OF CORPORATIONS. ofifices for one year, or until others are elected in their stead. Vacancies in the Board shall be filled only by a vote of a majority of the Directors then existing. Sec. 2. 'The annual election for Directors shall be held on the (6) S^first Tuesday of May in each year], at the prin- cipal ofifice of the company. Sec. 3. Regular meetings of the Board of Directors shall be held at the ofifice of the company in the City of (7) on the (8) [^Jirst Tuesday of each montJi\. A majority of the whole number of Directors shall constitute a quorum for the transaction of business. Sec. 4. Special meetings of the Board of Directors may be called by the President in his discretion, or at the request in writing of two members of the Board. Notices of such meetings shall be given by a written or printed notice de- livered or mailed to each Director (9) days before said meeting. Sec. 5. The order of business at the regular meetings of the Board of Directors shall be : 1. Calling the roll. 2. Reading the minutes of the last regular and all inter- vening special meetings. 3. Reading the minutes and report of the Executive Committee. 4. Communications and reports of the President. 5. Report of the Treasurer. 6. Reports of standing committees. 7. Reports of special committees. 8. Unfinished business, 9. New business. Article II. STOCKHOLDERS. Section i. Regular meetings of the stockholders shall be held at the principal office of the company on the (10) \^first Tuesday of May in each year], for the purpose of electing Directors. At such meetings two inspectors of elec- tion shall first be chosen by ballot to count and certify the votes for directors at such meeting. APPENDIX D. 375 Sec. 2. Special meetings of the stockholders may be called by the President in his discretion, and shall be called by him whenever requested so to do by stockholders owning (ii) \one-third^ of the capital stock. Sec. 3. Stockholders representing (12) \one-third'\ of the whole capital stock of the company, present either in person or by proxy, shall be necessary to constitute a quorum. Article III. OFFICERS. Section i. The officers of the company shall consist of a President, Secretary and Treasurer, and shall be annually elected by [and from] the Board of Directors. [One person may hold any two of the above offices.] All elections shall be by ballot, and a majority shall be necessary for a choice. Vacancies among the officers may be filled at any meeting of the Board, but no officer elected by the Board shall be removed except by a vote of (12) \tzvo4Jiirds\ of the Directors. Sec. 2. The President shall have the chief management, control and supervision of the affairs of the company ; he shall preside at all meetings of the stockholders and of the Directors, and shall [with the advice of the Executive Com- mittee] appoint all such subordinate officers as may be neces- sary for the transaction of business, and remove the same at will, and fix their compensation. He shall sign all certifi- cates of stock of the company, and all checks, drafts, notes, contracts or other obligations of the company. Sec. 3. It shall be the duty of the Secretary to keep the minutes of all meetings of the stockholders and of the Directors [and such minutes of the meetings of the Execu- tive Committee as such Committee may direct] ; to keep the books and records of the company, except the stock-book, and to give notice to all Directors of the time and place of all special meetings, and to notify all stockholders appearing as such on the books of the company of all regular and special meetings of the stockholders. Sec, 4. It shall be the duty of the treasurer to receive all moneys belonging to the company, and to deposit the 376 THE LAW OF CORPORATIONS. same with such bank as may -be designated by the (13) {Ex- eaitive Committee, or Board of Director s\ to the credit of the company in its corporate name ; to keep true and accurate vouchers of all money disbursed ; to keep regular books of account, showing all receipts and disbursements of every nature for the company, and to render an account thereof when required by the Board of Directors [or the Executive Committee]. Before entering upon the performance of his duties he shall furnish such bonds for the faithful perform- ance of the same as the [Executive Committee or] Board of Directors may require. He shall have the custody of the seal of the company, and he shall keep or cause to be kept a book containing the names of all persons, alphabetically arranged, who are or shall within six years have been stock- holders of such company, showing their places of resi- dence, the number of shares of stock held by them respec- tively, and the time when they respectively became the owners of such shares ; and the amount of stock actually paid in. Article IV. EXECUTIVE COMMITTEE. [ Tins article may be inserted if desired?^ Section i. There shall be an Executive Committee, which shall consist of the President and two Directors, to be chosen by ballot by the Board of Directors. The Committee may fix such times for the meetings as they may see fit, and may be called together by the President at any time for special business. Sec. 2. All the powers and duties of the Board of Direc- tors, except as otherwise expressly provided by such Board, may be exercised and discharged by the Executive Com- mittee. Sec. 3. The Executive Committee may fix and designate such bonds to be given by the Treasurer, or any other officer or employee of the company, conditioned for the faithful performance of their duties and with sureties to be approved by such committee as they may see fit. APPENDIX D. 377 Article V. DIVIDENDS. Section i. Dividends shall be made from the profits of the company at such times as the Board of Directors may determine. Article VI. CERTIFICATES OF STOCK. Section i. Each owner* of stock in the company shall be entitled to a certificate or certificates representing the shares owned by him, which certificate shall be signed by the President and Treasurer and sealed with the corporate seal. Sec. 2. Such stock shall be transferable on the books of the company in person, or by attorney duly authorized, upon the surrender of the old certificate. Article VII. contracts of the company. Section i. All notes, deeds, contracts and other evi- dences of debt or obligations to bind the company shall be signed by the President and countersigned by the Secretary. Sec. 2. Checks and drafts of the company shall be signed by the Treasurer and countersigned by the President. Article VIII. CORPORATE SEAL. Section i. The seal of this company shall be circular in form, with the name of the company and the year of incor- poration thereon, and shall be in the custody of the Treas- urer. Article IX. BY-LAWS: HOW AMENDED. Section i. These by-laws may be altered or amended by a vote of two-thirds of the whole number of Directors at any regular meeting of the Board, or at a special meeting called for that purpose, provided notice of the intention to 378 THE LAW OF CORPORATIONS. make such alteration or amendment shall be given at a previous regular meeting. VI. Certificate of Payment of Capital Stock. We, (i) , President, and (2) , being a ma- jority of the Trustees of (3) , do hereby certify, 1, That the capital stock of said company is (4) dollars. 2. That the entire amount of said capital has been paid in. \If any portion of the capital was paid in in property add] and that (5) dollars was paid in in cash, and (6) dollars was paid in in property for the use of said company at its fair and reasonable value. Dated (7) , 18 . State of New York, ) ^^ . (City AND) County OF (8) ,) (9) , President, and (10) , being duly sworn, severally depose and say, that the said (11) is the President and (12) are Trustees of the (13) and a majority thereof, and that the statements made in the foregoing certificate are true. Sworn to before me this of , 189—. VII. Annual Report tinder the Manufacturing Act. We, (i) , President, and (2) , being a ma- jority of the Trustees of (3) , do hereby certify, 1. That the capital stock of the said company is (4) dollars. 2. That the amount actually paid in is (5) dollars \if any portion of t lie capital %v as paid in in property add\ of which (6) dollars was paid in in cash and (7) dollars was paid in in property for the use of said company at its fair and reasonable value. 3. That the amount of the existing debts of said com- pany do not exceed (8) dollars. Dated (9) , 18 . appendix d. • 379 State of New York, (City and) County of (io) '' ^^ (ii) {President or Secretar}'\ being duly sworn, says that (12) is the President and (13) are the Trus- tees of the (14) company and a majority thereof, and that this deponent is (15) [President or Secretary'], and the foregoing report is true to the best of his knowledge, infor- mation and belief. Sworn to before me, this — day of , 189^-. VIII. Annual Report under the Business Act. We, (i) , President, and (2) , being a ma- jority of the Trustees of the (3) company, do hereby certify, that on the first day of January last, 1. The capital stock of the said company was (4) dollars. 2. That the actual proportion paid in was (5) dollars \if any portion of the capital was paid in in property add\ of which (6) dollars was paid in in cash and (7) dollars was paid in in property for the use of said company at its fair and reasonable value. 3. That the nature of the then existing assets of the cor- poration was (8). {Specify nature of assets.] 4. That the names of the stockholders at the said date were (9) 5. That since the last annual report the following divi- dends have been paid and declared (10). {Specify dividends.^ Dated (11) , 18 . {Add affidavit as in form number VII.] IX. Assent to Mortgage. We, the undersigned, being (i) {state the necessary num- ber of stockholders and amount of stock to be held], holding the number of shares of stock of said company set opposite our respective names, do hereby consent that said company shall execute a bond or bonds {or note or notes], conditioned for the payment of the sum of (2) dollars and a 380 THE LAW OF CORPORATIONS. mortgage to secure the payment thereof upon all or any part of the real or personal estate of said company, and also upon all or any parts of the goods, chattels, Hberties and franchises of saidcompany. Dated (3) , 18 . Names of Stockholders. Number of Shares. X. Acknowledgment by Corporation. State of New York, \ ^^ . (City and) County of(i) On the (2) day of , 18 , before me per- sonally appeared (3) known to me to be the (4) {state zvhat officer'] of the (5) described in and who executed the foregoing (6) who being by me duly sworn, did depose and say, that he resides in the (7) ; that he is the (8) {state office held] ; that he knows the corporate seal of the said (9) ; that the seal affixed to the foregoing instrument is the corporate seal of the said (10) and was affixed thereto by order of the Board of Directors of said (ii) ; and that he signed his name thereto by the like order as (12) {state office held] of the said (13) . And deponent further says that he is acquainted with (14) and knows him to be the (15) {state name of other officer signing] and that the signature of said (16) above subscribed is the genuine handwriting of said (17) and was thereto subscribed by the like order of the Board of Directors in the presence of deponent. Subscribed and sworn to, before me this day of , 18 . XI. Verification of Pleading or Petition. State of New York, [ ^^ . (City and) County of (i) (2) being duly sworn says that he is (3) {state what officer] of the (4) ; that he has read the forego- APPENDIX D. 381 i"g (5) ^"^ knows the contents thereof and that the same is true of his own knowledge, except as to those matters therein stated to be alleged on information and belief, and as to those matters he believes it to be true. Deponent further says that the reason that the fore- going (6) is verified by deponent and not by (7) [state party, as plaintiff or defendant or petitioner'\ is that (7) \sauie'\ is a corporation and deponent is (8) thereof. [//" tJiere are allegations on information and belief , add'\ and that the sources of deponent's information and the grounds of his belief are (9) [state same']. Sworn to, before me this ) day of , 18 . ) XII. Report to State Comptroller ivhere dividend of six per cent or more has been declared. Report of the (i) for the year ending the 1st day of November, A.D. 18 . Office of the (i) [give post-office address of company']. 18 . To the Comptroller of the State of New York: Agreeably to law, as treasurer of the above company, I make the following report, viz. : Total authorized capital of company $ Whole number of shares of stock authorized. ...... Number of shares of stock issued Par value of each share % Amount paid into the treasury of the company on each share c % Amount of capital paid in *. % •Amount of capital upon which dividends were de- clared $ Date of each dividend declared Amount of each dividend declared $ Rate per cent per annum of dividends Amount of profit added to sinking fund $ , Treasurer. 