Cornell University Law Library The Moak Collection PURCHASED FOR The School of Law of Cornell University And Presented February 14, 1893 IN HEnORY OF JUDGE DOUGLASS BOARDMAN FIRBT DEAN OF THE SCHOOL By his Wife and Daugliter A. M. BOARDMAIN and ELLEN D. WILLIAMS , Cornell University Library KFN5345.S72 1890 A treatise on the New York Manufactiiriiv 3 1924 021 908 284 (IJnrnpll Slatu irlynol ICtbraty The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/cletails/cu31924021908284 A TEEATISE ON THE NEW YORK MANUFACTUEING COEPORATION ACT OF 1848, AND BUSINESS COEPOEATION ACT OF 1875. TOGETHER WITH SAID ACTS, AS AMENDED, EXTENDED AND MODIFIED TO APRIL, 1890. WITH FOEMS AND BY-LAWS. 1^ BY EDWARD W. SOUTHWORTH AND DWIGHT ARVEN JONES, OF THE MEW TOEE BAR. SECOND EDITION. NEW YORK: BAKER, VOORHIS & CO., PUBLISHERS, 66 NASSAU STREET. 1890. Copyright, 1890, By Edwaed W Soothworth and Dwighi Abven Jonks. PREFACE TO SECOND EDITION. The plan of arrangement originally followed in the preparation of this book has been adhered to in the present edition. The book is confined exclusively to the Laws of 1848, Chapter 40, and the Laws of 1875, Chapter 611, and Part I is given to the former Act and Part II to the latter. The sections of the Manufac- turing Act, with all amendments and with the general statutory law applicable thereto, are still arranged with reference to their subject-matter. But in addition, we have given the amended sections of the Act in their numerical order, followed by the provisions supplement- ary to these sections, in the first chapter of the work, and have thus endeavored to present the Act itself in a convenient shape for ready reference. This, it is be- lieved, will add materially to the usefulness of the book. We have also given the extensions of the Manufacturing Act in full in Appendix A, and have added much im- portant and recent statutory law. The decisions rendered since the publication of the first edition are numerous and valuable, and these also have been incorporated in the text. Both the Manufacturing Act and the Busi- ness Act, therefore, are given in this edition, with the statutes and decisions to the present date. New York, Avril, 1890. TABLE OF CONTENTS. PART I. THE MANUFACTURING CORPORATION ACT OF 1848. CHAPTEE I. PAGE THE ACT. 1-23 Section 1. Formation of companies. 3. Wlien corporation is formed ; powers, etc. 3. Number and election of trustees. 4. Trustees to hold over. 5. Designation and appointment of officers. 6. Trustees to make calls on stockholders. 7. Trustees to make by-laws. 8. Stock personal estate and transferable. 9. Copy of certificate of incorporation to be evidence. 10. Liability of stockholders. — Capital stock, when to be paid in. 11. Certificate of payment of capital stock to be recorded. 13. Annual Report. — Liability of trustees. 13. Payment of dividends by insolvent company. — Trustees liable. 14. Stock to be paid in cash. 15. False certificate or report. — Trustees liable. 16. Liability of executors, etc., as stockholders. 17. Who to vote at elections. 18. Liability of stockholders to laborers, servants, etc. 19. Alteration or repeal of act. 30. Company may increase or diminish capital stock. 21. Meeting to increase or diminish capital, etc., how called. 22. Meeting to increase or diminish capital, etc;, how con- ducted. — Certificate to be filed. 23. Indebtedness of company not to exceed capital stock. 24. When stockholders cease to be liable for debts. VI TABLE OP CONTENTS. Chapter I. — The Act — continued. p^os Section 25. Stock books to be kept. 26. General powers of companies. 27. Statement of affairs of company, on request. Supplementaiy Provisions. — Laws 1853, Chapter 333. Laws 1857, Chapter 29. Laws 1860, Chapter 269. Laws 1861, Chapter 170. Laws 1864, Chapter 517. Laws 1866, Chapter 78. Laws 1866, Chapter 838. Laws 1878, Chapter 163. CHAPTEE II. PURPOSES FOR WHICH CORPORATIONS MAT BE FORMED UNDER THE MANUFACTURING ACT . 23-37 § 1. Scope of act. 2. Amendments to section 1. 3. Extensions of act. — How shown in alphabetical table. 4. As to the organization of companies for "Agricultural, horticultural, medical or curative business. " 4a. As to the organization of news companies. 5. Table showing purposes for which corporations can be formed under the act, and its extensions. CHAPTEE III. FORMATION OF CORPORATIONS 38-47 § 6. Provisions affecting formation. 7. Requisites of certificate of incorporation. 8. When incorporated. Duplicate certificates. 9. Incorporators. Promoters. 10. Provisions making certified copy of certificate evidence. 11. Amended certificate. CHAPTEE IV. TRUSTEES 48-68 § 12. Provisions as to number, qualification, election, &c. 13. Who may be a trustee. 14. Annual election of trustees. 15. Provisions authorizing executor, pledgor, &c., to vote. 16. Trustees to manage company. TABLE OP CONTENTS. vii Chapter IV.— ^Trustees — continued. viae § 17. Trustees' meetings. 18. Provisions allowing election after proper date. — Trustees hold over. 19. Trustees may act until successors are chosen. 20. Provisions as to officers. 21. Trustees to select officers. 22.' Duties and powers of officers. 23. Officers' unauthorized acts, how ratified. 24. Provisions as to by-laws. 25. General features of by-laws. 36. Duties of-trustees, under act. 27. How to increase or reduce number of trustees. CHAPTEE V. INDIVIDUAL LIABILITY OF TRUSTEES.— ANNUAL RE- PORT 64-90 § 28. Provisions as to annual report. 29. Section 12 a penal statute. 30. Nature of trustees' liability. 31. Contents of the report. 32. Who must sign report. ^ 33. Who to verify report. 84. Time within which report must be made, filed, and pub- lished. 35. Debts for which trustees are liable. 36. Effect of a prior judgment against company. 37. An accrued liability necessary. 38. Who liable under section 12. 39. Different boards may be liable for same debt. 40. Liability once fixed not affected by subsequent defaults. 41. Liability as to renewal notes and notes given for preced- ing indebtedness. 42. When assignee and executor may sue. 43. Cause of action does not survive against executor of de- ceased trustee. 44. Fellow stockholder may, but co-trustee cannot sue. 45. Suits not maintainable without the State. 46. Plaintiff held to great strictness in pleading and proof.—. Examples. 47. Requisites of complaint. 47a!. Two or more trustees can be joined as parties defendant. 48. As to joinder of actions under sections 10, 12, 15 and 23. VIU TABLE OF CONTENTS. Chapter V. — Individuai, Liability or Trustees, &c. — continued. PAOB § 49. In what county action should be brought. 