The Vigilancia

• Decision Date: 07 May 1895
• Citation: 68 F. 781
• Parties: THE VIGILANCIA. v. PROCEEDS OF THE VIGILANCIA et al. THE SEGURANCA. THE ALLIANCA. THE ADVANCE. ATLANTIC TRUST CO.
• Court: U.S. District Court — Southern District of New York

68 F. 781

THE VIGILANCIA. THE SEGURANCA. THE ALLIANCA. THE ADVANCE. ATLANTIC TRUST CO. v. PROCEEDS OF THE VIGILANCIA et al.

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

May 7, 1895

Carter & Ledyard and E. L. Baylies, for petitioners.

R. D Benedict and Maxwell Evarts, for Huntington and Pratt & Co.

Cary &amp Whitridge and W. P. Butler, for Brown Bros.

James McKeon, for G. & R. Hudson.

W Mynderse, for B. & R.M. Ins. Co. and others.

BROWN District Judge.

Petitions for the surplus proceeds of the above vessels having been filed by the Atlantic Trust Company, as mortgagee in trust for holders of bonds of the United States & Brazil Mail Steamship Company, as well as by other creditors, who contest the validity of the trust mortgage, and upon an order of reference thereon, the commissioner having made his report exceptions have been filed to the commissioner's finding sustaining the validity of the mortgage as against creditors, as well as against the steamship company. The principal points of the contestants in claiming the invalidity of the mortgage are: (1) That the mortgage was usurious and void as against creditors, because the bonds were sold at a discount of 20 per cent.; (2) that the directors by whom the mortgage was executed were not elected in conformity with the by-laws of the company, which required a previous notice of 20 days of the time and place of holding the election; (3) that the supplementary mortgages upon the Seguranca and Vigilancia were void, because made after the act of 1890, which requires the written assent of two-thirds of the stockholders, which was not obtained.

The report of the commissioner presents a full statement of the facts; and he overrules each of these objections, with a statement of his reasons therefor, which seem to me, upon careful examination, to be sound.

1. It is a principle of constant application in the federal courts that the construction of a state statute given to it by the highest court of the state, is to be taken as the meaning of the statute, and effect given to it accordingly. The defense of usury in actions against corporations is expressly prohibited by the state statute of 1850. The construction given to this act is, that in effect it repeals the statute of usury as respects corporations. Curtis v. Leavitt, 15 N.Y. 9, 85, 154, 229; Rosa v. Butterfield, 33 N.Y. 665, 675; Merchants' Exch. Nat. Bank v. Commercial Warehouse Co., 49 N.Y. 635; Bank v. Wheeler, 60 N.Y. 612; affirmed 96 U.S. 268. This has been so often affirmed that I not consider myself at liberty to regard this defense as available to the contestants. The statute is for the protection of the lender to corporations; and this purpose would be thwarted if his security could be destroyed by a defense of usury interposed by creditors, as much as if that defense were allowed to be interposed by the corporation itself. In the language of Rosa v. Butterfield, such contracts, since the act of 1850, are 'not usurious,' and it is immaterial that the defense is not made directly by the corporation.

2. The meeting at which the directors who executed the mortgage were chose was held on May 28, 1889, and notice thereof was published on May 8, and on every week day thereafter including the 28th. The by-laws required that 'notice of the time and place of holding the election shall be published not less than 20 days previous thereto. ' The contestants claim that the by-laws required 20 full days to intervene, which would not be till May 29th. This is contrary, however, to the ordinary rule for the computation of time in this state. By Code Civ. Proc. Secs. 787, 788, it is provided that 'the time within which publication of legal notices or within which acts in actions or any special proceedings are required to be done, shall be computed by excluding the first day and including the last'; and by section 5013 of the United States Revised Statutes a similar provision was made in regard to proceedings in bankruptcy. These provisions do not literally include the publication of notices under the by-laws of corporations. But the state rule, prescribed in all cases of legal proceedings, is a legislative provision of such importance, and its analogy to the present case is so plain, that I can have no doubt that it ought to be adopted, in the absence of any contrary indication, as the meaning and intent of this by-law. In most of the cases in which a different rule has been adopted, the language construed has been peculiar, seeming to require the specified number of days or months to have elapsed; such as the entry of judgment 'after four days,' or avoiding an assignment 'within four months.' Dutcher v. Wright, 94 U.S. 553; Kane v. City of Brooklyn, 114 N.Y. 586, 594, 21 N.E. 1053. In the present case there...