382 the law of corporations. State of New York, ) ^^ , (City and) County of (2) , f On this (3) personally appeared before me, (4) , treasurer of (5) , who being duly sworn did depose and say, that the foregoing report is just and true, according to the accounts in the books of the com- pany, and that it includes all dividends, whether in cash, stock, scrip, or of any other character or description, declared by said company during the year ending on the ist day of November, A.D. 18 , and that the amount of profit added to tile sinking fund of this company, during the said year, without a division thereof among its stockholders, was $ as above stated. — , Treasurer. Sworn to and subscribed before me, \ the day and year aforesaid. ) , Notary Public. Where no dividend or a dividend of less than six per cent has been declared, substitute the following for the last affi- davit and acknowledgment. State of New York, ] ^^ . (City and) County of (2) , f On this (3) , before me, personally appeared (4) , treasurer, and (5) , secretary, of the above- named company, wdio being by me severally duly sworn, did say that the amount of capital paid in of said com- pany is (6) , and that said company declared no dividend in cash, stock, scrip, or of any other character or description during the year ending the ist day of November, 18 , save the dividends herein reported, and that they will with fidelity, according to the best of their knowledge and behef, estimate and appraise the capital stock of said company at its actual value in cash, not less, however, than the average price which said stock sold for during said year, and not less than the price or value as in- dicated or measured by the amount of the dividends made or declared during the year; and that the amount of profit added to the sinking fund of this company during the said APPENDIX D. 383 year without a division thereof among its stockholders, was (7) dollars. , Treasurer. , Secretary. Sworn to and subscribed before me, ) the day and year aforesaid. ) Notary Public. Office of the (8) {state name and post-office address of com- panyi\. 18 . We, the undersigned, being the treasurer and secretary of the above-named company, do certify, that in pursuance of our aforesaid oaths, we have estimated and appraised the capital stock of said company, at its actual value in cash as follows, viz. : (9) shares at (10) dollars per share, amounting in the whole to (11) dollars. In witness whereof, we have hereunto set our hands the day and year aforesaid. , Treasjirer. , Secretary. XIII. Statement for Local Taxation. Statement made by the (i), {state full name of company or corporatioji] to the assessors of the {2),{state town or ward of city where the principal office or place of tra7isacting the finan- cial concerns of said company or corporation is located^ for the purposes of taxing the property of said company for the year 18 . Capital stock paid in or secured to be paid in, Rate of last annual dividend. Surplus earnings on hand exceeding ten per cent of the capital stock, {If stock is worth less than par state actual value.^ Nominal taxable capital and surplus, Value of other personal property. 384 THE LAW OF CORPORATIONS. Deductions : Amount of capital actually paid for real estate [state lo- cation of real estate']. Amount of indebtedness [except mortgages on real estate and current expenses]. Mortgages on real estate, Amount invested in the stocks of other corporations which are taxed upon their capital, Amount invested in United States securities, Amount of capital stock held by New York State, Amount of capital stock held by any incorporated liter- ary or charitable institution, Total amount of taxable personal property and capital. The principal place of transacting the financial business of this company is at [If assessed by the state under Laws of \ZZ\, chap. 361, so state]. Treasurer. State of New York, ) (City and) County of — ) I, the treasurer of said corporation, being duly sworn, do hereby certify and declare that the foregoing statement is in all respects just and true. APPENDIX E. The following laws of 1890 were received too late to be incorporated in the text^the last chapters having been passed after the book had gone to press. Chapter 193 is of considerable importance, as involving the rights of purchasers of the franchises and property of manufacturing corporations. Chapter 506, which goes into effect July ist, is the act for the regulation and supervision of mortgage companies, which has already attracted much attention. Chapter 119. An Act to amend chapter one hundred and forty-three of the laws of eighteen hundred and seventy-four, entitled " An act to authorize the formation of corporations for the erection and keeping of hotels," as amended by chapter one hundred and twenty-seven of the laws of eighteen hundred and eighty-five, and chapter five hun- dred and ninety-two of the laws of eighteen hundred and eighty-six. Section i. Section sixteen of chapter one hundred and forty-three of the laws of eighteen hundred and seventy-four, entitled " An act to authorize the formation of corporations for the erection and keeping of hotels," is hereby amended so as to read as follows : § 16. After the passage of this act it shall not be lawful to organize any corporation under chapter seven hundred and ninety-one of the laws of eighteen hundred and sixty-six, or the acts passed supplementary thereto and amendatory thereof. § 2. Said act, as amended by chapter one hundred and twenty-seven of the laws of eighteen hundred and eighty- 3S5 386 LAW OF CORPORATIONS. five, and chapter five hundred and ninety-two of the laws of eighteen hundred and eighty-six, is hereby further amended by adding thereto and making a part thereof as section nine- teen, as follows : § 19. Any company formed under this act may secure the payment of any debt heretofore contracted, or which may be contracted by it, in the business for which it was in- corporated, by mortgaging all or any part of the real or per- sonal estate of such company ; and every mortgage so made shall be so valid to all intents and purposes as if executed by an individual owning such real or personal estate ; pro- vided that the written assent of the stockholders owning at least two-thirds of the capital stock of such company shall first be filed in the ofifice of the clerk of the county where the mortgaged property is situated. § 3. This act shall take effect immediately. Chapter 193. An Act supplemental to chapter forty of the laws of eigh- teen hundred and forty-eight, entitled " An act to au- thorize the formation of corporations for manufactur- ing, mining, mechanical or chemical purposes," and the amendments made thereto. Section i. When the property and franchises of any corporation, organized under the provisions of chapter forty of the laws of eighteen hundred and forty-eight, entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," and the amendments made thereto, shall be sold by virtue of any mortgage or deed of trust duly executed by it, or pursuant to the judgment or decree of a court of competent jurisdiction, or by virtue of an execution issued thereon, or under any sale made by a receiver appointed in proceedings for the dissolution of such corporation, the creditors of such corporation, or such of them as desire, or any person, per- sons, or committee designated by them, may purchase at such sale such franchises and such property, or any part thereof, and upon such purchase shall acquire title to the APPENDIX E. 387 -same in the manner prescribed by law. He or they may as- sociate with them any number of persons, not less than the numbers required by law, for the incorporation of such cor- poration, a majority of whom shall be citizens and residents of this state, and they may become a corporation and take and possess the property and franchises thus sold, and which were at the time of sale possessed by the corporation whose property shall have been so sold upon making, acknowledg- ing and filing, in the office \\4iere certificates of such corpora- tions are required by law to be filed, a certificate in which they shall describe by name and reference to the law under which it was organized, the corporation whose property and franchises they have acquired, and the court, b}- whose au- thority the sale had been made, with the date of the judg- ment or decree authorizing or directing the same, and if the sale was made by a receiver, the date of the order appoint- ing the receiver, and a brief description of the property sold, and also the following particulars : 1 . The name of the new corporation intended to be formed by the filing of such certificate. 2. The maximum amount of its capital stock, and the number of shares into which it is to be divided, specifying the classes thereof, whether common or preferred, and the amount of and rights pertaining to each class. 3. The number of trustees, not less than three nor more than thirteen, with their names and post-ofTice address, who shall manage the affairs of the new corporation for the first year. 4. Any plan or agreement which may have been entered into, at or previous to the time of sale, by the purchasers or by them and their associates, in anticipation of the forma- tion of the new corporation, and pursuant to which such purchase was made. Such corporation shall be vested with and be entitled to exercise and enjoy all the rights, privileges and franchises which at the time of such sale belonged to or were vested in the corporation last owning the property sold or its receiver, and shall be subject to all the provisions, duties and liabili- ties imposed by law on such corporations. 388 LAW OF CORPORATIONS. § 2. At or previously to the sale the purchasers thereof or the persons for whom the purchase is to be made may enter into a plan or agreement for or in anticipation of the readjustment of the respective interests therein of the creditors uniting in such plan of the corporation owning such property and franchises at the time of sale, and the respec- tive rights of the associates of such creditors uniting in such plan, if any, and for the representation of such creditors and associates, if any, in the stock of the new corporation to be formed, and also in the bonds of the new corporation, if any bonds are to be issued. And may therein regulate the vot- ing by the holders of the preferred and common stock at any and all stockholders' meetings, and by the holders of any or all of the bonds of the corporation foreclosed, or of the bonds issued or to be issued by the new corporation, and such right of voting by bondholders shall be exercised in such manner, for such period and upon such conditions as shall be therein described. Such plan or agreement must contain suitable provision for the bondholders voting by proxy, if they are allowed to vote, and must not be incon- sistent with the laws of the state, and shall be binding upon the corporation until changed as therein provided or as other- wise provided by law. If bonds of the new corporation are issued as provided for by the said plan or agreement, they may be secured by a mortgage or trust deed upon the prop- erty of the new corporation, its franchises, rights and privi- leges. The new corporation, when duly organized, pursuant to such plan or agreement and the provisions of law, may issue its bonds and stock in conformity with the provisions of such plan or agreement, and may at any time within six months after its organization pay, compromise or discharge any debt, claim or liability of the former corporation to the creditors of the former corporation who unite in the plan or agreement to form said new corporation as provided in and by said plan. And may establish preferences in respect to the payment of dividends in favor of any portion of its capital stock, and may divide its stock into classes, but the capital stock of the new corporation shall not exceed in the aggregate the maximum amount of stock mentioned in the APPENDIX E. 389 certificate of incorporation, nor shall the bonds issued by it exceed in the aggregate two-thirds of the value of the cor- porate property. § 3. The supreme court may direct a sale of the whole of the property, or such part of it as it may think proper, together with the rights, privileges and franchises of the corporation when the sale is made by a receiver, and if the whole of the property is not so sold, together with the rights, privileges and franchises of the corporation, the bal- ance of the property shall be sold separately. If the sale is made under the power contained in a mortgage or mortgages or deed of trust, the judgment or order may in like manner direct the sale to be made either in case of the non-payment of interest only, or of both the principal and the interest due and to be paid and secured by any such mortgage or mort- gages or deeds of trust. § 4. This act shall take effect immediately. Chapter 292. An Act to amend section eight of chapter two hundred and forty-eight of the laws of eighteen hundred and seventy-two, entitled "An act to authorize the forma- tion, establishing and maintaining of driving-park, park and agricultural associations." Section i. Section eight of chapter two hundred and forty-eight of the laws of eighteen hundred and seventy-two, entitled " An act to authorize the formation and establish- ing and maintaining of driving park, park and agricultural associations" is hereby amended to read as follows : § 8. The ofificers of any association organized under the provisions of this act shall be jointly and severally liable, for all debts due from said association, contracted while they are of^cers thereof, and prior to the filing of a certificate showing that the whole amount of capital stock has been paid in as required by section three of this act, provided a suit for the collection of the same be brought within one year after the debt shall become due and payable. 