50. Compulsory reference cannot be ordered, nor trustee arrested. 51. Summons, how indorsed. CHAPTEE VI. INDIVIDUAL LIABILITY OF TRUSTEES.— Continued 91-110 § 52. Trustee sued under section 12, has three main defenses. 53. First denial of the debt. 54. Judgment against company not evidence against trustee. 55. Judgment in favor of company conclusive in favor of trustee. 56. Defenses denying corporate indebtedness. 57. Defenses based on time debt arose or existed. 58. Second denial of the default. 59. Defense established by proof of dissolution. 60. Third denial of trusteeship. 61. Liabilities of trustees holding over. 62. De facto trustees. 63. Eesignation and its effect. 64. Limitation of actions. 65. Provisions as to false reports, statements, etc. 66. Application and construction of section 15. 67. Provisions as to certain dividends. 68. Liability of trustees for paying prohibited dividends. 69. Provisions as to indebtedness exceeding capital. 70. Action, how brought thereunder. 71. Loans to stockholders. 72. Other liabilities of trustees. CHAPTEE VII. STOCK AND STOCK CERTIFICATES 111-128 § 73. Provisions as to stock and its transfer. 74. Nature of stock. 75. Certificates, how transferable. 76. Corporate liens on shares. 77. Lost or destroyed certificates, how replaced. 78. Provisions as to issuing capital stock. 79. Capital stock, how issued. 80. Certificate of payment of capital stock to be recorded. 81. Provisions as to increase or diminution of capital stock. 82. Increasing or diminishing capital stock. 82fl!. How to increase number of shares of capital stock. TABLE OF CONTENTS. IX CHAPTER VIII. PAOE STOCKHOLDERS 129-142 § 83. Provisions as to calls upon stockholders, etc. 84. Subscribers. 85. "When subscribers relieved from subscriptions. 86. Unpaid subscriptions. 87. Forfeiture of shares. 88. Provisions as to stock books and entries therein. 89. Stock books. 90. Stockholders' right to dividends. 91. Provisions authorizing stockholders to demand statement. 93. Stockholders' privileges. CHAPTBE IX. INDIVIDUAL LIABILITY OF STOCKHOLDERS . . 143-181 § 93. General statement of individual liability of stockholders under act. 94. Provisions as to stockholders' liability to laborers, serv- ants and apprentices. 95. Nature of the liability. 96. Who are "laborers, servants and apprentices." 97. Eequisites to enforcing claims against stockholders. 98. Laborers' claims may be assigned. 99. Provisions as to individual liability of stockholders when capital is not paid in, or certificate of payment is not recorded. 100. Stockholders' individual liability under these provisions. — When it exists. 101. For what debts stockholders liable hereunder. 102. Stockholders relieved from future liability by "bona fide and properly consummated sale of stock. 103. Liability as between vendor and vendee, when transfer is not registered. 104. Defects in organization no defense to certain stockholders. 105. No defense to stockholder that stock was represented to him to be full paid. 106. Stockholders only liable to extent of stock held by them. 107. Stockholders severally liable to such contract creditors as are within section 24. X TABLE OP CONTENTS. Chapter IX. — Ihdividuai, Liability, &c. — continued. § 108. Action at law against single stockholder usually best, but may be defeated by equitable offset. 109. What claims a creditor stockholder may equitably offset. 110. Rule where such creditor stockholder is also debtor of company. 111. Questionable limitation of this privilege of equitable offset. 113. Creditor may bring equitable suit. 113. Rules governing such equitable suit. 114. Court of equity will restrain in such equitable suit sepa- rate actions at law against stockholder. 115. Section 10 imposes no liability in favor of corporation, and receivers cannot sue stockholders thereunder. 116. Section 10 imposes no penalty. Action under it may be brought in sister States. 117. Questionable whether stockholder may sue co-stock- holder under section 10. 118. Who may sue. 119. What creditor must show to recover against stockholder. 120. When action to be brought against company under section 34. 131. Judgment to be recovered' therein and execution to be issued. 123. Judgment against company no evidence of debt in action against stockholder. 123. When certain requisites prescribed by section 34 are excused. 124. Stockholders holding stock issued for property freed from liability under section 10. 135. Such stock must, liowever, have been honestly issued by trustees. 136. Stockholders ceasing to be such, how long liable there- after. 137. Limitations apply to actions under section 10. 138. As to right of contributions between stockholders. 129. Provisions exempting executors, pledgees, &c., from per- sonal liability. 130. When exemption applies. 181. Liabilities of stockholders apart from act. TABLE OP CONTENTS. xi CHAPTEE X. PASB POWERS AND PRIVILEGES OF CORPORATIONS FORMED UNDERACT 182-S13 § 132. Provisions as to general powers. 133. Other general powers. 134. Company may martgage. 135. Nature of provisions allowing mortgage. 135a. Stockholders' consent. 1356. For what debts mortgages may be given. 136. Privileges of purchasers at, -mortgage sale of franchise and property of corporations. 137. Two or more companies may consolidate. 137a. .Consolidation of manufacturing corporations. 138. Company may change corporate name. 139. May hold stock of certain other corporations. 140. May extend duration of corporate existence. 141. May change its place of business. 142. May carry on business out of State. 143. Other special privileges. CHAPTEE XI. TAXATION AND DISSOLUTION 214-240 1. Taxation. § 144. Where corporations are taxable. 145. State Tax Law 1880, as amended. 145a. Object and eflFect of act. 146. Construction of act. 147. General method of corporate taxation. 147a. Tax upon organization of companies. 2. Dissolution. 148. Provisions as to alteration or repeal of charter. 149. Where charter is annulled the corporation is extinct. 150. Corporation extinct upon expiration of its term of exist- ence. 151. Stockholders cestuia que trust and not partners after ex- piration of charter. 152. Dissolution of companies, how effected. XU TABLE OP CONTENTS. PART II. THE BUSINESS CORPORATION ACT OF 1875. CHAPTEE XII. PROVISIONS OP THE BUSINESS CORPORATION ACT 343-27^ § 153. What corporations may organize hereunder. 154. General powers of companies. 155. Application for license. 156. Secretary of State to issue license to commissioners. 