In re Astell Engineering & Iron Works, Inc.

• Decision Date: 12 November 1921
• Citation: 278 F. 743
• Parties: In re ASTELL ENGINEERING & IRON WORKS, Inc.
• Court: U.S. District Court — Eastern District of New York

278 F. 743

In re ASTELL ENGINEERING & IRON WORKS, Inc.

United States District Court, E.D. New York.

November 12, 1921

Abraham L. Doris, of New York City, for the motion.

James S. Regan, of New York City, opposed.

GARVIN District Judge.

The trustee in bankruptcy has moved to confirm the report of a special commissioner holding a chattel mortgage executed by the bankrupt null and void. While the application to have the mortgage declared void was based on four grounds, two were waived, and a third raises no serious question, leaving only the fourth, which will be now considered.

The trustee claims that the mortgage was void because of failure to obtain the consent of two-thirds of the stockholders, as required by section 6 of the New York Stock Corporation Law (Consol. Laws, c. 59), which is as follows:

'Every stock corporation * * * may mortgage its property and franchises to secure the payment of such obligations, or of any debt contracted for said purposes. Every such mortgage, except purchase-money mortgages and mortgages authorized by contracts made prior to May 1, 1891, shall be consented to by the holders of not less than two-thirds of the capital stock of the corporation, which consent shall be given either in writing or by vote at a special meeting of the stockholders called for that purpose, upon the same notice as that required for the annual meetings of the corporation, and a certificate under the seal of the corporation that such consent was given by the stockholders in writing, or that it was given by vote at a meeting as aforesaid, shall be subscribed and acknowledged by the president or a vice president and by the secretary or an assistant secretary, of the corporation, and shall be filed and recorded in the office of the clerk or register of the county wherein the corporation has its principal place of business.'

A special meeting of the board of directors of the bankrupt was held January 19, 1921, at which were present Richard S Groves, George Brown, and James S. Regan. The capital stock of the bankrupt consisted of 200 shares of common stock, par value $100 each, of which Regan held 4 shares, Brown 78, and Groves 118, of which latter number 5 were later transferred to Frank Groves.

Whatever confusion or conflict of authority may be revealed by an examination of earlier decisions, section 6, supra, has been construed by this circuit in the Matter of Post, 219 F. 171, 135 C.C.a. 69, where the court observes:

'The language of the statute is most clear and specific; manifestly it was made so to accomplish some purpose. That purpose is very plainly indicated on the face of the statute; it substitutes for mere oral expressions of assent, casually given it may be, an orderly permanent record which can be referred to. The provision, in the language of the New York Court of Appeals, ' involves an application to the stockholders, and, on their part, consideration, judgment, and final determination, and, on the part of the assenting stockholders, a written expression of their conclusion.' Rochester Bank v. Averell, 96 N.Y. 475. The same court has been liberal in its construction of the statute as to details of compliance. Thus in Greenpoint Sugar Co. v. Whitin, 69 N.Y. 335, a written assent was held good although it did not itself state the amount of the debt which it was given to secure; the court say

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