390 LAW OF CORPORATIONS. §2. Nothing in this act contained shall affect any claim or liability which now exists. § 3. This act shall take effect immediately. Chapter 400. An Act in relation to life and casualty insurance companies, associations and societies organized under the laws of this state. Section i. No order, judgment or decree, providing for an accounting or enjoining, restraining or interfering with the prosecution of the business of any life or casualty insur- ance company, association or society of this state or appoint- ing a temporary or permanent receiver thet'eof, shall be made or granted otherwise than upon the application of the attorney-general on his own motion or after his approval of a request in writing of the Superintendent of the Insurance Department except in an action by a judgment creditor or in proceedings supplementary to execution. § 2. This act shall take effect immediately. Chapter 439. An Act to amend chapter five hundred and forty-six of the laws of eighteen hundred and eighty-seven, entitled "An act to provide for the organization of trust com- panies, for their supervision, and for the administration of their affairs." Section i. Section twenty-seven of chapter five hun- dred and forty-six of the laws of eighteen hundred and eighty-seven, entitled " An act to provide for the organiza- tion of trust companies, for their supervision, and for the administration of their affairs," is hereby amended so as to read as follows : § 27. The trustees shall have a discretionary power of investing the moneys received by them in trust, in public stocks of the United States, or of any individual state, or in the bonds or stocks of any incorporated city or county of this state, duly authorized to be issued, or in such real and APPENDIX E. 391 personal securities as they may deem proper ; but no trust company shall invest in the stock of any private incorporated company to an amount in excess of ten per cent of the capital of the trust company. § 2. Section thirty-one of said chapter five hundred and forty-six of the laws of eighteen hundred and eighty- seven is hereby made applicable to any trust company char- tered and existing before June eightli, eight hundred and eighty-seven, by special acts of the legislature. § 3. All acts or parts of acts inconsistent with the pro- visions of this act are hereby repealed. §4. This act shall take effect immediately. Chapter 506. An Act relating to the supervision of mortgage companies oreanized under the laws of another state. Section i. The Superintendent of the Banking Depart- ment is hereby empowered and directed to issue a license under his hand and seal, in accordance with the conditions hereinafter mentioned, authorizing mortgage companies organized under the laws of another state to transact busi- ness within the limits of this state. The supervisory power granted under this act shall apply to associations, copartner- ships, individuals, joint-stock companies, firms, or corpora- tions organized under the laws of any other state, and known as mortgage, loan, investment or trust companies, who sell, offer for sale, or negotiate bonds or notes secured by deed or trust or mortgage of real estate, or choses in action, owned, issued, negotiated or guaranteed by it or them. § 2. The companies, associations and others described in section one of this act, shall make and furnish to the Super- intendent of the Banking Department a true and verified statement of their financial condition in detail on blanks fur- nished by the superintendent for that purpose, which state- ment shall show, first, the amount of capital actually paid in, in cash • second, the amount of capital subscribed ; third, the undivided profits or earnings on hand , fourth, the total liabilities itemized in such form as may be indicated in the 392 LAW OF CORPORATIONS. blanks ; fifth, the total amount of moneys loaned, invested or guaranteed ; sixth, the number and amount of all mort- gages in arrears of interest for a period exceeding six months prior to the date of said report ; seventh, the number and amount of mortgages foreclosed during the past year ; and eighth, the present cash value of all the real estate held or owned by foreclosure or otherwise, and such other and fur- ther information concerning their business afTairs and meth- ods as the superintendent shall require. The said state- ment shall be signed by such officers and others, and in such form as the superintendent may prescribe. The first state- ment under this act shall be made on the first day of July, eighteen hundred and ninety, and succeeding statements shall be made semi-annually on the first day of January and July respectively. The superintendent may, if he be of opinion that it is desirable, require that a like report from any company either wholly or in part, as to the particulars aforesaid, be made to him at any time, and submitted within such period as he may designate. Before the issuance of a license to transact business, it shall be the further duty of the superintendent, either personally or by some competent person or persons appointed by him, to visit and examine thoroughly into the condition, business methods and affairs generally of any company, association, corporation, copart- nership, or individual proposed to be licensed by him ; and the said superintendent is hereby empo\vered to make such examination as often thereafter as he deems necessary, but such examination shall be made at least once in every year. The superintendent and every such examiner shall have power to administer an oath to any person whose testimony may be required in any such examination, and to compel the appearance and attendance of any such person for the pur- pose of such examination by summons, subpoena, or attach- ment in the manner now authorized in respect to the attend- ance of persons a switnesses in the courts of record of this state , and all books and papers which it may be deemed nec- essary to examine by the superintendent or the examiner or examiners so appointed shall be produced and their produc- tion may be compelled in like manner. The expense of APPENDIX E. 393 every such examination shall be paid by the corporation, company, firm or association examined to such an amount as the superintendent shall determine. Whenever such ex- amination shall be made by the superintendent personally, or by one or more of the regular clerks in his department, no charge shall be made in such examination but for the necessary travelling and other actual expenses. On every such examination inquiry shall be made as to the condition and resources of the company generally, the mode of con- ducting and managing its affairs, the advice of its directors or trustees, the investment of its 'funds, the safety and prudence of its management, the security afforded to those by whom its engagements are held, and within the require- ments of its charter and of law have been complied with in the administration of its affairs. § 3. Whenever it shall appear to the Superintendent of the Banking Department from an examination made and the statement or report submitted by any such company, corpo- ration, copartnership, firm or association, pursuant to the requirements of section two of thjs act, that it is conducting its affairs in a safe and authorized manner, he shall issue to said company, corporation, copartnership, firm or associa- tion a certificate, under his hand and seal, permitting it to transact business in this state for the term of one year from the date thereof. § 4. No person, association, corporation, compan}- or part- nership shall, after the first day of October, eighteen hun- dred and ninety, act in this state as the agent or represen- tative of any company, corporation or others described in section one of this act unless the same be duly licensed by the Superintendent of the Banking Department, ashereinbe- fore provided. Every such company, corporation or others described in section one of this act, shall, within thirty da}-s after being authorized to transact business in this state, file in the ofifice of the Superintendent of the Banking Depart- ment a certificate stating the name and business address of every person, association, corporation, company, firm or others who act or propose to act in this state as the agent or representative of such company, and in case of any change 394 LAW OF CORPORATIONS. in such representation, an amended certificate shall forth- with be filed as herein provided. Whoever shall offend against the provisions of this section shall be guilty of a misdemeanor, and shall also forfeit the sum of one thousand dollars. The penalties prescribed herein shall be recovered by suit in the name of the people of this state, to be prose- cuted by the attorney-general. § 5. Licensees under the provisions of this act shall pay their proportionate share of the expenses of the Banking Department as is now required of banks and other corpora- tions supervised by the Superintendent of the Banking De- partment by section six of chapter four hundred and nine of the laws of eighteen hundred and eighty-two, and for such purposes said licensees shall be subject to the provisions of said section. § 6. Licensees under the provisions of this act shall be granted a limit of twenty days after January first and July first respectively, in which to file the semi-annual statements in the office of the Superintendent of the Banking Depart- ment, and upon failure to so report within the specified time or to otherwise comply with the requirements of this act the superintendent shall revoke the said license as pro- vided in section seven of this act. § 7. Whenever it shall appear to the said superintendent from an examination made or report submitted by such li- censee under this act, or from sufficient information other- wise obtained that such licensee is conducting its business and affairs in an unsafe or unauthorized manner, he shall by an order under his hand and seal of office addressed to such licensee direct said licensee to discontinue such unsafe or illegal practices, and to conform to the requirements of its charter and of law, and to provide for the safety and secur- ity of its transactions. If such licensee shall neglect or re- fuse to make any report as hereinbefore specified, or to com- ply with such order as aforesaid ; or whenever it shall appear to the superintendent that it is unsafe or inexpedient for any such licensee to continue the transaction of business, he shall forthwith revoke the license of such company and serve a copy of the order of revocation on said company at its i APPENDIX E. 395 head office ; a copy of said order shall also be served upon each agent or representative of said company named as pre- scribed by section four of this act, by depositing the same in the post-office directed to each of said agents at his place of business. The superintendent may also in his discretion publish such order with such other facts as he may deem proper for six successive days in the state paper published in the city of Albany. § 8. If shall be the duty of the Superintendent of the Banking Department, on or before the first day of March in each year, to communicate to the legislature a statement of the condition of every company and others, described in section one, authorized to transact business in this state, or from which a report has been received for the preceding year, giving, in detail, the actual financial condition of every such company, together with such other facts as may, in his judgment, be right and proper to communicate for the pub- lic benefit. It shall be the duty of the superintendent to print the said report, as a separate document, the cost of same to be defrayed in like manner as other expenses in- curred in and about the conducting of the business of the said departme.nt. § 9. Every corporation, company, firm or association, de- scribed in section one of this act, shall, before being author- ized to transact business within this state, by an instrument in writing, duly executed, appoint the Superintendent of the Banking Department of this state the true and lawful attor- ney of such corporation, company, or association, upon whom all lawful process in any action or proceeding by any resident of