157. Commissioners to open subscription books. — Subscribers, ■when to meet. 158. What the by-laws must provide. 159. Commissioners' report. — Certificate of incorporation. 160. License deemed revoked, when. 161. Table of companies to be published annually in session laws. 163. Directors. — Officers. — Number of directors, how changed. 163. Capital stock. — Subscriptions, how payable. 164. Stock certificates and their transfer. 165. Corporation may issue bonds. 166. Stock or bonds, for what issued. 167. Capital stock, how increased or reduced. 168. Corporate account books to be kept. 169. Stock book to be kept; its contents, &c. 170. Annual report to be filed. — Penalty upon neglect. 171. Certain dividends prohibited. 173. Loans to stockholders prohibited. 173. False certificate or report. — Liability therefor. 174. Liability when indebtedness exceeds capital stock. 175. Executors, &c., not personally liable as stockholders. 176. Executors, &c., may vote at elections. 177. Qualifications of stockholders' liability. 178. Annual election of directors. — Voting thereat. 179. On failure to elect, directors hold over. 180. Oath of inspectors of election. 181. Extending duration of corporate existence. 183. Corporations, where taxable. 183. Change of principal place of business. 184. What companies may reorganize hereunder. 185. Corporations under act, of two classes. TABLE OP CONTENTS. Xlll Chapteb XII.— Peovisions of the Act — continued. page § 186. Full liability companies. 187. Limited liability companies. 188. Word " limited " to be used. — Penalty for its omission. 189. Individual liability of stockholders in " limited " com- panies. 190. Effect of dissolution. 190a. Amended certificate to extend business. 1906. Increase of number of shares of stock. 190c. Full liability companies may reorganize as limited lia- bility companies. 190d. Natural gas companies. CHAPTEE XIII. CORPORATIONS UNDER THE BUSINESS ACT.— DISTINC- TIONS BETWEEN THIS ACT AND THE MANUFAC- TURING ACT 373-390 § 191. Introductory. 193. What corporations may form under the Business Act. 193. Formation of corporations. 194. Directors. 195. Officers.— By-laws. 196. Capital stock. 197. Increase or diminution of capital stock. 198. Powers and privileges. 199. Directors' liability. — Annual report. aOO. Stockholders. 301. Pull liability companies. — Stockholders' liability therein. 203. Limited liability companies. 303. Stockholders' liability in "limited " companies. 304. Taxation and dissolution. 205. Certain provisions not in act. APPENDIX A. — Extensions of the Manufacturing Act APPENDIX B. — Provisions of the Penal Code applicable to Acts APPENDIX C. — Forms under the Manufacturing Act APPENDIX D. — Forms under the Business Act . INDEX TO PART I.— The General Manufacturing Act INDEX TO PART II. — The Business Corporation Act 393 316 333 387 349 37S TABLE OF CASES. [References are to pages.] Abbott V. The Hard Rubber Co. 53 Adams v. Mills, 75, 94 Adderly v. Storm, 50, \ 54 Adriance v. Roome, 58 Agate V. Edgar, 171 Agate V. Sands, 159, 161 Alexander v. Cauldwell, 59, 94 Allen V. Clark, 74, 75, 86 Allen V. Ward, 173 American Grocer v. The Grocer, 42 American Silk Works v. Salomon, u8 Anderson v. Speers, 106, 108 Anderton v. Wolf, 142 Andrews v. Murray, 67, 74, 167 Appeal of Linnard, 113 Arthurs. Griswold, 105, no Aspinwall z/. Sacchi, 155, 178 Aspinwall v. Torrance, 17^ Astor V. Westchester Gaslight Co. 189 Atlanta Hill Mining Co. v. Andrews no Averill v. Barber, 142 Bailey v. Bancker, 158, 167, 172, 179 Baker z/. Backus, 119 Ballard v. Burgett, 1 1 2 Bank, etc. v. Ibbotson, 99, 159, 164 Bank of Attica v. Pottier & Stymus Mfg. Co. 60 Bank of Augusta v. Earle, 210 Bank of Austria v Earl, 2U Bank of Buffalo v. Kortright, 1 14 Bank of California v. Collins, 82 Bank of U. S. v. Dandridge, 53 Bartlett v. Drew, 133, 181 Battershall v. Davis, 118, 131 Beach v. Smith, 119, 285 Beardsley v. Johnson, 52 B Beers v. The Phoenix Glass Co. 59 Belmont v, Coleman, 172 Berridge v. Abemethy, 172 Beveridge v. N. Y. Elevated R. R. . . C°- S3 Billings V. Robinson, 115, 131, 132, 133 Billings V. Trask. 109, 166 Bird V. Hayden, 84 Birmingham Nat'l Bank v. Keck, 173 Birmmgham Nat'l Bank v. Mosser, 173 Bisley v. I. B. & W. Rw. Co. 58 Bissell V. Bissell,,73 Bissell V. N. Y. C. & H. R. R. R. Co. 90 Blake z/. Griswold, 82, 105, 135 Blake v. Wheeler, loi, 102 Blatchford v. R. R. Co. 136 Bliss V. Matteson, 54 Bliven v. Peru Steel & Iron Co. 239 Boardman v. L. S. & M. S. R. R. Co. 137 Bolen V. Crosby, 57, 72, 74 Bolz V. Ridder, 105 Bominer v. Am. Spiral Spring Co. 46 Bonnell v. Griswold, 66, 68, 70, 72, 87, 98, 105 Botsford V. Dodge, 87 Boughton V. Otis, 78, 99 Boyle V. Thurber, 285 Boynton w. Andrews, 176 Boynton v. Hatch, 176 Bracketti'. Griswold, 81, 82, 105 Bradt v. Benedict, 98 Brand v. Goodwin, 285 Brewster v. Hatch, 46, Brick Church v. The Mayor, 60 Briggs V. Cornwell, 156, 159, 162 Briggs V. Easterly, 83 Briggs V. Penniman, 133, 159, 164 XVI Beferencsa] TABLE OF CASES, [are to pages. Brinckerhoff v. Bostwick, Receiver, 109 Brinckerhoff v. Brown, 98 Brisbane v.D.,L 8c W. R. R. Co. 113, 136 Brockway v. Ireland, 175 Bronson v. Dimock, 83 Brown v. A. B. C. Fence Co. 148 Brown w. Smith, 121, 151, 174 Brown v. Torrey, 174 Bruce ^'. Driggs, 120, 151 Bruce v. Piatt, 66, 98, 99, loi, 102 Buffalo, &c., R. R. Co. v. Cary, 46, 155 Buffalo & Jamestown R. R. v. Gif- ford, 45 Buffalo Grape Sugar Co. v. Albur- ger, 115 Bulkley v. Whitcomb, 162 Burgess v. Seligman, 180 Burke v. Smith, 54 Bunv. Wilcox, 129, 130, 157 Burrall v. Bushwick R R. Co. 112 Butler I/. Smalley, 73, 97, 105 Byers v. Franklin Coal Co. 74, 77 Byrne v. N. Y. Brick & Cement Co. 238 Cable V. McCune, 84 Cameron v. Seaman, 73, 85, 97, 99 Campbell v. American Zylonite Co. 113 Carley v. Hodges, 81 Carpenter v. Black Hawk Mining Co. 191, 192 Carpenter ^/. N. Y.,&c., R. R. Co. 137 Carr v. Risher, 68 Castle V. Lewis, 54 Cayuga Lake R. R. Co. v. Kyle, 46 Central City Savings Bank v. Walk- er, 238 Central Gold Mining Co. v. Piatt, 191, 192 Central Trust Co. v. N. Y. C. & N. R. R. Co. 230 Cerbat Mining Co. v. State, 219 Chambers!/. Lewis, 86, 108, 157 Chandler z/. Hoag, 71, 78, loi, 102 Chapman v. Chumar, 147 Chase v. Lord, 97, 151, 175 Chase -v. Vanderbilt, 54 Chemical Nat. Bank v. Colwell, 84 Chesebrough Mfg. Co. v. Coleman, 214 Childs V. Smith, 44 Christensen v. Colby, 1 59 Christensen v. Eno, 1 1 2 Christian Union v. Yount, 211 Cincinnati Cooperage Co. v. O'Keefe, 73 Claflin v. Farmers & Cit. Bk. 58 Clapp v. Wright, 89 Clark V. Myers, 146, 179 Clarke v. Acosta, 108 Clarke ?