Boehme v. Rall

• Decision Date: 22 May 1893
• Citation: 51 N.J.E. 541,26 A. 832
• Parties: BOEHME v. RALL et al.
• Court: New Jersey Court of Chancery

26 A. 832

51 N.J.E. 541

BOEHME

v. RALL et al.

Court of Chancery of New Jersey.

May 22, 1893.

Action by Reinhard Boehme, receiver of the New York Silk Bibbon Manufacturing Company, against Henry William Rail and William Deuster, trustees, to set aside a certain mortgage executed by such corporation to defendants as trustee for certain creditors of the company. Bill dismissed.

Edward Ruse, for complainant.

Eugene Stevenson, for defendants.

GREEN, V. C. On the application of Albert Strall, a stockholder and creditor as well as president of the New York Silk Ribbon Manufacturing Company, said company was declared insolvent, and by an order of this court the complainant was appointed its receiver on November 10, 1890. He qualified as such, and took possession of the real and personal property of the corporation. The real estate is situate at Haledon, in Passaic county, N.J. The personal property in question consists of machinery, stock, and manufactured goods in the factory at that place. The receiver discovered by an examination in the office of the clerk of Passaic county the record of two real-estate mortgages and one chattel mortgage executed by the company, the validity of which he does not question; and also a mortgage dated November 1, 1890, executed by the said company to Henry William Rail and William Deuster, as trustees for certain creditors, covering real and personal property, which he claims is invalid, and files this bill to set it aside. This mortgage, after reciting that, whereas the New York Silk Ribbon Manufacturing Company is justly indebted to certain named creditors in the respective amounts stated, aggregating the sum of $7,454, without interest, and for which debts the creditors held the promissory notes of said company, payable on demand, witnessed that the company, for better securing the payment of said sums of money to the said creditors, with the interest thereon, did grant, bargain, sell, etc., the premises described, and the goods and chattels specified, to the said trustees, to have and to hold the tract of land and premises therein granted, with the appurtenances, unto the said trustees, their heirs and assigns; and to have and to hold the goods and chattels therein bargained and sold unto the said trustees aforesaid, their executors, administrators, or assigns, forever; in trust, however, to secure the abovementioned debts to the therein named creditors, respectively; with the condition that if the said creditors should be paid the sums due them, then said instrument to be void; with other provisions anticipating the maturing of the obligation. The New York Silk Ribbon Manufacturing Company was organized on the 12th of March, 1887, under the law of the state of New York entitled "An act to authorize the formation of corporations for mining, manufacturing, mechanical, or chemical purposes," passed February 17, 1848, and of the several acts extending and amending said act. By its certificate it appears that the object for which the company was to be formed was the manufacture of silk ribbon and all other silk goods; that the amount of the capital stock of the company was to be $25,000; the term of its existence to be 25 years; the par value of the said stock to be $100 per share, and the number of trustees to manage the company nine; and that the operations of the company were to be carried on at the city of New York. The company was what is known as a "co-operative corporation," none but operatives in the business being permitted to be stockholders or officers, and none but stockholders being employed as operatives. After carrying on manufacturing for some time in the city of New York, it was deemed advisable to remove to the state of New Jersey, and on or about the 16th day of September, 1889, the corporation removed its plant, machinery, and stock to the village of Haledon, in Passaic county, in this state, having purchased real estate and established its factory there. It at the same time ceased to carry on any manufacturing or other business in the state of New York, and thereafter conducted all of its business operations, including the manufacture and consignment of goods, in New Jersey, holding all its trustee and formal stockholders' meetings therein. By an amended certificate filed in the office of the clerk of the county of New York, dated September 16, 1889, it was declared that "at a meeting of the stockholders of the company, regularly called, by vote or the stockholders representing two-thirds of the stock of said company, it was resolved to carry on some part of the business of said company (heretofore carried on only in the city and county of New York) outside of the state of New York, to wit, at Haledon, in the township of Manchester, in the county of Passaic, and state of New Jersey." The New York office was abandoned, but manufactured goods were consigned to a commission house in that city for sale. While the company was in operation in New Jersey, when in want of funds, money, for the purpose of carrying on operations, was advanced by the officers and stockholders, to whom, from time to time, the notes of the company were given for the money so advanced to the company. After continuing operations here for some time, it was found impossible to succeed, and the impending insolvency of the company was recognized. Thereupon, as appears by a certificate tiled in the clerk's office of the county of New York dated November 1, 1890, signed by various persons as stockholders of the said company, therein claiming to constitute a majority of all the stockholders thereof, and holding more than two-thirds of the capital stock thereof, their assent was given to the execution and delivery of a mortgage covering the factory property situated in the township of Manchester, in the county of Passaic, conveyed to the said company by William Bushman by deed dated January 17, 1889; and also covering the goods and chattels of said corporation on said land for the purpose of securing the indebtedness, amounting in the aggregate to $7,454, with interest thereon. The debts to be secured were contracted and payable in New Jersey; the property intended to be mortgaged was in this state; and the trustees and creditors intended to be secured thereby, 32 in number, were residents thereof, except 7 or 8, who resided in New York.