this state against such corporation, company or association may be served, with the same effect as if such corporation, company or association existed in this state, and had been lawfully served with process therein. A cer- tificate of such appointment, duly certified and authenti- cated, shall be filed in the office of the Superintendent of the Banking Department, and copies certified by him or his dep- uty shall be deemed sufficient evidence in regard thereto. Service in favor of a resident of this state upon such attor- ney shall thereafter be deemed a personal service upon such 396 LAW OF CORPORATIONS. corporation, company or association. • Whenever lawful process against such corporation, company or association shall be served upon the superintendent of the Banking De- partment, under the provisions of this act, he shall forth- with forward a copy of the process served on him, by mail, prepaid, and directed to the president or secretary of the corporation, company or association at the last-named post- office address of such corporation, company or association. For each copy of process the superintendent shall collect the sum of two dollars, which shall be paid by the plaintiff or moving party at the time of such service, the same to be recovered by him as part of his taxable disbursements, if he succeeds in his suit or proceeding. The term " process" in this act includes any writ, summons, petition, or order, whereby any suit, action, or proceeding shall be commenced by a resident of this state. § 10. The supervisory powers granted under this act shall also apply to associations, copartnerships, joint-stock companies or corporations organized under the laws of this state, who sell, or offer for sale, or negotiate bonds or notes secured by deed of trust or mortgage of real estate, situate outside of this state, owned, issued, negotiated or guaranteed by it or them. § II. The provisions of this act shall not apply to trust, loan, mortgage, security, guarantee or indemnity companies or associations, organized under the laws of another state, which now do or hereafter may make the deposit of securi- ties with the Superintendent of the Banking Department required by section two hundred and twenty-four of chapter four hundred and nine of the laws of eighteen hundred and eighty-two. § 12. The sum of three thousand dollars, or so much thereof as may be necessary is hereby appropriated out of any moneys in the treasury not otherwise appropriated to defray the expenses of carrying out the provisions of this act, to be paid from the treasury on the order of the Super- intendent of the Banking Department, said sum to be re- funded to the treasury by the licensees under this act on APPENDIX E. 397 assessment made by the said superintendent as provided by section five of this act. § 13. This act shall take effect July first, eighteen hun- dred and ninety. Chapter 508. An Act to amend chapter forty of the Laws of eighteen hundred and forty-eight, entitled, as amended by chap- ter eight hundred and thirty-eight of the Laws of eigh- teen hundred and sixty-six, "An act to authorize the formation of corporations for manufacturing, mining, mechanical, chemical, agricultural, horticultural, medi- cal or curative, mercantile or commercial purposes." Section i. Section one of chapter forty of the Laws of eighteen hundred and forty-eight, entitled, as amended by chapter eight hundred and thirty-eight of the Laws of eigh- teen hundred and sixty-six, "An act to authorize the for- mation of corporations for manufacturing, mining, mechani- cal, chemical, agricultural, horticultural, medical or curative, mercantile or commercial purposes," is hereby amended so as to read as follows : Sec. I. At any time hereafter, any three or more persons who may desire to form a company for the purpose of carry- ing on any manufacturing, mining, mechanical, or chemical business, or the business of printing, publishing or selling books, pamphlets or newspapers, or advertising the same or other articles, or for the purpose of purchasing, taking, hold- ing and possessing real estate and buildings, and selling, leasing and improving the same, or the business of making butter, cheese, concentrated or condensed milk, or any other products of the dairy, or the business of erecting buildings for church sheds or laundry purposes, and the carrying on of laundry business or the business of slaughtering animals, or for the purpose of towing or propelling canal-boats, vessels, rafts or floats on the canals and navigable rivers of the State of New York, by animal or steam power, or for the purpose of buying, storing, selling or shipping coal, merchandise and farm produce, their operations not to be confined to the country* * So in the original. 398 LAW OF CORPORATIONS. in which their certificates shall be filed, or the supplying of hot water or hot air or steam for motive power, heating, cooking or other useful applications in the streets and public and private buildings of any city, village or town in this state, or the business of buying, breeding, grazing, pasturing, dealing in and selling cattle, sheep, hogs, horses and other live-stock in the United States of America, British North America and elsewhere, may make, sign and acknowledge, before some officer competent to take the acknowledgment of deeds, and file in the office of the clerk of the county in which the business of the company shall be carried on, and a duplicate thereof in the ofifice of the secretary of state, a certificate, in writing, in which shall be stated the corporate name of said company, and the objects for which the com- pany shall be formed, the amount of the capital stock of said company, the time of its existence (not to exceed fifty years), the number of shares of which the said stock shall consist, the number of trustees and their names who shall manage the concerns of said company for the first year, and the name of the town and county in which the operations of said company are to be carried on. No company organized under this act for the purpose of taking, purchasing, hold- ing or possessing real estate and buildings, and selling, leas- ing and improving the same, shall be permitted to purchase and hold real estate to the value of more than one million dollars, provided, Jbowever, that any company so organized for the purpose of creeting, owning and maintaining a building in any city to be used or rented as an office or store building may hold real estate in excess of the value of one million dollars ; but this act shall not be deemed to repeal or affect in any way any act heretofore passed and amendatory of or supple- mentary to the said act of February seventeenth, eighteen hundred and forty-eight, except as herein provided. Sec. 2. This act shall take effect immediately. INDEX PAGE Actions and Defences. See Le^al Actions and Proceedings. Action for Sequestration of Property 291 .Scv Lissolution. Action to Annul a Corporation 295 See Legal Actions and Proceedings; Dissolution. Agricultural Associations. See Driving Park and Agricultural Asso- ciations. Agricultural Purposes: Organization of Companies'for 4 Amending Certificate of Organization 44 Does not affect pending suits 44 Certificate may be amended or corrected 44 Cannot make material change by [Note 3] 44 Amount of Capital Stock. May be -increased or diminished 105 .SVt' Capital Stock. Annul: Action to 295 Answer. See Legal Actions and Proceedings. Assignment of Property: When corporations cannot make 153 When moneyed corporations cannot make 154 Whether the statute applies to banks [Note 2] . 135 Prohibited after petition for dissolution 287 Attachment: When granted against domestic -corporation 250 When granted against foreign corporations 250 Interest of a stockholder may be attached 251 May be levied upon cause of action, etc 251 How to be levied 251 May be levied upon property of foreign corporation though receiver has been appointed in another state. . 251 Not on un-issued bonds of foreign corporation in hands of its agent in this state 252 Nor upon shares owned by non-resident in stock of a foreign corporation 252 Nor upon property of national banks 252 Banking Powers: Corporations not incorporated for banking pur- poses shall not possess 152 Penalty for membership in association wrongfully assuming [Note 6] 152 Corporations wrongfully assuming, notes given by, void 152 Whe'n corporation having, may be dissolved 288 399 400 INDEX. PAGE Banks: How organized 21 Amount of capital 21 Shares of stock personal property 128 Certificate, what must set forth 21 Powers of 22 When to commence business 23 Consolidation of 72 Agreement to be made 72 Assent of stockholders necessary 73 Agreement to be submitted to Superintendent of Banking De- partment 73 He will fix the amount of capital stock 73 Dissenting stockholders must be paid for stock 74 May change place of business 92 Must apply to the court 92 Notice of application to be published ' 92 Must be by petition 92 Court may authorize change 93 May change name 95 Must apply to the court 95 Application to be approved by the Superintendent of the Bank- ing Department 95 When court will make order 95 May reduce amount of capital stock 114 Must make quarterly reports. 141 Contents of such reports 141 Must be published 141 Penalty for failure to make such report 141 Annual report to be published 142 Contents of such report 142 List of stockholders to be kept 151 Must be filed in county clerk's ofiice 151 Whether included in certain restrictions upon moneyed corpora- tions [Note 2] 155- No personal liability of stockholders 210 Tax on franchises , 279 Boilers : Companies to insure. ^5 Books, Right to Examine. See Rights of Stockholders. Bridge Companies • 34 Number of corporators 34 Method of organization 33 Certificate to be signed by each subscriber 35 Amount of capital 35 How to be divided 35 Number of directors 35 Increase of capital stock by 108, 118 Must make annual reports I44 INDEX. 401 Bridge Companies — Contimied. page Coiileius of such reports 145 Stockholders liable until capital paid in 213 Nature of the liability 222 Brooklyn, City Court of. See Superior City Courts. Buffalo Superior Court. See Superior Court of Buffalo. Building and E levator Companies 36 Number of corporators 36 Method of organization 33 Amount of capital 36 How changed ^ 105, 108, 118 Number of trustees 37 Trustees may make by-laws 58 Stock books to be kept 151 To be subject to inspection of stockholders 151 Loans to stockholders prohibited 163 Liability of directors for failure to make annual report 165 When debts exceed capital , ijg Stockholders liable until capital paid in 213 Nature of the liability 222 Liable to laborers, etc 213 Nature of the liability 229 Burglary : Companies to insure against loss by 16 Business Act 333 What corporations may be organized under 8 For any business except banking, insurance, etc 8 Purposes for which corporations have been formed under 9 Method of organization g Number of corporators 9 Majority of corporators must be citizens of the state , 10 Preliminary certificate, what must contain 10 Must be filed with the secretary of state • 10 Secretary of state will issue license 10 No subscription received unless ten per cent, paid in 10 Capital stock, amount of 120 May be changed 105, loS, 119 Shares, par value of 125 May be changed 127 When meeting of subscribers to be called 1 1 Proceedings at such meeting 11 By-laws to be adopted 11 What they must provide 58 Record of, to be filed in office of secretary of state 11 Officers must be elected from directors 57 Must be president, secretary and treasurer 57 When by-laws amended, copy must be filed 59 Corporations organized under, may re-organize. 79 Full liability companies may re-organize as limited 77 402 INDEX. Business Act — Continued. page Other companies may re-organize under 79 Certain companies excepted [Note 4] 79 Whether companies organized under special act may [Note 4]. 79 Method of re-organization 79 May change place of business 92 Certificate of change to be filed and recorded 92 Directors, number of II May be changed 97 May declare forfeiture of shares 125 May prescribe other penalties for failure to pay instalments 126 Certificate of stock must be issued 126 . May increase number of shares 127 Stock not to be transferred when stockholder is indebted to company .. 127 Annual reports must be made 136 Within twenty days after the first day of January 136 In case corporation does business without the United States.. . 136 Contents of report 137 Must be filed with secretary of state 137 Certificate of payment of stock must be made 137 Stock books to be kept 151 Subject to inspection of stockholders 151 Books of account to be kept 151 Subject to inspection of stockholders 151 Loans to stockholders prohibited 163 Liability of directors 176 For failure to make annual report 165 Voting for dividends when company is insolvent 162 For signing a false report 176 Differs from Manufacturing Act 176 When debts exceed capital 178 Stockholders may examine books of 193 Liability of stockholders under 207 In full liability companies, liable for all debts 207 But not until judgment against the company 207 In limited liability company, liable until stock paid in 208 Applies to all equitable owners of stock 20S Nature of the liability 222 Method of enforcing 223 Limitations on liability of stockholders 209 By-Laws. Not inconsistent with existing laws 57 Unless authorized may not create lien on shares 58 Corporations have right to make necessary 57 Must be adopted at meeting within the state 58 Directors of certain corporations may make 58 When directors neglect to make, may be made by stockholders, . . 