/. Dickson, 156 Clave V. Thompson, 285 Cochran v. Am. Op. Co. Lim. 289 Cochran v. Smith, 285 Coffin V. Reynolds, 147 Cole V. Ryan, 130 CoHes V. Trow City Directory, 185 Collins T/. Suau, 172 Coman v. Lakey, 190 Conkling v. Secor Sewing Machine Co. 190 Conro V. Port Henry Iron Co. 53 Copeland v. Johnson Mfg. Co. no Cornell z". Clark, no Cornell v. Moulton, 73 Cornell v. Roach, 72, 83, 86, 103 Corning v. McCuUough, 166, 168, 178 Corning v. Southland, 60 Cowell V. Springs Co. 211 Cox V. Gould, 153, 189 Cox V. N. Y. C. & H. R. R. R. Co. 90 Craft V. Cuykendall, 85 Craig V. Dimock, 1 5 1 Craw V. Easterly, 49, 100, loi Cross V. Pinckneyville Mill Co. 24 Curtain v. Father Matthew Soc. 61 Curtis V. Leavitt, 54 Cushman v. Thayer Mfg. Jewelry Co. 114 Cutting z/. Damerell, 114, 132, 133 Cuykendall v. Corning, 84, 1 52, 1 58, 169, 173 Cuykendall v. Douglass, 125 Cuykendall v. Mills, 166 Dabney v. Stevens, 53, 58, 60, 85 Dalton V. Goodwin, 285 Davis Sewing Machine Co. v. Best, 58 Dayton v. Borst, 131 Dean v. Biggs, 1 32 Dean v. De Wolf, 147 Dean v. Mace, 148, 171 Beferenees] TABLE OF CASES, [are to pages. XVll Dean v. Whiton, 146 De Caumont v. Bogert, 1 1 5 De Groif v. American Linen Thread Co., 185 Demingw. Puleston, 67, 75, 81, 100, 167 Dempsey v. Willett, 148 Denike v. N. Y. & R. L. C. Co. 190, 238, 239 De Vinne v. Rianhard, 41 De Witt V. Hastings, 45 Diamond Watch Co. v. Roeber, 185 Dikeman v. Pudchafer, 151 Doctor z/. Guggenheim, 1 72, i8i Dodge V. Havemeyer, 168, 175 Dodge V. Potter, 151 Dorris v. French, 45, 130, 132 Dorris li. Sweeny, 45, 132 Douglass 7/. Ireland, 88, 166, 175 Draper v. Beadle, 175 DriscoU V. West Bradley & Gary Mfg. Co. 61, 114 Dubois V. Hall, 190 Duche V. Buffalo Grape Sugar Co. 43 Duckworth v. Roach, 103, 104 Dunham v. Village, &c. 61 Dunn V. Star Fire Ins. Co. 1 14 Dutchess Cotton Mfg. Co. v. Davis, 133 Dyeing and Printing Est. v. De Wes- tenberg, 208 Easterly v. Barber, 83, 100, loi East N. Y. R. R. Co. v. Lighthall, 53 Eaton V. Aspinwall, 45. 155 Eddy V. Co-Operative Dress Asso'n, 177 Eden Musee Am. Co. v. Carr, 25 Edison' Electric Light Co. v. New Haven Electric Light Co. 200 Ellis V. Howe Machine Co. 60 ElHs V. Schmock, 156 Elwell V. Dodge, 60 Ely 7/. Holton, 25 Empire City Bank, 1 56 Erickson v. Nesmith, 167 Erie R. R. Co. v. Ramsey, 165 Erwin v. Navigation Co. 102 Esmond v. BuUard, 74, 75, 85 Estes V. Burns, 82 Evening Journal Association v. State Board of Assessors, 231 Excelsior Grain Binding Co. v. Stay- ner, 285 Excelsior Petroleum Co. v. Embury, 107 Excelsior Petroleum Co. v. Lacey, 107 Ex parte Barker, 51 Ex parte V)^sAo\\.y^ 51 Ex parte Dodge, 73 Ex parte Murphy, 50 Ex parte Willcocks, 50 Fairbanks v. Davis, 151 Farmers' Loan & Trust Co. of N. Y. V. McKinney, 211 Farmers' & Mechanics' Bank v. Em- pire S. Dressing Co. 58 Farnsworth v. Wood, 158, 165, 166 Fenlon v. Dempsey, 135 First Nat. Bank v. Peric, 84 First Nat'l Bank of Deadwood v. Gustin, &c.. Mining Co. 167 Fisher v. Marvin, 170 Flash z/. Conn, 84, 159, 166, 173 Fleischauer v. Dittenhoefer, 173, 178 Fourth Nat'l Bank v. Francklyn, 167 Frask v. Peekskill Plough Works, 198 Freeland v. McCullough, 1 53 Freeman's Nat'l Bk. of Boston v. Smith, 122, 141 French v. McMillan, 135, 138 French v. O'Brien, 59 Frothinghani v. Barney, 239 Fuller V. Rowe, 238 Gadsden v. Woodward, 65, 89 ^ Gamble v. Queens Co. Water Co. 142 Garrison v. Howe, 65, 76, 78, 98, 99, 153, IS9- 165 Geisenheimer v. Dodge, 87 Getty V Devlin, 46 Gildersleeve v. Dixon, 73, 97 Glen's Falls Paper Co. v. White, 69, 70, 71, 72, 87, 89 Goff V. Whitney, 152, 153 Goldsmith v. Smith, 137 Goldsmith v. Swift, 105 Gordon v. Comes, 229 v Graham v. Atlanta Hill, &c., Co. 191 Graham v. Hoy, 181 XVIU Beferences\ TABLE OF CASES, [are to pages. Gray v. N. Y. & Virginia S. S. Co. 109 Greeley v. Smith, 237 Greenpoint Sugar Co. v. Wiiitin, 184, 188, 189 Griffith v. Mangam, 164 Grynes v. None, 1 1 5 Guggenheimer v. O'Keefe, 73 Gutta Percha & Rubber Mfg. Co. v. McMahon & Tanner, 214 Halsey v. McLean, 166 Halstead v. Dodge, 87, loi, 130 Handy v. Draper, 157, 169, 171, 172, 178 Hardman v. Sage, 170 Harris v. Norvell, 147, 158 Hastings v. Drew, 181 Hatch V. Attrell, 285 Hatch V. Dana, 133 Haviland w. Chace, 118 Heath v. Barmore, 184 Heckmann v. Pinkney, 25 Henderson v. Royal British Bank, 156 Hermance v. Hilmers, l6i Herries v. Piatt, 146 Herries v. Wesley, 49, 135 Hickory Farm Oil Co. v. Buffalo, N. Y. & P. R. R. Co. 210 Hill V. Conkling, 148 Hill V. Newichawanick Co. 137 Hill V. Silvey, 1 57 Hill V. Spencer, 147 Hoag V. Lament, 81 Hoagland v. Bell, 155, 172 HoUingshead v. Woodward, 98, 173, 176, 177 Holmes, Booth & Haydens v. The Holmes, Booth & Atwood Mfg. Co. 42 Holmes, Booth & Haydens v. Wil- lard, no Holmes & Griggs , Mfg. Co. v. Holmes & Wessel Metal Co. 207 Homer v. Henning, et al. 108 Hovey v. Ten Broeck, 147, 148, 149 Howe V. Deuel, 54 Hoyt V. Thompson, 55, 58 Hudson River Bridge Co. v. Patter- son, 217 Hughes V. Vermont Copper M. Co. 136 Hughes V. Woodward, 89 Huguenot Nat'l Bk. v. Studwell, 73, 98 Huntington v. Attrill, 105, 281 Hyatt V. Allen, 137 Hyatt V. Esmond, 155 Hyatt V. Roach, 89 Hyatt z/. Swivel, 113 Importers' & Grocers' Exchange, 239 Inglehart v. Thousand Island Hotel Co. no In re Dramatic Fund Asso. 239 In re N. Y., L & W. Ry. Co. 47 Isham V. Buckingham, 113, 132 Jackson v. Campbell, 58 Jagger Iron Co. v. Walker, 81, 170 Jarvis v. Manhattan Beach Co. 114 Jermain v. R. R. Co. 136 Jessup V. Carnegfie, 44 Johnson v. Bush, 120 Johnson w. Underhill, 113, 114, 115, 145, 148, 154, 155 Jones V. Barlow, 66, 67, 68, 77, 80, 81, 92, 93, 103 Jones V. Guaranty & Indemnity Co. 192 Jones V. Terre Haute, &c., R. R. Co. 54, 113, 137 Judd V. Fulton, 73 Judson V. Rossie Galena Co. 164 Kane v. Bloodgood, 1 37 Karnes v. Rochester, &c., R. R. Co, 138 Kelsey v. Pfaulder Process Ferment- ation Co. 135, 239 Kelsey 7/. Sargent, no, 142 Kent V. Quicksilver M. Co. 54, 60, 185 Kincaid w. Dwinelle, 172, 173, 178 Kindberg v. Mudgett, 102 , King V. Barnes, 47, 275 King V. Duncan, 1 59 Kirkland v. Kille, 68, 98 Knauer v. Globe Mutual Life Ins. Co. 173, 178 Knight V. Dederick, 66 Knowles v. Duffy, 175 Knowlton v. Congress & Empire S. Co. n9, 126 Knox V. Baldwin, 65, 68, 80, 83, 102 Kraft V. Freeman, &c., Asso. 59 Krauser v. Ruckel, 147, 149 Beferences] TABLE OF CASES, {a/re to pages. XIX Lake Ontario R. R. Co. v. Munson, 45. 