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Black v. Ellis

Supreme Court of New York, Appellate Division

December 11, 1908

BLACK
v.
ELLIS.

[113 N.Y.S. 559] Edgerton, Allen & Dean (Charles A. Edgerton, of counsel, and Garrard Glenn, on the brief), for appellant.

Maurice S. Hyman, for respondent.

Argued before PATTERSON, P. J., and INGRAHAM, McLAUGHLIN, CLARKE, and HOUGHTON, JJ.

CLARKE, J.

This appeal is taken from the judgment alone, and upon the judgment roll. The questions, therefore, arise upon the exceptions to the conclusions of law stated in the decision.

The plaintiff, the receiver of the Stirling Hotel Company, a domestic corporation, brings this action to set aside a chattel mortgage as null and void, and to have the same discharged and canceled of record. The findings of fact set forth that the defendant is, and since January 17, 1905, has been, the owner of the premises 208 and 210 West Fifty-Sixth street. The premises were first leased from the previous owners, defendant's grantors, on July 23, 1904, by one Annie M. Anderson. This lease was for a period of 21 years, 2 months, and 8 days, beginning July 23, 1904, at an annual rental of $19,000. The eighteenth clause of said lease provided:

" And the said tenant hereby covenants and agrees to pay to the said landlord in case of any breach for default by her in any of the covenants and agreements on her part herein agreed to be kept and performed, the sum of $7,500 which is to be taken and received by the said landlords as liquidated damages for said breach and not by way of penalty."

The nineteenth clause provided as follows:

" And the said tenant does hereby covenant and agree that she will secure the payment of the said $7,500 by executing to the said landlords at the time of the execution of this lease, a chattel mortgage for that amount upon certain household furniture and chattels belonging to her and stored at No. 60 West 39th Street, Borough of Manhattan, City of New York, and also upon household furniture and chattels in the premises hereby demised, and this day sold to the tenant by the said landlords. * * * and said tenant further covenants and agrees, as one of the conditions of this lease, that on or before July 1st in each and every year of the term hereby demised to make, execute and deliver to said landlords a new chattel mortgage in proper shape and form so as to entitle it to be filed and to be a first lien upon the household furniture and chattels hereinbefore agreed to be covered by the chattel mortgage given simultaneously herewith. * * *"

[113 N.Y.S. 560] This chattel mortgage to secure the payment of the $7,500 provided for in the eighteenth clause, by way of liquidated damages for a breach, was duly executed by Annie M. Anderson on July 23, 1904, and was delivered and recorded. On the 27th of July, four days thereafter, said Anderson transferred her entire interest in and to said lease to the Stirling Hotel Company, and did at or about the same time deliver to the said company all the furniture then on said premises, and all of the furniture and furnishings mentioned and described in the nineteenth clause of the lease between Gunn and Grant, defendant's grantors, and Anderson, subject to the chattel mortgage covering the furniture and furnishings hereinabove described. As part of the consideration for the sale of said chattels and transfer of the lease, the Stirling Hotel Company assumed all the obligations in said lease contained on the part of the tenant to be performed, and accepted the title to said chattels subject to the lien and incumbrance of the chattel mortgage, and entered on the premises. Thereafter, on January 13, 1905, the fee of the premises was conveyed, and the chattel mortgage assigned to the defendant. The hotel company remained in possession until it was dispossessed in August, 1907, and attorned as tenant. When it was dispossessed it was indebted to the defendant for back rent on said lease in a sum exceeding $7,500, and is still so indebted.

The Stirling Hotel Company had not, during its years of occupancy, made or filed a new chattel mortgage each year, as required of Annie M. Anderson in the original lease and as agreed to by it. On the 20th day of March, 1907, under a threat of dispossession, it did execute and deliver to the defendant a chattel mortgage similar to the one executed by Anderson, and containing this additional clause:

" These presents being given in conformity with a clause in said lease that the chattel mortgage mentioned therein should be re-executed and re-delivered yearly by the tenant to the landlord; these presents being to ratify and confirm and in all respects to carry out the provisions in said lease contained, relating to said chattel mortgage."

The court has found as a matter of fact that the chattel mortgage dated March 20, 1907, was executed and delivered without the written consent of at least two-thirds of the stockholders of the Stirling Hotel Company having first been filed in the office of the clerk of the county of New York, and that such written consent has never been filed therein; that prior to the execution and delivery of said chattel mortgage no stockholders' meeting was called to consider the question of giving or executing said chattel mortgage, nor was any notice of stockholders' meeting for such purpose ever sent to the stockholders of said corporation; that the question of giving said chattel mortgage was never considered or discussed at a stockholders' meeting, nor does the minute book of the meetings of the stockholders contain any record of an assent of any of the stockholders to the giving thereof, or any reference to said chattel mortgage whatever. The court also found that at least two thirds of the stockholders were aware of the execution and delivery of the mortgage prior to its delivery, and that the remaining stockholder had no such knowledge. But it further found:

" That * * * said chattel mortgage was executed by the proper officers of the said company with the knowledge and consent of George O. Gillingham, [113 N.Y.S. 561] * * * Alice B. Scott, * * * and Ella L. Boon, * * * who constituted the entire board of directors, and all the officers of said company, and were the holders of more than two-thirds of the issued capital stock of said corporation."

There was but one other stockholder, Annie M. Anderson, the original lessee who had executed the original chattel mortgage. She had no knowledge of the execution of the mortgage by the company, although she had transferred her lease and furniture to the company subject to the conditions of the mortgage.

Upon these findings of fact, the learned court drew the conclusion of law " that the said mortgage was not given or accepted in violation of section 2 of the stock corporation law (Laws 1890, p. 1067, c. 564), as it was, and at all times remained, a valid lien upon the property therein covered and described" ; and that " the defendant was entitled to judgment that the complaint be dismissed upon the merits." To these conclusions of law, plaintiff duly excepted, and from the judgment entered upon said decision appeals.

A corporation is an artificial entity created by law. Its powers, rights, obligations, duties, and limitations are those, and those only, granted, permitted, allowed, and prescribed by law. Its right to do business, to acquire, to hold, and dispose of property, is that, and only that, conferred upon it by law. Section 2 of chapter 40, p. 55, of the Laws of 1848, the first general corporation act relating to manufacturing corporations, authorized corporations formed thereunder to purchase, hold, and convey real estate for corporate purposes, but prohibited them from mortgaging or giving any lien thereon. Of this provision, the Court of Appeals said, in Rochester Savings Bank v. Averell, 96 N.Y. 467:

" The Legislature in creating corporations may grant or withhold such powers as it sees fit, and the prohibition against mortgaging in the act of 1848 was absolute and unqualified."

This restriction was modified by chapter 517, p. 1154, of the Laws of 1864, which permitted such corporations to mortgage their real estate to ...


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