205 In certain corporations, form of, prescribed 58 INDEX. 403 By-Laws — Continued. p^^-^ Amendment, certain provisions as to 5g Regulating elections to be published 60 Admissible in evidence to prove corporate transactions 249 See Legal Actions and Proceedings ; Evidence ; Forms. Capital Stock. What it represents 100 May be issued for property 100 Under the Manufacturing Act loi Under the Business Act loi Title-guaranty companies 102 Preferred stock, when may b^ issued 102 Change of, for common stock 104 Amount of, may be increased or decreased 105 Increasing and decreasing, by gas-light and navigation companies, no Title-guaranty companies. 114 Building corporations no Business corporations no Water-works companies 122 Railroads in foreign countries 118 Increasing capital stock 108 Insurance companies 112 Credit guaranty companies 113 Moneyed corporations 115 Safe-deposit companies uy Railroad companies u^ Bridge companies uS Ferry companies j 20 Driving-park associations , 120 Pipe-line companies 120 Stage-coach companies 122 Telegraph companies 122 Turnpike companies 122 Increase in case of re-organization 118 Reducing capital stock 105 Insurance companies m Banks u^ Other moneyed corporations 115 Is personal property 123 Shares may be of any value unless restricted 124 Fractional shares may be issued 124 Certificates and transfers of stock 123 Under the Manufacturing Act 124 Under the Business Act 125 Title-guaranty companies 127 Railroads 128 Banks 128 Safe-deposit companies 128 Miscellaneous corporations 1 29 « 404 INDEX, Capital Stock — Continued. page Directors are liable for withdrawing or distributing 15S Stockholders liable on unpaid instalments 219 Creditor may enforce payment 220 When receiver may enforce payment 220 Return of portion not conclusive evidence of overvaluation 227 As a basis for tax on franchises 268 Cattle: Organization of companies for buying, breeding, etc 3 Organization of companies to insure 15 Certificate of Incorporation. May be amended 44 Cannot make material change by amending [Note 3] 44 .Where must be filed 44 Conclusive as to location for purposes of taxation 260 Certificates of Stock: Stockholders of certain corporations en- titled to 126 Under the Business Act „ 126 Title-guaranty companies 126 Not necessary to constitute one a stockholder 188 In case of loss when new to be issued 188 Mandamus will not lie to compel transfer of 190 Remedy for refusal, an action for damages 190* Or an equitable action to compel transfer 190 City Court of Brooklyn. See Superior City Courts. City Court of New York: Jurisdiction of 237 City Court of Yonkers: Jurisdiction of 238 Church Sheds: Organization of companies for constructing, etc 3 Coal and Farm Produce: Organization of companies for dealing in, etc. 3 Coal and Peat: Organization of companies for buying, etc 4 Collateral : Holder of bonds as, may prove face value on foreclosure [Note i] 81 Complaint. See Legal Actions and Proceedings. Consolidation of Corporations. See Special Powers and Privileges. Constitution. Provisions of, in regard to formation of corporations i Acts prior to its adoption for formation of 2 Corporate Name. See Name of corporation. Corporators: Functions of, cease upon organization [Note 2] 6 County Courts: Jurisdiction of 238 Courts, Jurisdiction of 235 Supreme court 235 Superior city courts • 236 Superior court of Buffalo 237 City court of New York 237 County courts. 237 City court of Yonkers 238 Courts of justices and district courts of New York 238 Courts of inferior jurisdiction generally 238 INDEX. 405 PAGE Credit-Guaranty Companies 20 Number of corporators 20 Method of organization 20 Charter, what must set forth 20 Amount of capital 21 How changed 105,108, 113 When to commence business. . . 2i Must make annual report in month of January 140 Contents of report 140 Must deposit same in office of Insurance Department 140 Creditors: Rights of, upon consolidation 76 Capital stock a fund for benefit of 163 Liability of directors to, when loan made to stockholders 164 Creditor-stockholder may enforce liability of trustee 171 How property distributed among, in case of insolvency 309 Right to examine books of receivers 312 Dairy Purposes: Organization of companies for 3 Debts: Liability of trustees for. i'^v Liabilities of Officers and Direc- tors. Demurrer. See Legal Actions and Proceedings. Directors. Number of, may be changed 96 Under the Manufacturing Act 96 Under the Business Act 97 Insurance companies 98 Title-guaranty companies 98 Inland navigation companies 146 Turnpike and plankroad companies 149 Certain moneyed corporations 149 Books required to be kept by 1 50 Under the Manufacturing Act 150 Under the Business Act 151 Building companies 151 Hotel companies 151 Navigation companies 151 Turnpike and plankroad companies 151 Title-guaranty companies 151 May not transfer property when company insolvent 153 Reports required. 130 Occupy a fiduciary position 158 Holding over, certain acts void 203 Duties of 130 Sec' Duties of Officers and Directors. When may petition for dissolution 281 May be made parties to an action for dissolution or sequestration of property 292 Cannot be removed except by final judgment 301 4o6 INDEX. PAGE Dissolution • ^^^ Voluntary dissolution 281 When directors may petition for 2S1 Contents of petition . , 282 How construed ^^3 Proceedings upon application 2S4 Court may appoint a receiver 284 May grant an injunction 285 Transfers prohibited pending dissolution 287 Involuntary dissolution 288 When action for, may be brought 288 To be brought by the attorney-general 2S8 If he omits to do so creditor or stockholder may apply for leave to ^88 Must be a judgment creditor 290 Court may grant an injunction 289 May appoint a receiver 289 Action for sequestration of property 291 When may be brought 291 Court may grant an injunction 291 May appoint a receiver 2qi Officers and stockholders may be made parties 292 Judgment for dissolution or sequestration of property 293 Must provide for a distribution of the property 293 Where stockholders are parties to the action 293 Judicial "supervision of corporations 294 When action may be maintained for 294 To compel officers to account 294 To compel them to pay over any property appropriated by them 294 To suspend or remove them from office where they have abused their trust 294 To set aside an alienation of property wrongfully made by them 294 Or to restrain or prevent such an alienation 294 May be brought by the attorney-general 295 But not for the purpose of enforcing private rights 295 In some cases by a creditor or officer 295 Action to annul corporation 295 To be brought by the attorney-general when directed by the legislature 295 Or upon leave of the court 296 Parties interested entitled to notice 297 Action triable by jury. . ._ 29S Injunction may issue 298 Judgment must provide for a receiver 298 General provisions applicable to the above actions 29S Stockholders or officers not excused from answering questions. 298 INDEX. 407 Dissolution — Continued. face Injunction may be granted at any time 299 Creditors may be required to prove claims 299 When attorney-general must bring an action against a corporation. 300 When brought upon information of person having interest 300 When injunction may issue 300 Suspending general business granted only by the court 300 Upon notice to the principal officer of the corporation 300 Officer cannot be removed except by final judgment 301 Action to wind up dissolved corporation 301 Must be brought by the attorney-general 301 In any county he may select 302 On whom summons to be served 302 Receiver to be appointed 302 Proceedings not stayed by any issue raised 302 Corporation dissolved upon expiration of its term of existence. . . . 302 Receivers, when appointed: In an action for dissolution 302 In an action to foreclose a mortgage on property 302 In an action to preserve the assets 303 In a proceeding for voluntary dissolution 303 Notice of application to be given 303 Order appointing to designate place of deposit of funds 304 Whom the receiver represents 304 Property to vest in receiver 304 Except in case of insurance companies 304 Attorney-general may apply for removal of 306 In voluntary proceedings for dissolution 306 Officer or stockholder may be appointed 307 Notice of appointment to be given 3^7 Assignments and transfers of property prohibited 307 Publication of notice of appointment 307 General meeting of stockholders must be called 308 May retain amounts of pending actions 30S Method of distribution of funds 309 Rendering final account 310 In involuntary proceedings for dissolution. 311 Must report quarterly 31 1 Accounts and statements to be subject to inspection 312 May be removed by the court 312 Receivers of life-insurance companies 312 District Courts of New York: Jurisdiction of 238 Service of summons out of 241 Docks: Organization of companies for constructing, etc 5 Domestic Corporation. Definition of the term 234 National bank doing business in this state is a 23^" Corporation consolidated from foreign corporations is a 234 Property taxable same as that of individuals 2 59 4o8 INDEX. PACK Dredging: Organization of companies for 5 Dividends as a basis for taxes on franchises 268 Driving Park and Agricultural Associations 3g Number of corporators 39 Method of organization 33 When certificate may be filed 40 Amount of capital 40 How changed 105, 108, 12a Number of directors 40 What officers must be elected 40 Must make annual reports 147 Contents of such reports 147 Officers liable for all debts of iSo Stockholders liable until capital paid in 217 Nature of the liability. 222 Duration. When no time limited charter perpetual 50 Existence may be extended 5i> 52 Business corporations 51 Banks 51 Turnpike and plankroad companies 52 Duties of Officers and Directors 130 Reports to be made 130 Under the Manufacturing Act 130 Under the Business Act 136 Marine-insurance companies 137 Fire and inland navigation companies 138 Life, health and casualty insurance companies 139 Guaranty companies 140 Banks 141 Safe-deposit companies I43 Trust companies I43 Railroad companies 144 Ferry companies 145 Guano companies 14^ Park associations I47 Pipe-line companies.. ^47 When must make statements for purposes of taxation 264 Elections : By-laws regulating, to be published 60 Each share of stock entitled to one vote 19-4- Married women may vote ^94 Stock books conclusive as to right I94 When not held on day designated new election must be held 194 Persons complaining of, may apply to court for redress 195 Moneyed corporations ^95 Business corporations ^9° Cumulative voting in ^99 Title-guaranty companies ^99 INDEX. 409 Elections — Contimud. page Safe-deposit companies 199 Railroads 1 99 Cannot be held out of the state 201 Nor unless notice given to stockholders 201 When stockholders may call meetings 202, 204 Executors, administrators, etc.. may vote 202 Pledgee has no right to vote 202 Elevators : Organization of companies for constructing, etc 4, 5 Evidence. Corporate existence, how proved . 248 of foreign corporation 248 By-laws admissible to show power of officers 249 Corporate transactions, how proved 249 Execution : When satisfied only out of property attached 238 When corporation cannot be examined in proceedings supplement- ary to 258 Executors, etc. May vote on stock of decedent 202 Existence of Corporations. May be extended 51, 52 Method of extending .S2 Explosion: Companies to insure against loss by 15 False Reports: Liability for. See Liability of Officers and Directors. Fees of Secretary of State. (Note i) 45 Ferry Companies 37 Number of corporators 37 Method of organization 33 Additional particulars to be stated in certificate 37 Duration of the company 37 Number of directors 37 When company may commence business 37 Directors may make by-laws 58 May increase capital stock 120 Must make annual reports , I45 Contents of such reports I45 Tax on franchise 273 Penalties for non-payment 275 Fictitious Subscriptions: Penalty for making i8i Fidelity Companies. May guarantee the fidelity of persons holding positions of trust ^5 Fire and Inland Navigation Insurance Companies 14 Number of corporators ^4 Method of organization I4 Amount of capital .... 