129 Lake Superior Iron Co. v. Drexel, 175 Lawyer v. Rosebrook, 289 Leavitt v. Fisher, 1 1 5 Lee V. Pittsburgh C. & M. Co. 59 Leggett V. Bank of Sing Sing, 77 Leitch V. Wells, 112 Leslie z/. Lorillard, 185 Lewis w.' Armstrong, 74 Lewis w. Ryder, 153, 172, 174 Lienkauf z/. Coleman, 182 Life & Fire Ins. Co. v. Mechanics', &c. 58 Lindsley v. Simmons, 171, 173 Live Stock Asso. Lim. v. Levy, 185 Livingston v. Lynch, 55 Lord V. Yonkers Fuel Gas Co. 188, 191, 192 Lorillard v. Clyde, 47 Losee v. BuUard, 80, 98, 102 Lovett V. German Ref'd Ch. 50 MacNaughton v. Osgood, no McClave v. Thompson, 108 McComb V. Kellogg, 108 McCuUough V. Moss, 53, 55, 58 McCullough V. Norwood, 173 McDermott v. Board of Police, 60 McHarg v. Eastman, 65, 67, 74, 84, 102, 172 Mclntyre v. Strong, 153, 288 McLasher v. N. Y. Daily Standard, 42 McMahon v. Macy, 172 McMaster v. Davidson, 1 53 McNeil V. Tenth Nat. Bank, 112, 113 Mahoney Mfg. Co. v. Anglo-Cal. Bank, 54 Mann v. Currie, 132, 133 Manning v. Quicksilver Mining Co. .137 Mappier z/. Mortimer, 166, 178 Marie v. Garrison, 50 Marine Bank v. Butler Col. Co. 59 Martin v. Niagara Falls Paper Mfg. Co. S9, 191 Martin v. Webb, 59 Mason v. N. Y. Silk Mfg. Co. 165 Mathews v. Aiken, 67 Mathezz/. Neidig, 157, 159, 160,164 Matter of Application of Junius R. Van Vechten, 56 Matter of Bethune, 90 Matter of Biglin v. Friendship Ass'n, 117 Matter of Empire City Bank, 50, 159 Matter of Hudson R. R. R. Co. 50 Matter of L. I. R. R. Co. 50 Matter of LeBlanc, 137 Matter of Lightall Mfg. Co. 50 Matter of Manhattan Dispensary, 205 Matter of N. Shore & Ferry Co. 51 Matter of Pyrolusite Manganese Co. 239 Matter of Reciprocity Bank, 155,. 156 Matter of Rochester Water Commis- sioners, 31 Matter of Syracuse, C. & N. Y. R. R. Co. 52 Matter of The Mart, 239 Matter of Union Ins. Co. 50 Matter of U. S. Mercantile Report- ing Co. 205 Matter of Wheeler, 50 Matter of White, 50 Matter of Woven Tape Skirt Co. 239 Mayor, &c. v. Eisler, 90 Mead v. Keeler, 54, 59 Merchants' Bank v. Bliss, -66, 102, 107 Merchants' Bank v. Livingston, 112 Merchants' Mfg. Co. zi. Grand Trunk Ry. Co. 211 Meriden Tool Co. v. Morgan, 44 Merrick v. Brainerd, 210 Merrill v. Suffolk Bank, 236 Merritt tr. Reid, 171, 178 Metropolitan Concert Co. Lim. v. Abbey, 282 Meyer >. Blair, 130 Middlebrook v. Merchants' Bank, 114 Middlesex Bank v. Hirsch, 59 Miller v. Fenton, 67 Miller v. White, 66, 67, 71, 74, 85, 94, 158, 172 Mills V. Stewart, 133 Mitchell V. Hotchkiss. 66, 82, 167 Mitchell V. Vermont Copper Co. 133 Moore v. Mausert, 25, 68 Moore v. Met. Nat. Bank, 112 Moore z/. Rector, &c., of St. Thomas, 71 XX Seferences] TABLE OF CASES, [are to pages. Moran v. Lydecker, 238 Morey v. Ford, 89 Morgan v. Skiddy, 46 Morrill V. C. T. Segar Mfg. Co. 53 Morse z*. McCuUough, 172 Moss V. Averell, 60 Moss V. McCuUough, 172 Moss 2/. Oakley, 152, 172 Moulton V. Beecher, 89 Mumma v. Potomac Co. 236 Munson v. Syracuse, G. & Co. R. R. ■ Co. 46, I ID' Murad v. Thomas, 285 Nassau Gas Light Co. v. City of Brooklyn, 230 National Bank, &c. v. Fenton, 77 Nat. Park Bank v. G. A. M. W. & S. Co. 58 National Tube Works v. Gilfillan, Nay V. Levy, 68 Neele v. Berryhill, 151 Newburgh Petroleum Co. v. Weare, 211 Newby v, Oregon Cen. R. R. Co. 42 New England Iron Co. v, Gilbert El. R. R. Co. 178 Nimmons v. Tappan, 85, 87, 106 Norris »i.DeWolf, 75 N. Y. Car Oil Co. v. Richmond, 47 N. Y. Iron Mine v. F. Nat'l Bank, 58 N. Y. & N. H. R. R. Co. v. Schuy- ler, 114 Oakes v. Turquand, 1 56 Ormsby v. Vermont Copper Co. 55 Osborne & Cheeseman Co. v.' Croome, 99 Oswego Starch Factory v. DoUo- way, 214, 233 Otter V. Brevoort Petroleum Co. 119 Oviatt V. Hughes, 76, 82, 153 Palmer v. Lawrence, 130 Parks V. Automatic Punch Co. 137 Parrot v. Colby, 170 Parrott v. Sawyer, 170 Partridge v. Badger, 50, 58, 59 Patterson v. Robinson, 108 Paulding v. The Chrome Steel Co. 190, 238 Peckham v. Van Wagenen, 136 Penniman v. Briggs, 99 People, &c. V. Albany R. R. Co. 50 V. Albany Ins. Co. 230 V. Assessors, 230 V. Asten, 233, 234, 235 V. A. & S. R. R. Co. 133 V. Beach, 24,42, 43, 212 V. Board of Assessors, 235 V. Bull, 90 V. Carr, 124, 281 V. Coleman, 233, 234 V. Coleman, 235 V. Commissioners, 230 V. Commissioners, 230 V. Commissioners, 230, 233- 234 ' V. Commissioners, 230 V. Commissioners, 233 V. Cook, 236 V. Cummings, 56 V. Davenport, ei al. Trustees, 230 V. Fire Association, 230 V. Fire Underwriters, 61 V. Gold & Stock Tel. Co. 229, 230 V. Hektograph Co. 239 V. Home Ins. Co. 229 V. Horn Silver Mining Co. 229, 231 V. Hydrostatic Paper Co. 239 V. Jaehne, 25 ■V. Knickerbocker Ice Co. 231 V. Luther, 73 V. McLean, 215, 233 V. Martins, 231, 236 V, Med. Society, 61 V. Metropolitan R. R. Co. 53 V. Moore, 212 V. Newburgh, &c., Plank Road Co. 274 V. N. Y. C. &H. R.R. R. Co. 73 V. N. Y. Floating & Dry Dock Co. 229, 230 V. Parker, 230 V. Remington, 148 V. Sailors' Snug Harbor, 61 References] TABLE OP CASES, [are to pages. XXI People, &c. V. Schurtz, 235, 236 V. Seneca Lake, &c., Co. 239 V. Spring Valley Hy- draulic Gold Co. 229 V. The Assessors of Olean, 215 V. Throop, 61 V. Troy House Co. 118 ■V. Tuthill, 50 V. Twaddle, 49 V. Walker, 237 V. Warren, 230, 235 People ex rel. McDonald v. U. S. Mercantile Rep. Co. 135 People ex rel. The Fairfield Chemi- cal Company v. Coleman, 233, 234 People's Bank v. St. Anthony's R. C. Church, 59 Perkins v. Hatch, 155 Perry v. Hoadley, 285 Peter Cooper's Glue Factory "o. Mc- Mahon, 215 Pfohl z/. Simpson, 157, 164, 165,289 Phila. & Reading Coal & Iron Co. v. Hotchkiss, 57, 84, 99 Phillips V. Therasson, 152 Phillips V. Wickham, 49, 53 Phoenix Warehouse Co. v. Badger, 130. 132 Pier V. George, 81 Pier V. Hanmore, 66, 69, 70, 106 Pilcher v. Brayton, 149 Plympton v. Bigelow, 211 Pollock V. Nat. Bank, 1 14 Poughkeepsie, &c., Plank Road Co. V. Griffin, 45 Powis V. Harding, 156 Prentiss v. Nichols, 239 Printing Co. v. Assessors, 231 Prosser v. Matthieson, 146 Pugh V. Hurtt, 166 Pugh If. Sherman's Case, 1 56 Railroad Co. v. Nickals, 120 Railway Age v. Garnett, 42 Railway Co. v. AUerton, 53 Raisbeck v. Oesterricher, 44 Randall v. Havemeyer, 1 57 Recaimer Mf^^. Co. v. Seymour, 59 Rector, &c.. of Trinity Church v. Vanderbilt, 76, 103, 104 Reed v. Bank of Newburgh, 49 Reed v. Hoyt, 1 10 Reed v. Keese, 100 Rensselaer, &c.. Plank Road Co. v. Barton, 45 Revere Copper Co., &c. v. Dimock, 74 Reynolds v. Mason, 81 Richards v. Beach, 289 Richards v. Coe, 289 Richards v. Crocker, 285, 289 Richardson v. Abendroth, 146, 147, 154, 167 Roach V. Duckworth, 67, 68 Robinson v. Attrell, 285 Robinson, v. Nat'l Bank of New- beme, 113, 114 Robinson v. Smjth, 109 Robinson v. Thompson, 285 Rochester Savings Bank v. Averell, 188, 189, 190 Rocky Mountain National Bank v. Bliss, 171 Rodburn v. N. I. & E. Ry. Co. 164 Rorke v, Thomas, 67, 74, 75, 85, 107 Rossie V. Lead M. Co. 53 Ruggles, Rec'rz/. Brock, 132, 156 Runyan v. Lessee of Costar et al. 210 Rutter V. Kilpatrick, 1 29 Sanborn v. Lefferts, 66, 82, 98, 100 Savings Ins. of St, Louis v. O'Brien, 167 Sawyer v. Hoag, 163 Sawyer w. Rosebrook, 172 Sayles v. Brown. 