Frank
Hopkins, of Syracuse, N.Y., for City of Syracuse.
Benj.
Stolz, of Syracuse, N.Y., for general creditors.
RAY
District Judge (after stating the facts as above).
The
special master has found certain facts, viz.:
'First.
The Heffron Company is a foreign corporation, incorporated
under the laws of the state of Maine, December 27, 1907. It
immediately began doing business within the state of New
York and continued so to do until the filing of the
petition in bankruptcy. During all of such time, its
business has been carried on within the state of New York.
On December 8, 1913, a petition in bankruptcy, involuntary
in form, was presented to the court, on which date Frank B.
Hodges was appointed receiver, and Mr. Hodges was appointed
trustee of the bankrupt on the 14th day of April, 1914. The
bankrupt was insolvent for at least four months immediately
prior to the filing of the petition in bankruptcy.
'Second.
On June 26, 1913, and for some time prior thereto, the
Heffron Company was the owner of certain real estate in the
city of Syracuse, described as follows. * * *
'On
the last-mentioned date, this property was incumbered by
two mortgages; one amounting to $16,400, held by the
Syracuse Savings Bank, and another amounting to $20,000,
held by Clifford E. Lipe. On said date, it executed and
delivered to Daniel H. Tolman its bond, secured by a
mortgage covering the property above described in the sum
of $50,000, which mortgage bore interest at the rate of 6
per cent. and which was recorded in the Onondaga county
clerk's office June 28, 1913, in Book 462 of Mortgages,
at page 406. This mortgage was executed pursuant to a
resolution of the board of directors, but no consent to the
execution of such mortgage was ever given by the
stockholders. No consent of the stockholders had been given
to the execution of the mortgage to Clifford E. Lipe above
referred to. The Heffron Company had never procured from
the Secretary of State the certificate prescribed by
section 15 of the General Corporation Law of the state of
New York, to the effect that it had complied with the
requirements of law authorizing it to do business within
this state.
'Third.
At or prior to the execution of the bond and mortgage to
Daniel H. Tolman and as a part of the same transaction, the
Heffron Company and Daniel H. Tolman entered into an
agreement in writing (Exhibit 10) which, in effect, secured
to Tolman, in addition to the interest specified in the
bond and mortgage, a commission of 1 1/2 per cent. on the
gross monthly sales of the Heffron Company, and
subsequently there was paid to Tolman by the Heffron
Company $424.67 to apply upon such commissions.
'Fourth.
From the proceeds of the loan of $50,000 received from
Daniel H. Tolman, the Heffron Company paid the bonds and
mortgages held by the Syracuse Savings Bank and Clifford E.
Lipe, respectively. It also paid the claims of certain
creditors, aggregating $1,995, attorney and recording fees
of $255, and the balance was retained by it. Interest was
paid on the mortgage down to August 30, 1913.
'Fifth.
The Heffron Company never paid to the state treasurer of
the state of New York the license tax or fee imposed on
foreign corporations by section
181 of the Tax Law (Consol. Laws, N.Y. c. 60), nor did it
ever pay the annual franchise tax imposed by section 182 of
the Tax Law of the state of New York.
'Sixth.
On April 15, 1913, it filed with the state comptroller of
the state of New York, a report (Exhibit 1) on a blank form
prepared by the comptroller and executed by its secretary
and treasurer, showing, among other things, the date and
place of its corporation, the date when it began business
in the state of New York, the amount of its capital stock,
the dividends paid since is incorporation, the nature of
its business and the percentage of its capital stock
employed in the state of New York during the year ending
October 31, 1912, in manufacturing and in the sale of the
product of such manufacture. This report shows the company
to have been a manufacturing corporation, that its total
capital stock was $1,000,000, and that the percentage of
its capital, used in this state during the year mentioned
in manufacturing, to have been 60 per cent. Upon this
report, and without any other evidence or outside
information, the comptroller on the 18th day of April,
1913, fixed a license tax under section 181 of the Tax Law
of $1,250, and a franchise tax under section 182 of the Tax
Law for the years 1908 to 1912, inclusive, which with
accrued penalties now amounts to $2,196.34. In arriving at
the tax imposed by section 182 of the Tax Law, the
comptroller ignored the claim of the Heffron Company, as
shown by the report filed, tending to show that it was a
manufacturing corporation, as well as its claim that 60 per
cent. of its capital was employed in the state of New York
during the year 1912 in manufacturing, and the amount of
the tax imposed under section 182 was the tax properly
imposed on a nonmanufacturing corporation without any
exemption to which it was entitled under section 183 of the
Tax Law if it were a manufacturing corporation employing,
at least, 40 per cent. of its capital stock in
manufacturing in this state.