14 Directors : number and qualification of 14 May be changed 9^ Must report annually ^38 Contents of report • ^38 Must deposit same in office of Insurance Department 138 Penalty for failure to make report I39 4IO INDEX. Fire and Inland Navigation Insurance Companies — Continued. page When directors liable 180 Tax on franchises 278 Penalties for non-payment 278 Exempt from local taxation on personal property 260, 279 Appointment of receivers of 315 Floating Elevators : Organization of companies for constructing, etc. 4 Foreclosure. Re-organization after 81 .S'tv Re-organization. Foreign Corporations. What are foreign corporations 234 Right to hold stock of 56 May sue and be sued in the courts of this state 232 Principles governing such actions 235 May enforce any remedy to the same extent as a citizen 232 May assign cause of action to a resident 232 Action may be maintained against, by a resident for any cause. . . . 233 Exception in case of purely statutory action 233 When may sue another foreign corporation 233 Jurisdiction of the courts over 235 Limitations on jurisdiction 238 Service of summons upon ; 239 Not necessary that officer be here in his official capacity 240 Extent of agency of officer required to give jurisdiction 241 When may be served by publication 242 Complaint must state under what laws corporation is organized. . . 243 Verification of pleadings by 245 Cannot plead usury 245 Cannot plead the statute of limitations 246 Exception in action for causing death 246 May be compelled to give security for costs 246 In action on promissory note time to answer will not be extended except upon notice 247 Corporate existence of, how proved 248 Property may be attached 250 Even though receiver has been appointed in another state 251 Unissued bonds in the hands of its agent in this state cannot be. 252 Nor shares of a non-resident in stock of 252 Nor property of national banks 252 Judgment upon default, against 257 What proofs are required to enter 257 Against what property judgment can be enforced 257 Judgment creditor may maintain action for the discovery of prop- erty of 258 Taxable on property invested in business in this state 265 When taxed on business done in this state 271, 273 Forfeiture for Non-user 47 Corporate powers cease unless business commenced in one year. . . 47 Must be such business as company has right to do 47 INDEX. 411 Forfeiture for Non-user. — Continued. ""^^^ Certain corporations excepted from this provision 47 Forfeiture of Shares: Company cannot declare unless authorized. . . . 124 May be declared under the manufacturing act 124 Under the business act 125 Title guarantee companies 127 Railroads 12S Banks 12S Safe deposit companies ^28 Miscellaneous corporations 129 Forms. Certificate of incorporation under the Manufacturing Act. ... 367 Preliminary certificate under the Business Act 368 License under the Business Act 3^9 Commissioners' report and record of proceedings 370 By-laws 373 Certificate of payment of capital stock 3/8 Annual report under the Manufacturing Act 37S Annual report under the Business Act 379 Assent to mortgage 379 Acknowledgment by corporation 380 Verification of pleading or petition 380 Report to state comptroller for purposes of taxation 381 Statement for local taxation 383 Franchises. Taxation on, for purposes of state, act for 353 Sec Taxation. Gas-Light Companies 34 Number of corporators 34 Duration of company 34 Method of organization 33 Directors, number of 34 May make by-laws 5^ May change amount of capital stock I^o Directors of, voting for certain dividends liable 162 Liability for failure to make annual report ^65 Stockholders liable until capital paid in 214 Nature of the liability 222 Liable to laborers, etc 214 Nature of the liability ^-9 Property of, may be exempted from taxation [Note i] 259 General Assignment. See Insolvent Corporations. Guano Companies jS , -,0 Number of corporators J"^ Method of organization 33 Duration of company 38 Trustees, number of . . 3° May make by-laws 58 Must make annual reports M6 Contents of such reports ^46 412 INDEX. Guano Companies. — Continued. page Directors voting for certain dividends liable 162 Stockholders liable until capital paid in 214 Nature of the liability : . . 222 Liable to laborers^ etc. 214 Nature of the liability 229 Guaranty Companies. When may be organized under the Business Act 9. 48 Halls : Organizing of companies for purchasing and acquiring, etc. ... 4 Homestead Corporations 40 Number of corporators . 40 Method of organization 33 Hotel. Companies 42 Number of corporators 42 Method of organization 33 Amount of capital 42 Trustees, number of ; . 42 May make by-laws 58 Stock books to be kept 151 Subject to inspection of stockholders 151 Stockholders liable to an amount equal to stock held 215 Sec Appendix E 385 Hot Water and Steam: Organization of companies for supplying, etc. 3 Ice : Organization of companies for collecting and storing 3 Increasing Capital Stock. See Capital Stock. Injunction : Corporation may be restrained by 252 In action by the attorney-general 252 Cases in which an injunction has issued 253 When can be granted only by the court 253 Service of an injunction order, how made 254 When may issue upon dissolution 289, 299, 300 In action for sequestration of property 291, 299 In action to annul 298, 299 Inland Navigation Companies 37 Number of corporators 37 Method of organization 33 Amount of capital 37 How changed '' no Number of directors 38 Directors voting for certain dividends liable 162 Must make annual reports 146 Contents of such reports 146 Liable for making false reports 178 Stockholders liable until capital paid in 216 Nature of the liability 222 Liable to laborers, etc 216 Nature of the liability 229 Tax on franchises 273 INDEX. 413 Inland Navigation Companies. — Continued. page Tax on franchises, penalty for non-payment 275 Insolvent Corporations. May not make transfers of property 153 May not make general assignment for benefit of creditors 153 Insolvency: When corporation may be dissolved for 281, 288 When property may be sequestrated 291 Insurance Companies. May be consolidated 71 Agreement to be submitted to superintendent of insurance de- partment 71 Assent of stockholders necessary 72 Agreements to be filed 72 May change name *. 96 Notice of intention to be published 96 Superintendent of insurance department must consent 96 . Directors, number of, may be changed 98 May decrease amount of capital stock iii May increase amount of capital stock .. 112 No personal liability of stockholders 210 Tax on franchise 272, 273 Penalties for non-payment 275 Insurance and Guaranty Companies. May invest surplus in stock of other companies - 55 Exception in case of life-insurance companies 55 Directors may make by-laws 58 Involuntary Dissolution. See Dissolution. Judgment. Whether a debt within terms of statute making trustees liable [Note 3] 166 Entry of, against foreign corporations 257 What must be shown by plaintiff 257 Against what property may be enforced 257 What must provide in case of dissolution 293 Judgment Creditor. Cannot maintain action against domestic corpora- tion to compel discovery of property 258 When he may against a foreign corporation 258 When he may to 'procure sequestration of property 258, 291 When may bring action for dissolution 288 Having no lien on property, not entitled to notice of application for dissolution 29I Judicial Supervision: Action for 294 See Dissolution. Laborers, etc.: Liability of stockholders to 229 Who constitute the class. . . , 229 Service must be manual 229 To be paid weekly [Note] 231 To be paid in cash [Note] 231 Wages of, preferred in case of insolvency 318 Land: Organization of companies for improving, etc 5 Laundry Purposes: Organization of companies for 3 414 INDEX. PAGE Legal Actions and Proceedings 232 Corporations may sue and be sued 232 Practice governed by the Code of Civil Procedure 232 May be proceeded against criminally [Note 2] 232 When foreign corporations may be sued 232 Action against a foreign corporation may be maintained by a resident for any cause 233 Exception in case of statutory action ." 233 When action may be brought against foreign corporation by non-resident 233 Jurisdiction of the courts 235 Of the Supreme Court 235 Superior City Courts 235 Superior Court of Buffalo. . . 237 City Court of New York 237 County Courts 238 City Court of Yonkers 23S Courts of Justices and District Courts of New York 23S Courts of inferior jurisdiction generally • 23S Service of summons 239 In justices' courts 241 By publication 242 Pleadings 243 Must state whether domestic or foreign corporation 243 What necessary to raise issue of corporate existence 243, 244 How issue of misnomer raised 244 Verification of 245 Cannot plead usury 245 When moneyed corporation cannot plead statute of limita- tions 246 Foreign corporations cannot plead statute of limitations 246 Preparation for trial 246 In an action on a note, time to answer will not be extended ex- cept upon notice 247 Such an action entitled to a preference 247 Order for trial must be served with answer or demurrer 247 How production of books or papers compelled 247 Evidence 24S How corporate existence proved 248 By laws admissible in evidence 249 Books of foreign corporation presumptive evidence 249 When copy may be used 249 When admissions of member of corporation not a party to the action will be received 250 When declarations of an officer of a corporation, which is a party, are admissible 250 INDEX. 4 [ 5 Legal Actions and Proceedings.— Continued. p^j.^ Provisional remedies ocq When warrant of attachment may be granted 250 Not against a national bank 250 What may be levied on 250 251 When injunction will issue 252 2-3 Can be granted only by court in certain cases 253 How order served «- , . 2^,4 Receiver, when appointed 2-4 When notice of application must be given 255 Of life-insurance companies will not be appointed where com- pany has funds. ... ; 2?- Where application for, must be made 255 Copy of papers to be served upon attorney-general 256 Judgment and execution 257 Where defendant is a foreign corporation 25S What execution must require when property has been attached. 25S ■ When corporation cannot be examined in proceedings supple- mentary to execution .... 25S Judgment creditor's action does not lie against domestic cor- poration. 2eS Action to sequestrate property may be maintained 258 When a judgment creditor's action may be maintained against foreign corporations 25S Actions to enforce liability of directors 169 Pleadings strictly construed 169 Action abates upon death of either party 170 Cannot be interposed as a counter-claim 171 Penal in its nature 1-2 Where action must be tried 171^ iy5 Where debts exceed capital i^g Compelling issue of new certificate in case of loss 18S Application by petition to the court 188 Copy of petition to be served xSq Compelling transfer of stock igo Mandamus will not lie to compel igo Action for damages for refusal to transfer igo Equitable action may be brought in certain cases igo Corporation may defend such an action igo Proceedings when directors wrongfully hold over 203 Actions to enforce liability of stockholders 223 When receiver may enforce 220, 223 When creditors may collect subscriptions 220 Actions to procure dissolution of a corporation 2SS For sequestration of property 2gi For the supervision of corporations 294 To annul a corporation 295 4l6 INDEX. PAGE Liabilities of Officers and Directors : 158 Liable as trustees 15S For withdrawing capital 158 For receiving notes in payment of instalments 159 For receiving or purchasing shares of stock of own corporation [Note] 159 For exchanging same for shares of other corporations [Note] 159 Of moneyed corporations 160 For making loans to directors 160 Of manufacturing corporations 161 Of business corporations 161 Of gas-light companies ., 162 Of guano companies 162 Of inland navigation companies 162 These provisions for benefit of creditors 162 For loans to stockholders 163 For failure to make annual report 164 Wholly a statutory liability '. 165 Separate actions to recover for, may be brought 166 May be brought against one or all the directors 166 Prior action against corporation not necessary 166 Must be for existing debt 166 As to whether a judgment is such debt, query [Note 3] 166 Limited to debts contracted while trustee 168 Resignation terminates liability 168 What sufficient to constitute resignation [Note 3] 168 Not liable for debt imposed by fraud 169 Nor for tortious act of the corporation 169 Nor for contingent obligation 169 Plaintiff held to strict proof of cause of action 169 Action must be brought within three years 170 Is penal in its nature 170 Abates upon the death of either party 170 Cannot be interposed as a counter-claim 170 Where must be tried 171 Not liable to co-trustee 171 For making false reports 172 Liability highly penal 172 Under the Manufacturing Act ' 172 Under the Business Act '• • • • 176 Gas-Light Companies 176 Guano Companies • • • 176 Ferry Companies i?^ Independently of statute 178 Where debts exceed capital 178 Liability contractual I79 All trustees assenting must be joined ., I79 All creditors must be made parties I79 INDEX. 417 Liabilities of Officers and Directors.