167 Schenck w. Andrews, 174, 175 Schoonmaker «».■ Brooks, 90 Scott V. Middletown R. R. Co. 60 Scoville V. Thayer, 119, 127, 163 Sears v. Waters, 92 Shaler & Hall Quarry Co. v. Bliss, 78, loi Shaler & Hall Quarry Co. v Brew- ster, 78 Sheldon Hat Blocking Co. v. Eick- enmeyer Hat B. Co. 54 Shellington v. Howland, 135, 153, 154, 157, 171, 172 Sheridan Electric L. Co. v. Chatham National Bank, 53 Sheridan v. Sheridan Electric Light Co. 142 Sherman v. Herbert, 147 xxu Beferences^ XABLB OF CASES, [are to pages. Short V. Medbury, 147 Sibell V. Remsen, 238 Slee V. Bloom, 99, 172 Small V. Herkimer Mfg. Co. 133 Smith jy. Alvord, 211 Smith V. American Coal Co., &c. 114, 115, 136 Smith V. Co-operative Dress Ass. 59 Smith V. Danzig, 102, 165, 279 Smith V. Law, 54 Smith V. N. Y. Consolidated Stage Co. 53 Sodus Bay, &c., R. R. Co. v. Ham- lin, 132 Spear 7/. Crawford, 129, 130, 156 Spenser v. Clark, 142 Squires v. Brown, loi Steam Engine Co. v. Hubbard, 167 Stephens v. Fox, 181 Sterne v. Herman, 87, 166 Stevens v. Pratt, 211 Stokes V. Stickney, 82 Stover V. Flack, 155, 157, 180 Strong V. Brooklyn Cross Town R. R. Co. 124 Strong f. Smith, 50, 52 Strong V. Sproul, 67 Strong ■z'. Wheaton, 146, 148, 158, 172 Sturges V. Vanderbilt, 173, i8i, 236, 237 Sturgis V. Stetson, 119 Sutherland w. Olcott, 120, 124, 151 Tallmadge v. Fishkill Iron Co. 1 57 Taylor v. Attrill, 285 Taylor v. Earl, 53 Thomas v. Musical Mutual Pro. Union, 61 Thurber v. Thompson, 174 Thurston v. Duffy, 175 Torbet v. Eaton, 285 Tovey v. Culver, 8; Tracy v. Yates, 152 Trustees, &c. v. Flint, 61 Tucker w. Oilman, 133, 166 Twin Lock Oil Co. v. Marbury, 108 Tyng V. Clark, 67, 94 Union Hotel Co. v. Hersee, 130 Union Steamboat Co. v. City of Buffalo,' 2 14 Vail V. Hamilton, 50. 51, 189, 190? 192 Van Amburgh v. Baker, 84, 99 Van Cott V. Van Brunt, 93, 281 Van Wagenen v. Clark. 132 Vanderburgh v. Broadway R. R. Co. 49, 50, 56 Varnum v. Hart, 238 Veeder v. Baker, 65, 88, 89, 105 Veeder v. Judson, 164, 239 Veeder v. Mudgett, 118, 119, 126, 150, 151, 152, 156, 164, 169, 239 Veiller T/. Brown, 132, 153 Vernon v. Palmer, 68, 77, 90 Vernon Soc. v. Hills, 50 Victory Webb Printing Co. v. Beecher, 68, 76 Viele V. Wells, 147, 171 Vincent v. Bamford, 147 Vincent v. Sands, 72, 79, 100 Wade V. Baker, 99 Waite V. Ferguson, 167, 168 Wakefield z/. Fargo, 26, 147, 154 Wakeman z/.-Dalley, no Wallace & Sons v. Walsh, 71 Walsh V. Sexton, 1 1 5 Walton V. Coe, 289 Weaver z/. Barden, 112 Webster v. Turner, 53 Webster z-. Upton, 114 Weeks w. Love, 158, 159, 160, 164 Weeks v. Silver Islet Co. 133 Westelo V. Dewitt, 1 1 5 Westerfield v. Radde, 58, 71 Western Transportation Co. v. Scheu, 214 Wetherhead v. Allen. 172 Weymouth v. Dimock. 8; Wheeler v. Millar, 130, 133, 151, 157, 162 Wheeler 7/. Miller, 172 Whitaker v. Masterton, 69 White V. Price, 53, 179 Whitehall, &c., R, R. Co. v. Mey- ers, 131 Whitford v. Laidler, 182 Whitney Arms Co. v. Barlow, 69 wvJ.?' 7^' ^7, 92,93.97 Whittlesey z/. Franz, 132 Wickens v. Foster, 106 Wiles V. Suydam, 66, 67, 88, 89, 166, 168, 178 Williams v. Meyer, 133 TABLE OF CASES, [me to pages. XXlli Williams v. W. U. Tel. Co. 107, 112, 120, 138 Williamson v. Wadsworth, 147 Wilson 7/. Leslie, 151 Wintringham, Rec'r v. Rosenthal 132 Wood V. Lary, 120 Woodruff V. ErieRy. Co. 185 Woodruff & Beach Iron Works v. Chittenden, 157, 167, 169 Worrall v. Judson, 1 54 Wright's Case, 1 56 Wyckoff V. Lawson, 74 Ziegler v. Hoagland, 109, 142 Zoller w.O'Keefe, 73 PART I. THE ACT TO AUTHORIZE THE FORMATION OF CORPORATIONS FOR MANUFACTURING, MINING, MECHANICAL," CHEMICAL, AGRICULTURAL, HORTICULTURAL, MEDICAL OR CURA- TIVE, MERCANTILE OR COMMERCIAL PURPOSES. PASSED FEBRUARY 17, 1848. AS AMENDED, MODIFIED AND EXTENDED TO APRIL, 1890. The several Sections of the Act will be found in this Volume on the following Pages : Section 1, page 3, and i 3, (« 3, 3, " 4, 4, (( 4, 5, a 5, 6, " 5, « 7, ii 5, " 8, " 5, 9, (i 6, 10, " 6, n, u 6, • 13, ti 7, " 13, 41 7, " 14, (( 8, " 15, " 8, 16, (( 8, 17, " 9, 18, " 9, 19, tl 9, 30, it 9, 31, ti 10, 22, " 11, 33, ti 11, 24, it 12, 35, n 13, 36, n 13, 37, (( 13, with text, pape 38 " 41 48 55 " 57 129 60 111 47 149 " 149 64 106 " 118 " 104 " 179 53 " 145 386 121 133 122 108 150 134 " 183 138 CHA.PTER I. PROVISIONS OF THE MANUFACTURING ACT AS AMENDED. Section 1. Formation of companies. 2. When company is formed, powers, etc. 3. Number and election of trustees. 4. Trustees to hold over. 5. Designation and appointment of officers. 6. Trustees to make calls on stockholders. 7. Trustees to make by-laws. 8. Stock personal estate and transferable. 9. Copy of certificate of incorporation to be evidence. 10. Liability of stockholders. — Capital stock, when to be paid in. 11. Certificate of payment of capital stock to be recorded. 13. Annual report. — Liability of trustees. 13. Payment of dividends by insolvent company. — Trustees- liable. 14. Stock to be paid in cash. 15. False certificate or report. — Trustees liable. 16. Liability of executors, etc., as stockholders. 17. Who to vote at elections. 18. Liability of stockholders to laborers, servants, etc. 19. Alteration or repeal of act. 30. Company may increase or diminish capital stock. 31. Meeting to increase or diminish capital, etc., how called. 22. Meeting to increase or diminish capital, how conducted. — Certificate to be filed. 23. Indebtedness of company not to exceed capital stock. 24. When stockholders cease to be liable for debts. 35. Stock books to be kept. 26. General powers of companies. 27. Statement of affairs of company, on request. 