Lancaster v. Amsterdam Imp. Co.

Decision Date16 January 1894
CourtNew York Court of Appeals Court of Appeals

Appeal from supreme court, general term, first department.

Controversy between Frederick J. Lancaster, as plaintiff, and the Amsterdam Improvement Company, as defendant, submitted without action on an agreed statement of facts. From a judgment of the general term (25 N. Y. Supp. 309) for plaintiff, defendant appeals. Reversed.

The other facts fully appear in the following statement by GRAY, J.:

This was a submission of a controversy to the general term in the first department upon agreed facts. The Amsterdam Improvement Company was incorporated under the laws of the state of New Jersey, in May, 1891, by five persons, of whom one only was a resident of that state, the others being residents of this state. Its certificate of incorporation, filed that day, contained the following article: ‘Second. That the places in this state where the business of such company is to be conducted are Jersey City and the city of Hoboken, in the county of Hudson. The principal part of the business of said company within this state is to be transacted at Jersey City, in the county of Hudson, and the places out of this state where the same is to be conducted, and where the company proposes to carry on operations, are the cities of New York and Brooklyn, in the state of New York. And that the objects for which said company is formed are the purchase and sale of real property, both improved and unimproved; the improvement of such property as may be purchased, and which, when purchased, is unimproved; the exchange of property for other property; the lending of moneys upon first and second mortgages, secured by bonds; and the purchase and sale, by assignment or otherwise, of such mortgages and bonds. The portion or the business of said company which is to be carried on out of this state in the said cities of New York and Brooklyn will be such as will come under the head of the objects for which this company is formed. The principal office or place of business of said company, out of this state, is the city of New York, in the county and state of New York.’ On December 21, 1892, the secretary of state of the state of New York issued a certificate, of which the following is a copy: State of New York. Office of the Secretary of State, Albany. It is hereby certified that the Amsterdam Improvement Company, which appears from the papers filed in this office on the twenty-first day of December, 1892, to be a foreign stock corporation, organized and existing under the laws of the state of New Jersey, has complied with all the requirements of law to authorize it to do business in this state, and that the business of such corporation to be carried on in this state is such as may be lawfully carried on by a corporation incorporated under the laws of this state for such or similar business.’ The statute under which this company was incorporated provided that ‘it shall be lawful for three or more persons to associate themselves into a company to carry on any kind of manufacturing, mining, chemical, trading or agricultural business, agricultural fairs and exhibitions for the encouragement of competition in agriculture, horticulture, breed of stock and development of speed in horses, the transportation of goods, merchandise or possengers upon land or water, inland navigation, the building of houses, vessels, wharves or docks, or other mechanical business, the reclamation and improvement of submerged lands, the improvement and sale of lands,’ etc. This statute also provided that corporations shall have the power ‘to hold, purchase and convey such real and personal property as the purposes of the corporation shall require, not exceeding the amount limited in its charter, and all other real estate which shall have been bona fide mortgaged to the said company by way of security, or conveyed to them in satisfaction of debts previously contracted in the course of dealings, or purchased at sales upon judgment or decree which shall be obtained for such debts.’ Other provisions authorized a company organized under the statute to carry on a part of its business, and to have offices out of the state, and that they may hold, purchase and convey real and personal property out of the state, the same as if such real and personal property were situated in the state of New Jersey, provided that the certificate of organization shall state,’ etc. Another provision authorized any New Jersey corporation, incorporated under any general or special act, to conduct its business outside the state. May 23, 1891, Arthur P. Smith was the owner of a lot of vacant and unimproved land in the city of New York, which, by a deed dated that day, and duly recorded May 25, 1891, he conveyed to the defendant. On the 15th day of January, 1893, the plaintiff and the defendant entered into a written contract, whereby they agreed to exchange said lot of land for another lot of land owned by the plaintiff. The land of the plaintiff was valued at $72,000, and the land of the defendant at $49,500, and the difference, $18,500, the defendant agreed to pay to the plaintiff at the times and in the manner specified in the contract. It was agreed that the deeds should be exchanged at a place named on or before February 15, 1893. Pursuant to said contract the defendant executed a deed in due form, by which it assumed to convey the premises to the plaintiff. It is conceded that the defendant has done no business in the state of New Jersey, and that the only business or transactions in which it has been engaged since its organization have been carried on in the city and county of New York.

The following question was submitted to the general term: ‘Whether said defendant, the Amsterdam Improvement Company, possessed and has conveyed to Frederick J. Lancaster, the plaintiff herein, a good and sufficient title to the premises described in said contract and deed.’ That court has adjudged that the defendant's deed did not convey to the plaintiff a good title, and that its title was subject to the right, title, and interest of the people of the state, whose title was, at the time of the execution and delivery of the deed, superior and prior to that of the defendant.

Thomas S. Bassford, for plaintiff.

Louis Marshall, for defendant.

GRAY, J., (after stating the facts.)

Before apporaching the discussion of the principal question in this case, certain questions of subordinate importance may be disposed of, which have been raised upon the argument. One of them relates to the right of this corporation to recognition in our courts, as affected by the fact that the incorporators are, with one exception, citizens and residents of this state. Whatever inferences can be drawn as to the motives which took them into a foreign jurisdiction to organize a corporation under its laws, I agree with the general term that any such question has been once and for all settled by our recent decision in the case of Demarest v. Flack, 128 N. Y. 205, 28 N. E. 645. It appeard in that case that citizens of this state incorporated under the laws of West Virginia to carry on a certain business, with the principal office of the company in New York city, and where only it had been conducting its operations. It was claimed that these facts invalidated the corporation, and that there was a manifest evasion of, and fraud upon, the laws of the state. But it was held that they constituted no reason for refusing recognition to the corporation; that there was no essential difference between a corporation formed under the laws of a foreign state, the members of which were its own citizens, and one so formed, the members of which were citizens of our own state. If our citizens are attracted to other jurisdictions for purposes of incorporation, because of more favorable corporation or taxation laws, I cannot see in that fact, however, and in whatever sense to be deplored, any reason that they should be prevented from employing here the corporate capital in the various channels of trade or manufacture. That, as it seems to me, would be a rather hurtful policy, and one not to be attributed to the state.

Another question relates to the regularity of the proceedings for the incorporation of the defendant company under the laws of the state of New Jersey. I am unable to perceive any defect therein. I should say there had been a compliance with its statutes. But, if there could be pointed out some irregularity, it could not be made the subject of an objection to the defendant's title. It was a corporation de facto. Its incorporators had filed their certificate of incorporation as required by the laws of New Jersey, and a certificate had been filed in the office of the secretary of state of this state, as required by our laws of a foreign corporation. It was exercising a franchise attempted to be conferred upon it by the laws of New Jersey, and any question affecting its right to transact business because of alleged irregularities in organization is a matter for the government of that state to inquire into. It was said in Methodist, etc., Church v. Pickett, 19 N. Y. 482, with respect to the capacity of corporations to act, that ‘the rule established by law, as well as by reason, is that parties recognizing the existence of corporations by dealing with them have no right to object to any irregularity in their organization, or any subsequent abuse of their powers, not connected with such dealing. As long as they are overlooked or tolerated by the state, it is not for individuals to call them in question.’ That this principle is equally applicable to foreign corporations de facto was held in Bank of Toledo v. International Bank, 21 N. Y. 542. With respect to the question of whether the laws of the state of New Jersey authorize the kind of business which this company was organized and proposes to transact, I think that the provisions of the...

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