It is admitted, by conceding the validity of the first three mortgages, that by the laws of the state of New York a solvent corporation of this character was authorized to mortgage its property, but it is claimed that this authority did not pertain to this corporation at the time the mortgage attacked was given, in consequence of its anticipated insolvency. It is conceded that this mortgage does not contravene the provisions of the laws of the state of New Jersey. Wilkinson v. Bauerle, 41 N.J. Eq. 635, 7 Atl. Rep. 514; Vail v. Jameson, 41 N. J. Eq. 648,7 Atl. Rep. 520; Bergen v. Fishing Co., 42 N.J. Eq. 397, 8 Atl. Rep. 523. The bill alleges that this mortgage is illegal and void on several grounds, all of which were abandoned by counsel for complainant, with the single exception of that which related to its alleged invalidity under the laws of the state of New York. Upon this point the counsel for complainant relies on section 4, tit. 4, c. 18, pt. 1, Rev. St. N. Y. (1 Rev. St. 603.) Chapter 18 isentitled"Of Incorporations;" title 4 is entitled "Special Provisions Relating to Certain Corporations," a title inserted pursuant to the act concerning the Revised Statutes, passed December 10, 1828. Section 4, as it stood in 1890, when this mortgage was given, is as follows: "Whenever any incorporated company shall have refused the payment of any of its notes or other evidences of debt in specie or lawful money of the United States, it shall not be lawful for such company or any of its officers to assign or transfer any of the property or choses in action of such company, to any officer or stockholder of such company, directly or indirectly, for the payment of any debt; and it shall not be lawful to make any transfer or assignment in contemplation of the insolvency of such company to any person or persons whatever; and every such transfer and assignment to such officer, stockholder, or other person, or in trust for them or their benefit, shall be utterly void." On the trial, counsel for the defendants objected to the admission of this law of New York in evidence, on the ground that the same had not been properly pleaded. The rule undoubtedly is that, where a party relies upon the provisions of a foreign statute, either as the ground of relief or as a defense to the action, the substance of the act relied on ought to be set out. The rule is the same in equity as at law, the reason thereof being that the court cannot take judicial notice of the provisions of a foreign statute, and, if invoked, it should be so far stated that the court may see that the right or liability which depends exclusively on a statutory enactment arises by force of such statutory provision. Bank v. Hendrickson, 40 N. J. Law, 52-55. Counsel for complainant thereupon asked leave to amend his bill by properly pleading this statute. Defendants' counsel objected, on the ground that it was not a proper subject of amendment, that the statute avoided the merits of the case, and the application should be governed by the same rules as those which obtain where leave is asked of the court by a defendant to amend or plead out of time, viz. that it will not be granted except on terms that he does not interpose pleas of the statute of limitations, or pleas of the statute relating to usury, as a bar to the claim of complainant or plaintiff. The question of the amendment was reserved, the statute being introduced subject to the objection. The rule undoubtedly is that the court will not grant a favor to the defendant byway of extending time to plead, nor to answer, or to amend the same, where he has been in...