Holmes & Griggs Manuf'g Co. v. Holmes & Wessell Metal Co.

• Decision Date: 02 June 1891
• Citation: 27 N.E. 831,127 N.Y. 252
• Parties: HOLMES & GRIGGS MANUF'G CO. v. HOLMES & WESSELL METAL CO. et al.
• Court: New York Court of Appeals Court of Appeals

127 N.Y. 252

27 N.E. 831

HOLMES & GRIGGS MANUF'G CO.

v.HOLMES & WESSELL METAL CO. et al.

Court of Appeals of New York,

Second Division.

June 2, 1891.

Appeal from supreme court, general term, first department.

Adam C. Ellis, for appellants.

Sidney S. Harris, for respondent.

HAIGHT, J.

This action was brought to recover the amount of a promissory note bearing date December 1, 1884, executed by the defendant the Holmes & Wessell Metal Company, and indorsed by the defendants Morse and Shonnard. The defenses were ultra vires, no consideration, and a non-tender of certain stock for the purchase price of which the note was given. The plaintiff is a manufacturing corporation organized under the general act of 1848 for the purpose of manufacturing sheet and roller brass wire tubing and other articles composed wholly or in part of metal, in the city of New York. Its president was Charles E. L. Holmes, and its secretary and treasurer was George C. Edwards. On the 12th day of July, 1881, Holmes and Edwards entered into an agreement with the defendants Shonnard, Morse, and one Charles Wessell to organize a new company for the manufacture of brass, nickeline alloys, and other composite metals, under the corporate name of the ‘Holmes & Wessell Metal Company;’ the capital stock of such company to be $100,000, the whole amount to be issued and paid up in cash; three-fourths thereof to be subscribed and paid by Holmes and Edwards, and the remaining one-fourth by the other parties to the agreement. The agreement, in its preamble, recites that Holmes and Edwards propose to transfer the rolling-mill belonging to the plaintiff, including all of the machinery, tools, and appliances connected therewith, together with the lease of the premises occupied by the plaintiff, for the sum of $50,000. Subsequently, and at an annual meeting of the plaintiffs' stockholders held on the 20th day of July, 1881, the president and secretary were instructed to sell to the Holmes & Wessell Metal Company the entire machinery and plant owned by the plaintiff, for the sum of $50,000; and also authorized them to sell to the same company all the material, manufactured, unmanufactured, and in process of manufacture, owned by the plaintiff, and to also subscribe for 3,000 shares of the capital stock of the company, and to pay for the same out of the proceeds of the sale of the mill and materials. It further appears that the Holmes & Wessell Metal Company was incorporated on the 15th day of July, 1881, and that Charles E. L. Holmes subscribed for 2,000 shares, and George C. Edwards 1,000 shares, of the capital stock. Thereafter, and on the 23d day of July, 1881, the new company, at a meeting of its stockholders, authorized the purchase from the plaintiff of its plant and machinery, and to pay therefor the sum of $50,000, and for the entire stock of materials, manufactured and unmanufactured, owned by the plaintiff the sum of $31,333.93; and, on the 1st day of September thereafter, such sale was completed by the transfer of the plaintiff company to the defendant company of its entire plant, machinery, etc.; and, in payment therefor, and defendant company issued to George C. Edwards, trustee, the stock subscribed for by Holmes and Edwards, amounting to $75,000, and the balance, $6,333.96, was paid in cash. After such transfer, the plaintiff discontinued its business. On the 1st day of December, 1884, the plaintiff entered into a contract with the defendants Morse, Shonnard, and one Charles Wessell, in which the plaintiff agreed to sell to the other parties thereto 1,440 shares of the stock of the defendant company, standing in the name of Edwards, as trustee, for the sum of $30,000, payable, $5,000 in cash, and the balance by certain promissory notes, of which the note in suit is one. The agreement further provided that the stock should remain in the name of Edwards o some other officer of the plaintiff, as trustee, that it might be voted upon by him until delivered, as specifically provided in the contract.

It is doubtless true that a corporation cannot purchase or deal in stocks of other corporations, unless expressly authorized by law so to do. Talmage v. Pell, 7 N. Y. 328;Berry v. Yates, 24 Barb. 200;Milbank v. Railroad Co., 64 How. Pr. 20;Mechanics, etc., Mut. Sav. Bank and Bld. Ass'n v. Meriden Agency Co., 24 Conn. 159;Central R. Co. v. Pennsylvania R. Co., 31 N. J. Eq. 475;Hazlehurst v. Railroad Co., 43 Ga. 57; Valley R. Co. v. Lake Erie Iron Co., (Ohio,) 18 N. E. Rep. 486; People v. Trust Co., 130 Ill. 268-284, 22 N. E. Rep. 798; Franklin Co. v. Lewiston Institution, 68 Me. 43,Hill v. Nisbet, 100 Ind. 341-349. It is equally true, however, that it may do whatever may be necessary in the exercise of its corporate franchises. The selling of property and collection of debts is among the powers given; and hence it may take title to all kinds of property, even the stock of another company, in the payment of a debt. Talmage v. Pell, supra, and cases above cited. The statute under which the plaintiff was incorporated provides that ‘it shall not be lawful for such company to use any of their funds in the purchase of any stock in any other corporation.’ Laws 1848, c. 40, § 8. The funds here spoken of evidently mean the money of the company, and the statute was not intended to limit the powers to the corporation beyond that already indicated. The plaintiff was a private manufacturing corporation. It exercises no powers of a public nature, and has attempted no combination by which the public may in any manner be prejudiced. There are, consequently, no questions affecting public policy to be considered. The purpose of the company is expressed in a preamble to the resolutions adopted authorizing the sale of its plant and stock of materials on hand to the defendant company. It was, in short, to increase the business of the stockholders by adding to the manufacture of brass that of German silver and nickle alloys. The scheme adopted was the organization of a new corporation, bringing in some other persons with additional capital. The stock in the new company was subscribed for by Holmes and Edwards individually, and the stock when finally issued was issued to Edwards. It is true, he takes it as trustee, and holds it as such for the plaintiff;...