1 '2 PROVISIONS OF THE Supplementary Provisions. — Laws 1853, Chapter 333. Laws 1857, Chapter 39. Laws 1860, Chapter 269. Laws 1861, Chapter 170. Laws 1864, Chapter 517. Laws 1866, Chapter 73. Laws 1866, Chapter 838. Laws 1878, Chapter 163. Formation of companies, — Section 1. At any time hereafter, any three or more persons who may desire to form a company for the purpose of carrying on any kind of manufacturing, mining, mechanical or chemical busi- ness, or the business of printing, publishing or selling books, pamphlets or newspapers, or advertising the same or other articles, or for the purpose of purchasing, taking, holding and possessing real estate and buildings, and sell- ing, leasing and improving the same, or the business of making butter, cheese, concentrated or condensed milk, or any other products of the dairy, or the business of erect- ing buildings for church sheds or laundry purposes, and the carrying on of laundry business or the business of slaughtering animals, or for the purpose of towing or pro- pelling canal-boats, vessels, rafts or floats on the canals and navigable rivers of the State of New York by animal or steam power, or for the purpose of buying, storing, sell- ing or shipping coal, merchandise and farm produce, their operations not to be confined to the county in which their certificates shall be filed, or the supplying of hot water or hot air or steam for motive power, heating, cooking, or other useful applications in the streets and public and private buildings of any city, village or town in this State, or the business of buying, breeding, grazing, pasturing, dealing in and selling cattle, sheep, hogs, horses and other live stock in the United States of America, British North America and elsewhere, may make, sign and acknowledge before some officer competent to take the acknowledgment of deeds, and file in the office of the clerk of the county in which the business of the company shall be carried on, MANUFACTURING ACT AS AMENDED. 3 and a duplicate thereof in the office of the Secretary of State, a certificate in writing, in which shall be stated the corporate name of said company and the objects for which the company shall be formed, the amount of the capital stock of said company, the time of its existence (not to exceed fifty years), the number of shares of which the said stock shall consist, the number of trustees and their names, who shall manage the concerns of said company for the first year, and the name of the town and county in which the operations of the said company are to be carried on. No company organized under this act for the purpose of taking, purchasing, holding or possessing real estate and buildings, and selling, leasing and improving the same, shall be permitted to purchase and hold real estate to the value of more than one million dollars, but this act shall not be deemed to repeal or affect in any way any act here- tofore passed amendatory of or supplementary to the said act of February seventeen, eighteen hundred and forty- eight, except as herein provided.' When corporation is formed; powers^ etc. — Section 2. When the certificate shall have been filed as afore- said, the persons who shall have signed and acknowledged the same, and their successors, shall be a body politic and corporate, in fact and in name, by the name stated in such certificate ; and by that name have succession, and shall be capable of suing and being-sued in any court of law or equity in this State, and they and their successors may have a common seal, and may make and alter the same at ' As amended, L. 1857, c. 262; 1866, c. 799, 838; 1867, c. 248 ; 1869, c. 605 ; 1871, c. 657 ; 1872, c. 426 ; 1874, c. 149 ; 1877, c. 374 ; 1879, c. 290 ; 1880, 0. 241; 1882, c. 309; 1883, c. 240; 1884, c. 267; 1885, c. 84; 1888, c. 313. All extending acts authorizing additional companies to form under the Manufacturing Act are referred to in Chapter II, post, and will be found in full in Appendix A. For treatment of Section 1 and all following sections, see succeeding chapters, -where the sections are arranged and quoted with reference to their subject matter. 4 PEOVISIONS OP THE pleasure ; and they shall, by their corporate name, be capable in law of purchasing, holding and conveying any real and personal estate whatever which may be necessary to enable the said company to carry on their operations named in such certificate, but shall not mortgage the same or give any lien thereon. Number and election of trustees. — Section 3. The stock, property and concerns of such company shall be managed by not less than three, nor more than thirteen trustees, who shall respectively be stockholders in such company, and a majority of whom shall be citizens and residents of this State, who shall, except the first year, be annually elected by the stockholders, at such time and place as shall be directed by the by-laws of the company ; and public notice of the time and place of holding such election shall be published, not less than ten days previous thereto, in the newspaper printed nearest to the place where the operations of the said company shall be carried on ; and the election shall be made by such of the stock- holders as shall attend for that purpose, either in person or by proxy. All elections shall be by ballot, and each stockholder shall be entitled to as many votes as he owns shares of stock in the said company ; and the persons receiving the greatest number of votes shall be trustees ; and when any vacancy shall happen among the trustees, by death, resignation or otherwise, it shall be filled for the remainder of the year in such manner as may be pro- vided for by the by-laws of the said company.* Trustees to hold over. — Section 4. In case it shall happen at any time that an election of trustees shall not be made on the day designated by the by-laws of said com- pany, when it ought to have been made, the company, for that reason, shall not be dissolved, but it shall be lawful, on any other day, to hold an election for trustees, in such manner as shall be provided for by the said by-laws ; and As amended, L. 1860, c. 369, and L. 1883, c. 233. MANUFACTOEllTG ACT AS AMENDED. 5 all acts of trustees sliall be valid and binding as against such company until their successors shall be elected. Designation and appointment of officers. — Section 5. There shall be a president of the company, who shall be ■designated from the number of the trustees, and also such subordinate officers as the company, by its by-laws, may -designate, who may be elected or appointed, and required to give such security fbr the faithful performance of the duties of their office as the company, by its by-laws, may lequire. Trustees to make calls on stockholders. — Section 6. It shall be lawful for the trustees to call in and demand from the stockholders respectively, all such sums of money by them subscribed, at such times and in such payments or installments as the trustees shall deem proper, under the penalty of forfeiting the shares of stock subscribed for, and all previous payments made thereon, if payment shall not be made by the stockholders within sixty days after a personal demand or notice requiring such payment shall have been published