— Contimted. page In certain corporations liable for all debts 180 Misdemeanor for railroad officer to sell stock which he does not own, 181 For persons to sign ficticious name to subscription for stock. . . iSi For oflScer of corporation to issue stock without being duly- authorized 182 To reissue surrendered or cancelled stock 182 To exhibit false books or reports 182 To attach name to circular or prospectus without authority. . . . 182 To make dividend except from surplus profit 183 To divide property among stockholders 183 To receive notes in payment^of instalment 183 To apply funds to the purchase of its own stock 183 To receive such shares in payment of a debt due the com- pany 183 To exchange shares for those of another corporation 1S3 To make loans or discounts by a bank in excess of amount authorized 1 84 To make loans by same to directors in excess of amount author- ized 184 To assent to issuing notes by such company beyond amount authorized 1 84 To overdraw account in such bank 185 To receive deposits when bank is insolvent 185 To receive property of company without making an account of it 185 To publish false reports 185 Liabilities of Stockholders 206 Under the Manufacturing Act 206 Under the Business Act 207 Insurance companies 210 Banks 210 Safe-deposit companies 211 Trust companies 212 Railroads 212 Bridge companies 213 Building companies 213 Gas-light companies 214 Guano companies 214 Hotel companies 215 Navigation companies 215 Inland-navigation companies 216 Park associations 217 Pipe-line companies 217 Stage-coach companies 217 Telegraph companies 218 Plankroad and turnpike companies 218 4l8 INDEX. Liabilities of Stockholders. — Continued. page On unpaid stock 219 Must be a subscriber 219 Not necessary to have a certificate 219 Nor that shares be allotted 220 When may be enforced by creditor 220 When may be enforced by receiver 220 Defences'of stockholder 221 Till capital is paid in 222 As copartner with the corporation 222 Continues notwithstanding dissolution 222 When creditor may enforce 223 Not for the benefit of all creditors 223 When court may restrain separate actions 223 Statute will be strictly construed 224 Judgment against corporation not conclusive against stock- holder •• ...225 That he is a creditor of the company is a defence 226 That plaintiff was a stockholder is a defence 226 Where capital is issued for property 227 Under the Manufacturing Act 227 Must be issued at fair valuation 227 None for debts incurred before he became a stockholder 228 Terminated by extension of indebtedness 22S No defence that time to file certificate had not expired 228 To laborers, etc 229 Who are laborers, servants, and apprentices 229 Must be manual laborers 229 Lien upon Shares:. Company cannot create, unless authorized 124 Life, Health, and Casualty Insurance Companies 15 Number of incorporators 15 May insure lives I5 Health I5 Against accident 15 Against loss by lightning [Note 2] 14 Against loss by storms [Note 2] 14 Cattle 15 Plate-glass i5 Steam-boilers I5 Guarantee the fidelity of persons 15 Method of organization 16 Charter, what must set forth 16 Directors, qualifications of 16 Capital, amount of ^7 Charter to be approved by the attorney-general 17 Must make report annually I39 Contents of report I39 Must deposit same in office of insurance department 139 INDEX. 419 Life, Health, and Casualty Insurance Companies. — Continued. page Appointment of receivers of 305, 312 Lightning : Companies to insure against loss by [Note 2] 14 Limitations. See Statute of Limitations. Limited Liability Companies 46 " Limited " to form part of name of 46 Mandamus: Officer may be compelled by, to file certificate of organi- zation [Note 3] 6 Will not lie to compel company to issue new certificate of stock. . . 190 Manufacturing Act 321 Corporations may be organized under, for the following purposes : Advertising 2 Agricultural purposes 4 Cattle buying, breeding, etc 3 Church sheds, erecting, etc 3 Coal and peat, dealing in, etc 4 Coal and farm produce, dealing in, etc 3 Dairy purposes 3 Depots, constructing, etc 5 Dredging and dock-building 5 Elevators, building, etc 4, 5 Farm produce, dealing in, etc 3 Halls, constructing, etc 4 Hot water and steam, supplying, etc 3 Ice, collecting and storing 3 Land, improving, etc 5 Manufacturing 2 Mineral water, bottling, etc 3 Mining 2 News agencies, maintaining, etc 5 Oil, transporting, etc ^ 5 Printing and publishing 2 Railway depots, owning and constructing 5 Raising vessels, etc 3 Real estate business 3 Residences, purchasing, etc 4 Salvage , etc 4 Skating rinks, constructing, etc 4 Slaughtering animals 4 Steam, supplying, etc 3 Towing vessels, etc 3 Transporting oil 5 Vessels, raising, etc 3 Warehouses, constructing, etc 5 Water, furnishing for mining, etc 5 Water, furnishing for power, etc 5 Method of organization under 6 Certificate to be made and filed 6 420 INDEX. Manufacturing hct. — Continued. p^^e Name of company 7 May be changed 93 Objects for which corporations may be formed under 7 Capital, may be issued for property loi Capital stock, amount of ; 7 May be increased or decreased I05 Existence, term of 7 Shares, number of S May be changed 125 Trustees, number of S May be changed 96 Places of business, to be designated 6, 8 May be changed 90 Amended certificate to be filed 91 When may hold stock of other companies 54 By-laws, to be made by directors ; 58 Reorganization of, after sale. See Appendix E 385 Increasing and diminishing capital stock 108 Stock of companies, personal estate 124 May declare stock forfeited for non-payment of calls 124 May increase number of shares 125 Stockholders entitled to certificate of increase 125 Annual reports 130 Must be made within twenty days after the first day of Jan- uary 131, 133 Insolvency no excuse for not making 134 Must be signed by president and a majority of trustees 131 What must be stated 132 Substantial compliance with statute sufficient 132 What report held sufficient [Note 3J 133 Must be published in newspaper where corporation located... . 134 Must be filed in the office of the county clerk 134 Filing and publishing not necessarily within the twenty days. . 135 Certificate of payment of stock must be filed 135 Upon increase of stock 136 Stock books to be kept 150 To be subject to inspection of stockholders 151 Trustees liable if dividends paid when company is insolvent 161 Loans to stockholders prohibited 163 Trustees liable for failure to make annual report 164 Trustees liable when debts exceed the capital 178 When stockholders may require statements of affairs 193 Penalty for refusal to furnish 193 Stockholders liable until capital paid in 206 But not when stock is issued for property 206, 227 Liable as copartner with the corporation 222 Right of creditor to enforce 223 INDEX. 421 t Manufacturing Act. — Continued. page Stockholders liable In case of increase of capital stock 225 Defence of stockholder in action to enforce 226 Stockholder liable to laborers, etc 206 Nature of the liability , 229 Executors, administrators, etc., not liable 207 Holders of stock issued for property not liable 227 Unless fraudulent overvaluation 227 Not all companies organized under, exempted from state tax on franchises 270 See Appendix E 385 Manufacturing Purposes : Organization of companies for 2 Corporations organized for, may consolidate 68 Method of consolidation 68 Agreement for, to be made 69 Meeting of stockholders to be called 69 / Stock of dissenting stockholders to be appraised 69 Copies of agreement to be filed 70 Powerfe of old companies to vest in new 71 Corporations organized for, not liable to state tax on franchises.. .. 267 What are manufacturing companies within the provision of the act. . 270 Marine Insurance Companies 12 Method of organization 12 Number of corporators I2 Charter to be approved by the attorney-general 12 What should set forth 12 Of thirty years' duration 13 Must make report annually in January 137 Contents of report. . . .-. 137 Must deposit same in office of insurance department 137 When directors are liable 181 Tax on franchises 278 Penalties for non-payment 278 Exempted from local taxation on personal property 260, 279 Married Women : May vote at all elections 194 Mineral Water: Organization of companies for bottling, etc 3 Mining Companies : Organization of 2 Minority Representation: Of stockholders under the Business Act. . . 199 Misdemeanors : Certain acts of officers made misdemeanors 181 See Liability of Officers and Directors. Moneyed Corporations : Term defined 60, 154 By-laws regulating elections to be published 60 Certain assignments by, prohibited 155 Cannot make assignment in contemplation of insolvency 156 Or with intent to give preference to any creditor 156 Transferee of notes so made cannot recover on 156 May reduce amount of capital stock 115 May increase their stock 115 422 INDEX, Moneyed CoTporntioas.—Confinued. ^^^^ Must make annual report - 149 Certain loans forbidden i^o Officers liable in case of fraudulent insolvency i86 Must report to local assessors for purposes of taxation 264 Tax on franchises 279 Mortgage Companies: Act for the supervision of. See Appendix E.. 385 Mortgages : Special provisions regulating 61 Mortgage of franchises ^^ Manufacturing corporations 61 Business corporations 63 Building companies 6 • Gas-light companies 6+ Railroads ^+ Rolling-stock of, not real estate 64 Chattel mortgage of, need not be filed in town 64 Stage-coach companies 64 May be made 10 secure future advances 65 Assent of stockholders to 65 Subsequent assent validates 66 Where real estate is out of the State 67 Failure to file assent ^7 Municipal Taxation. See Taxation. Name : Generally any may be chosen 46 Not the same as an existing corporation 4t> Nor one nearly resembling the same 46 Of insurance companies 40 When " Limited " to form part of 4^ Provisions of the business act as to 4^^ How may be changed 93 Certain corporations not included 93 Application must be made to the court 93 Notice of, to be published 94 When court will make order 94 National Banks : Property of, cannot be attached 252 Shares of stock of, how taxable 265 Navigation Companies. See also Inland Navigation Companies. Number of corporators 3o Method of organization 33 Additional particulars to be stated in certificate 36 Amount of capital 3o How changed io5, 108, 1 10 Number of directors 3° Directors may make by-laws 58- Stock books to be kept I5i To be subject to inspection of stockholders 151 Stockholders liable until capital paid in 215 Nature of the liability 222 INDEX. 423 Navigation Compa.nies. —Contimeecf. ^^^^ Liable to laborers, etc 215 Nature of the liability 229 Stockholder includes equitable owner of stock 215 Engaged in foreign commerce may be exempted from taxation [Note I ] 259 Tax on franchises ' ' ' ' 273 Penalties for non-payment ••• 275 Navigation and Salvage : Organization of companies for 4 News Agencies : Organization of companies for receiving, etc 5 New York City Court. See City Court of New York. New York District Courts. \ See District Courts of New York. Non-User. See Forfeiture for Non-User. Officers : Right to appoint 56 Certain acts prescribe what officers shall be chosen 57 May be made parties to an action for dissolution or sequestration of property 292 When not excused from answering questions 298 Cannot be removed except by final judgment 301 See Duties of Officers and Directors; Liabilities of Officers and Directors. Oil : Organization of companies for storing and conveying 5 Organization of Corporations i Advertising companies , 2 Agricultural companies 4 Banks. 21 Building companies 3^ Bridge companies 34 Business companies 8 Cattle, companies for buying, etc 3 Church sheds, companies for erecting 3 Credit- guaranty companies 20 Coal and farm-produce companies 3 Coal and peat companies 4 Dairy purposes, companies for 3 Depots, companies for erecting 5 Dredging and dockbuilding companies 5 Elevators, companies for building, etc 4, 5, 36 Farm produce, companies for dealing in 3 Ferry companies 37 Gas-light companies 34 Guano companies 3^ Guaranty companies I5. iS, 20 Halls, companies for constructing, etc 4 Homestead corporations 40 Hot water and steam companies 3 Hotel companies 42 Ice, companies for collectmg, etc 3 424 INDEX-. Organization of Corpor&tions.—Contimied. '^'^^ Insurance companies, fire and inland navigation 14 Insurance companies, life, health, and casualty 15 Insurance companies, marine I2 Manufacturing companies 2 Mineral-water bottling companies 3 Mining companies = 2 Navigation companies 4. 36. 37 News agencies 5 Oil transportation companies 5 Park associations 3°. 39 Pipe-line companies 42 Plank-road companies 34 Printing and publishing companies - 2 Railroad companies 29, 31 Railroad supply companies 4i Railway depots, companies for constructing 5 Raising vessels, companies for 3 Real estate, companies for purchasing, etc 3 Residences, companies for purchasing, etc 4 Safe-deposit companies 23 Salvage companies 4 Skating-park associations S* Skating rinks, companies for constructing 4 Slaughtering companies 3 Stage-coach companies 39 Steam-supply companies 3 Telegraph companies 35 Title-guaranty companies ^8 Towing companies 3 Tramway companies 43 Transporting oil, companies for 5 Trust companies 24 Turnpike companies 34 Vessels, companies for raising, etc 3 Warehouse companies 5 Water companies 5 . 