Seymour v. Spring Forest Cemetery Ass'n

Decision Date15 January 1895
PartiesSEYMOUR v. SPRING FOREST CEMETERY ASS'N et al.
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

Appeal from supreme court, general term, Fourth department.

Action by Martha E. Seymour against the Spring Forest Cemetery Association and others to compel the payment of bonds issued by the corporation. From a judgment of the general term (19 N. Y. Supp. 94) affirming a judgment for plaintiff, and denying a new trial, defendants appeal. Affirmed.

A. D. Wales, for appellants.

Edward K. Clark, for respondent.

FINCH, J.

This appeal is from a final judgment rendered upon an accounting which ascertained the amount payable upon bonds held by the plaintiff, and issued by the defendant corporation. Necessarily, the main questions involved are as to the legality of that issue, and the right of the plaintiff to hold and enforce the obligations upon which she sues; and these questions arise out of a situation about which there is little, if any, dispute.

Eleven citizens of Binghamton became the owners of about 30 acres of land, which they bought for the purposes of a rural cemetery. Hotchkiss and Seymour, lawyers of standing and reputation in the city, owned an undivided tenth of the property; and each of the remaining nine associates, a similar share. They entered at once upon the work of improving the land, and preparing it for the intended use, and expended more or less of their own means upon it, looking forward to reimbursement and reasonable profit from the future sale of burial lots. As time passed, it became apparent that some change of the situation was imperatively needed. That every sale of a lot should require the signature of each of the eleven, and of their wives, was a serious inconvenience, and one likely to be greatly increased if any of the associates should die, leaving infant children to inherit. Good sense and sound business policy dictated that the tenancy in common of the individuals should be transformed into the single title of a corporation, and that change was effected. The associates conveyed to the newly-created corporation, of which they were the sole stockholders, and in which they were the only persons interested. They fixed the consideration of the transfer at $30,000, to be paid by the issue of corporate bonds to that amount, one-tenth of which was to be allotted to each of the original shares. Twentyone thousand dollars in amount of such bonds was issued, and the securities delivered to the proper owners, and those bonds are still outstanding. While the technical form of this transaction was a sale by the 11 to the corporation, its substance was merely a change in the manner of holding. The sellers were the buyers. They sold as individuals, and bought as a corporation, and no one else had any interest in the question of price, or terms of sale. If they were the vendors, on the one hand, dealing with themselves, in a corporate capacity, on the other, they were also the sole beneficiaries to be affected, and could not defraud themselves. The abstraction of the corporate entity should never be allowed to bar out and pervert the real and obvious truth. As beneficiaries, the stockholders necessarily assented to all the details of the arrangement, and no just criticism is possible, either upon the legality or morality of the transaction. Evidence was given to show that the land conveyed was not worth the sum secured, but that is a totally immaterial fact. Whatever the price, it wronged no one, and could wrong no one, and accomplished nothing, except to fix a primary limit to the anticipated profits. It was immaterial for another reason. The bonds were payable wholly out of the enterprise. First 50 per cent., and then 75 per cent., of the company's receipts from sales of lots, was to be applied on the bonds, and they were payable from no other source. If the price nominally fixed had been three times as great, its real product would have remained the same; for, either as bondholders or as stockholders, the whole proceeds, above expenses, would become theirs, and no more. It was the enterprise that was debtor, which could only pay by a liberal improvement and maintenance; and the actual price was the amount of its net surplus above expenditure, payable to the associates in the capacity of bondholders, at least,-a price to which they were fully entitled, and which represented the profits they might justly claim to reap. No doctrine as to the dealing of a fiduciary agent with the property of his principal has any application to such a transfer as was made.

There were some alleged technical irregularities in the issue of the bonds. These represented the purchase price of the land which the corporation bought and kept, and were its promise to pay, which it could not justly repudiate. That kind of plunder which holds onto the property, but pleads the doctrine of ultra vires against the obligation to pay for it, has no recognition or support in the law of this state. Arms Co. v. Barlow, 63 N. Y. 62;Duncomb v. Railroad Co., 84 N. Y. 199;Woodruff v. Railroad Co., 93 N. Y. 619. That no formal resolution of purchase was produced from the minutes of the corporation does not prove that there was none, and if in fact there was none, because the agreement to that effect preceded by a day or two the actual filing of the corporate certificate, at least the corporation ratified the proposed contract; for it accepted the deeds, took possession of the property, has sold it in burial lots, has kept it and its proceeds for more than 30 years, and put utterly out of its power, by its own acts, any possible restoration. It must therefore pay, or its possession becomes a robbery.

Some complaint is made of the form of the bonds. They devoted to the purpose of payment 50 per cent. of the corporate receipts, and some of them, at least, 75 per cent., after the first two years. The act of 1853 (chapter 122), allowing an appropriation of 50 per cent., relates only to the purchase of the land. It recognizes that the remainder may go to the expense of needed improvements, fitting the property for its intended purposes. Here the purchase covered both the land itself, and the improvements already put upon it, fitting it for use as a cemetery. In 1860 (chapter 163) such associations were authorized to fund any debt for purchases of land, or the improvement and embellishment thereof, without restriction as to application of income; and by the act of 1884 (chapter 433) all sealed certificates issued prior to 1860 were made as valid and effectual as if issued thereafter. The purpose seems to have been to cure any existing irregularity growing out of the prior provisions as to the application of proceeds. I do not think the restriction of 50 per cent. applied to these bonds; and, if it did, they have been sufficiently validated, both by the act of 1884, and by the long-continued recognition of the corporation.

There can be no reasonable doubt, therefore, that the bonds issued were valid corporate obligations in the hands of the original holders, who...

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