'Seventh.
On the 20th day of May, 1913, there was docketed in the
Onondaga county clerk's office a judgment against the
Heffron Company and in favor of David Chezensky and Louis
Alpern in the sum of $2,146.20. Thereafter the Heffron
Company took an appeal from said judgment to the Appellate
Division, First Department, and an undertaking on appeal in
the sum of $2,500 was executed by the United States
Fidelity & Guaranty Company. The United States Fidelity &
Guaranty Company was indemnified by the personal bond of
Messrs. Stansfield and Loop, officers of the Heffron
Company. On the 14th day of June, 1913, the attorney for
the judgment creditors Chezensky and Alpern, and the
attorney for the Heffron Company entered into a written
stipulation to the effect that the lien of said judgment
upon any real estate or property of the Heffron Company
should be suspended during the appeal, and that an order to
this effect might be entered in the clerk's office of
Onondaga county. Pursuant to this stipulation and on
application of counsel for the Heffron Company, the Special
Term of the Supreme Court did, on the 23d day of June,
1913, grant an order exempting the real property of the
Heffron Company from the lien of said judgment as against
judgment creditors, purchasers, and mortgagees in good
faith, and directing the clerk of Onondaga county to note
on the docket of said judgment that the lien thereof was
suspended on appeal pursuant to the terms of said order.
This order was entered in the clerk's office of
Onondaga county on June 23, 1913, and the clerk complied
with the terms of its direction to him. The stipulation
entered into between the attorneys for the respective
parties to the action, the granting of the order of the
Special Term, and the action of the clerk in noting on his
docket the suspension of the lien, were all without notice
to the United States Fidelity & Guaranty Company, although
section 1256 of the Code of Civil Procedure provides that
such an order may be made only upon notice to the attorney
for the respondent and to the sureties in the undertaking.
The appeal to the Appellate Division terminated on the 27th
day of December, 1913, by an affirmance of the judgment.
144 N.Y.Supp. 1103. An appeal was thereafter taken by the
Heffron Company to the Court of Appeals, and on the 29th
day of December, 1913, the United States Fidelity &
Guaranty Company executed an undertaking on appeal to the
Court of Appeals. The appeal to the Court of Appeals was
dismissed on the 4th day of June. 1914. The order of the
Special Term granted June 23, 1913, has never been
vacated, nor has the lien of the judgment as suspended by
said order ever been restored by an order of the Supreme
Court of the State of New York.
'Eighth.
The city of Syracuse on the 15th day of September, 1913,
levied an assessment against the Heffron Company for the year
1913, which, together with fees and penalties, now amounts to
the sum of $1,119.52, no part of which has been paid.
'Ninth.
The county of Onondaga on the 15th day of December, 1913,
levied an assessment against the Heffron Company for the year
1913, which, together with fees and penalties, now amounts to
the sum of $426.57, no part of which has been paid.'
These
findings of fact cannot be disturbed, as they are accurate
and fully supported by the evidence. As to certain judgments,
the special master finds that one has been paid, that another
has been paid, except $70, and that the others were obtained
within four months of the filing of the petition and are not
liens. He then finds as conclusions of law:
'First.
That the mortgage of Daniel H. Tolman described in the
second finding of fact is valid and is a lien upon the
property described therein for $50,000 and interest from
August 30, 1913.
'Second.
That the contract of June 19, 1913 (Exhibit 10) is so
related to the said mortgage and the bond accompanying the
same that interest in excess of 6 per cent. per annum was
thereby taken upon the loan secured by the mortgage.
'Third.
That by reason of the provisions of section
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