4° Choice of laws under which to organize '. 47 Whether companies may organize under general act where special act exists 48 Certificate: may be amended 44 Only to cure patent defects [Note 3] 44 Must be filed and recorded 44 Cannot be filed or recorded until fees paid 44 Nor until organization tax is paid 45 Fee for recording [Note i ] 45 Fees of Secretary of State [Note i] 45 INDEX. 425 PAGE Organization Tax 45 Certain corporations must pay tax for organization 45 Applies to reorganization of the company 46 May not exercise corporate rights until paid 46 Park Associations. Si;e Driving Park and Agricultural Associations. Personal Property : How taxable. See Taxation. Pipe-Line Companies 42 Number of corporators 42 Method of organization 33 Additional particulars to be stated in certificate 42 Amount of capital * 42 When certificate may be filed 42 Affidavit to be annexed thereto 42 Number of directors 43 May condemn land [Note] 43 Not in City of New York [Note] 43 May not purchase stock of other companies 55 May increase capital stock 120 Must make monthly statements I47 Contents of such statements i47 Must make annual reports 14S Penalty for failure to make 148 Stockholders liable until capital paid in 217 Nature of the liability 222 Liable to laborers, etc 217 Nature of the liability 229 Tax on franchise 273 Penalties for non-payment 275 Place of Business 9° May be changed 90 Under the Manufacturing Act 9° Business corporations 92 Banks 92 Plankroad and Turnpike Companies 34 Number of corporators 34 Notice of organization to be published 34 Method of organization 33 Duration of company 34 Affidavit of payment of stock necessary 34 May change amount of capital slock 105, loS, 122 May reorganize after foreclosure {See Reorganization] 87 Stockholders liable to an amount equal to stock held 21S Summary method of enforcing liability 219 Plate Glass : Companies to idsure 15 Pleadings. Corporate existence, how alleged 243 What is sufficient denial of 244 Misnomer waived unless pleaded 244 Verification of - 245 426 INDEX. Pleadings. — Continued. page Usury cannot be pleaded 245 When statute of limitations cannot be pleaded 246 See Legal Actions and Proceedings. Pledgee of Stock : No right to vote on unless transferred to him 202 Powers and Privileges of Corporations 49 General powers 49 Charter perpetual unless limited 50 May extend term of existence 51 Manufacturing corporations 51 Business corporations 51 Banks 51 Turnpike and plank-road corporations 52 Generally 52 The corporate seal , 53 Right to hold real estate .53 Lands in other countrLes ,....• 53 Adjacent lands 54 Right to hold stock of other companies 54 No implied right to subscribe for [Note 2] 54 Manufacturing corporations 54 Insurance and guaranty companies 55 Railroads. 55 Pipe-line companies 55 Right to hold stock of foreign corporations 56 Provision broader than that of domestic corporations 56 Officers, corporations have the right to appoint necessary 56 Bylaws, corporations may make necessary 57 Incidental powers and privileges 60 Rights to mortgage property 61 Manufacturing corporations 61 Business corporations ... 63 Building companies 63 Gas-light companies 64 Railroads 64 Stage-coach companies 64 Mortgages may be made to secure future advances 65 Assent of stockholders required to be filed 65 Where real estate is out of the state 67 Special powers and privileges 68 Certain corporations may consolidate 68 Corporations organized for manufacturing purposes 68 Insurance companies 71 Banks 72 Railroads 74 Telegraph companies 76 Rights of creditors on consolidation 76 Companies not extinguished by consolidation 77 INDEX. 427 Powers and Privileges of Corporations. — Contimied. page Reorganization as ' ' Limited Liability Companies " 77 Under the Business Act generally 79 Reorganization after foreclosure 81 Railroads 83 Plank-road companies. 87 Proceedings for sale of real property 88 Changing place of business 90 Under the Manufacturing Act 90 Under the Business Act 92 Banks ^ 92 Change of name 93 Insurance companies 9^ . Changing number of directors 9^ Under the Manufacturing Act 96 Under the Business Act 97 Insurance companies 98 Title-Guarantee companies 98 Practice. See Legal Actions and Proceedings. Preferred Stock: Right to issue, not implied 102 May issue, if provided for in by-laws io2 . May not afterwards without consent of all stockholders 104 May be exchanged for common = 104 Printing and Publishing Companies: Organization of 2 Proceedings for the Sale of Corporate Real Property 88 Property: Stock may be issued for, at fair valuation 100 Under the Manufacturing .Act loi Under the Business Act loi Title-guarantee companies I03 Action for sequestration of 291 See Dissolution. When to vest in receiver 3^4 Provisional Remedies. See Attachments ; Injunctions ; Receivers ; Legal Actions and Proceedings. Proxy : Right to vote on. See Elections. Railroad Companies 29 Method of organization 29 Certificate, what to set forth 29 Amount of- capital -9 Stock personal property ^28 Residences of directors to be stated 30 Articles of association to be signed by subscribers 30 Ten per cent to be paid in on subscriptions 3° Affidavit to be annexed to certificate 3° When to become body corporate 30 Number of directors 30 May not purchase stock of other companies 55 Except union railway depot companies 55 428 INDEX. Railroad Companies. — Continued. ^^^^ May declare forfeiture of stock 12S Consolidation 74 Amount of capital stock of new company 74 Agreement to be submitted to stockholders 75 Meeting to be called 75 May reorganize after foreclosure. .S'f^ Reorganization 83 May increase amount of capital stock 117. nS " Stockholders, liability of, until capital paid in, 212 Liable for debts due to laborers, etc 212 Nature of the liability 229 Conditions of enforcing same. 213 Tax on franchise 273 Penalties for non-payment 275 Railroads in Foreign Countries 31 Number of corporators 3^ Purposes for which companies may be organized 31 Method of organization ■ • • • 31 What certificate must state 3^ Residences of directors to be stated. 31 Subscribers must sign articles of association 32 Articles of association to be approved by the Governor 32 Ten per cent of subscriptions to be paid in 32 Must maintain principal office within the state 32 Annual meetings must be within the state 33 Directors may make by-laws - 58 Railroad-Supply Companies 4i Number of corporators • • ■ 4i Method of organization 33 May lay tracks not exceeding one mile in length [Note 3] 41 Railways : In counties of the state [Note] 29 Commissioners may lay out [Note] 29 Raising Vessels : Organization of companies for 3 Real Estate: Right to hold 53 In other states or countries 53 Adjacent lands 54 Proceedings for sale of 88 Where taxable 259 What included in, for the purposes of taxation 260 Real-Estate Business : Organization of companies for 3 Receivers : When can be appointed 254 When notice must be given to officer of the corporation 255 When receiver of life-insurance company will not be appointed .... 255 Where application for, must be made 255 Does not apply to receivers on foreclosure 256 Copies of papers must be served upon the attorney-general 257 When appointed upon voluntary dissolution 284, 303 Officer or stockholder may be appointed 306 INDEX. 429 Receivers. — Continued. page In voluntary dissolution must give notice of appointment 307 Persons must account to receiver for property 307 Provisions of law in respect to insolvent debtors apply to 308 Must call a meeting of the stockholders 308 Property must be distributed 3og Method of distribution ^oq Must account to the court 300 Powers of g^ When may collect unpaid instalments of stock 220 Cannot enforce liability of officers for making fraudulent dividends 162 Or for making loans to ^ockholders 164 Cannot enforce liability of stockholders until capital is paid in. . . . 223 When appointed upon proceedings for involuntary dissolution 289. 303 In action for sequestration of property 291, 303 In action to annul corporation 298, 303 In action to wind up a corporation 302, 303 In action to preserve the assets of a corporation 303 In action to foreclose a mortgage upon the property of a cor- poration 2Q^ When to report quarterly -jj Accounts and statements to be open to inspection 312 May be removed by the court 312 When property to vest in 30 , Except in case of insurance companies 304 In case of life-insurance companies 305 Attorney-general may apply for removal of 306 In case of fire and inland navigation insurance companies 315 Must report to the insurance department 315 And to the attorney-general 316 Insurance companies generally 315 Must report to the Insurance Department 315, 316 And to the attorney-general 316 To the court 315 In case of banks and trust companies 316 Must report to the Banking Department 316 And to the attorney general. ... 316 To the court 3 jg In case of railroads 3j5 Must report to the court 316 And to the attorney-general 316 Compensation of ._ 3 j- Does not apply to receivers appointed in action to foreclose a mortgage 31^ Wages of operatives, preferred claims upon 318 Who are included in the class 318 Reducing Capital Stock, See Capital Stock. 430 INDEX. PAGE Reorganization. Certain companies may reorganize 77 Full-liability companies may reorganize as limited-liability com- panies 77 Under the Business Act 79 After foreclosure 81 Manufacturing companies after sale [Note i] 83 Railroads 83 Plank-road companies 87 Increase of capital stock in case of 118 Reports 130 Under the Manufacturing Act 130 Under the Business Act 136 Marine-insurance companies 137 Fire and inland-navigation insnrance companies 138 Life, health, and casualty insurance companies 139 Guaranty companies 140 Banks 141 Safe-deposit companies 143 Trust companies 143 Railroad companies 144 Bridge companies 144 Ferry companies 145 Guano companies ... 146 Inland-navigation companies 146 Park associations e 147 Pipe-line companies 147 Turnpike and plank-road companies < 149 Certain moneyed corporations , 149 When required of receivers c 310 Set' Dissolution. Rinks : Organization of companies for erecting, etc 4 Residences : Organization of companies for purchasing, acquiring, etc. 4 Resignation : What is sufficient to constitute [Note 3] i63 Rights of Stockholders 188 To certificate of stock 188 In case of loss 188 Court may compel issue of new certificate 188 Compelling transfer 190 Mandamus will not lie to compel 190^ Dividends, right to 191 Books, right to examine 150, 192 Penalty for refusal 192 To statement of company's affairs 193 Rights at elections 194 Of moneyed corporations 195 Of business corporations 198 Of title-guaranty companies. 199 INDEX. 431 Rights of Stockholders.— Cot!Hu!U(/. page Rights at Elections of safe-deposit companies 199 Of railroads 199 Generally 201 When directors wrongfully hold over 202 When they neglect to adopt by-laws providing for elections 203 Safe-Deposit Companies 23 Number of corporators 23 Method of organization 23 What certificate must set forth 23 Amount of capital 24 May be increased \ 117 When may commence business 24 Directors may make by-laws 5S May declare forfeiture of shares 12S Shares of, personal property 129 Must make semi-annual reports 143 Stockholders liable to an amount equal to stock held 211 Sale of Corporate Real Property : Proceedings for 88 Petition to be presented to the court 88 What must set forth 88 To be verified 89 Persons interested may appear in the hearing 90 If corporation, insolvent creditors must be notified 90 A"^ Appendix E 3S5 Salvage : Organization of companies for 4 Seal : May be by impression directly on paper 53 May adopt any form of 53 Service of Summons : How made upon domestic corporations 239 How upon foreign corporations 239 Officer of, need not be here in official capacity 240 In justices' courts _. 241 Upon railroad companies 241 Upon express companies 242 Service by publication 242 On a domestic corporation 242 On a foreign corporation 242 Shares of Stock : No hen can be created on, by company unless ex- pressly authorized 124 Cannot be declared forfeited unless authorized 124 Owner generally not taxed for 265 Exception in the case of banks 265 How such shares assessed 265 Skating-Park and Sporting-Ground Companies 38 Number of corporators 38 Method of organization '. . 33 Duration of company 38 Certificate must be signed by the subscribers 38 432 INDEX. Skating-Park and Sporting-Ground Companies.— Confimted. page When certificate can be filed 3S Number of directors 3^ Must make annual reports ■• . . I47 Contents of the reports r I47 Directors liable when debts exceed the capital 179 Stockholders liable till capital is paid in 217 Nature of the liability 222 Slaughtering Animals : Organization of companies for 3 Special Proceedings : For voluntary dissolution of a corporation .... 281 5t'td 41 May increase capital stock. .... 122 Winding up Dissolved Corporations. When attorney-general must bring action for 301 Yonkers City Court. See City Court of Yonkers. ■^'" ^' UC SOUTHERN REGIONAL LIBRARY FACILITY AA 000 695 175 tun iiiiiiiiiiii; lii ->*t: .itzii. : liil