for six successive weeks in the news- paper nearest to the place where the business of the com- pany shall be carried on as aforesaid. Trustees to make by-laws. — Section 7. The trus- tees of such company shall have power to make such prudential by-laws as they shall deem proper for the man- agement and disposition of the stock and business affairs of such company, not inconsistent with the laws of this State, and prescribing the duties of officers, artificers and servants that may be employed, for the appointment of all officers, and for carrying on all kinds of business within the objects and purposes of such company. Stock personal estate and transferable. — Section 8. The stock of such company shall be deemed personal es- tate, and shall be transferable in such manner as shall be prescribed by the by-laws of the company ; but no shares 6 PROVISIONS OF THE shall be transferable until all previous calls thereon shall have been fully paid in, or shall have been declared for- feited for the non-payment of calls thereon. And it shall not be lawful for such company to use any of their funds in the purchase of any stock in any other corporation. Copy of certificate of incorporation to be evidence.— Section 9. The copy of any certificate of incorporation, filed in pursuance of this act, certified by the county clerk or his deputy to be a true copy, and of the whole of such certificate, shall be received in all courts and places as presumptive legal evidence of the facts therein stated. Liability of stockholders.— Capital stock, when to be paid in. — Section 10. All the stockholders of every com- pany incorporated under this act shall be severally indi- vidually liable to the creditors of the company in which they are stockholders, to an amount equal to the amount of stock held by them respectively, for all debts and con- tracts made by such company, until the whole amount of capital stock fixed and limited by such company shall have been paid in, and a certificate thereof shall have been made and recorded as prescribed in the following section ; and the capital stock, so fixed and limited, shall all be paid in, one-half thereof within one year, and the other half there- of within two years from the incorporation of said com- pany, or such corporation shall be dissolved. Certificate of the payment of capital stock to be re- corded. — Section 11. The president and a majority of the trustees, within thirty days after the payment of the last installment of the capital stock, so fixed and limited by the company, shall make a certificate stating the amount of the capital so fixed and paid in, which certificate shall be signed and sworn to by the president and a majority of the trustees, and they shall, within the said thirty days, record the same in the office of the said county clerk of the county wherein the business of the said company is carried on. MANUFACTURING ACT AS AMENDED. 7 Annual report.— Liability of trustees.— Section 12. Every such company shall, within twenty days from the first day of January, if a year from the time of the filing of the certificate of incorporation shall then have expired, and if so long a time shall not have expired, then within twenty days from the first day of January in each year after the expiration of a year from the time of filing such certificate, make a report, which shall be published in some news- paper published in the town, city or village, or if there be no newspaper published in said town, city or village, then in some newspaper published nearest the place where the business of the company is carried on, which shall state the amount of capital, and of the proportion actually paid in, and the amount of its existing debts, which report shall be signed by the president and a majority of the trustees, and shall be verified by the oath of the president or secre- tary of said company, and filed in the office of the clerk of the county where the business of the company shall be car- ried on, and if any of said companies shall fail to do so, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be made ; but whenever, under this section, a judgment shall be recovered against a trustee severally, all the trustees of the company shall contribute a ratable share of the amount paid by such trustee on such judgment, and such trustee shall have a right of action against his co-trustees, jointly or severally, to recover from them their proportion of the amount so paid on such judgment ; provided that nothing in this act contained shall affect any action now pending.' Payment of dividends by insolvent company.— Trustees liable.— Section 13. If the trustees of any such com- pany shall declare and pay any dividend when the company is insolvent, or any dividend the payment of which would ■ As amended, L. 1871, c. 657, and L. 1875, c. 510. 8 PROVISIONS OF THE render it insolvent, or which would diminish the amount of its capital stock, they shall be jointly and severally lia- ble for all the debts of the company then existing, and for all that shall be thereafter contracted while they shall re- spectively continue in office ; provided, that if any of the trustees shall object to the declaring of such dividend, or to the payment of the same, and shall, at any time before the time fixed for the payment thereof, file a certificate of their objection in writing with the clerk of the company and with the clerk of the county, they shall be exempt from the said liability. Stock to be paid in cash.— Section 14. Nothing but money shall be considered as payment of any part of the capital stock, and no loan of money shall be made by any such company to any stockholder therein, and if any such loan shall be made to a stockholder, the officers who shall make it, or who shall assent thereto, shall be jointly and severally liable to the extent of such loan and interest, for all the debts of the company contracted before the re- payment of the sums so loaned. False certificate or report.— Trustees liable.— Section 15. If any certificate or report made, or public notice given, by the officers of any such company, in pursuance of the provisions of this act, shall be false in any material representation, all the officers who shall have signed the same, knowing it to be false, shall be jointly and severally liable for all the debts of the company contracted while they are stockholders or officers thereof. Liability ot executors, etc., as stockholders.— Section 16. No person holding stock in any such company, as executor, administrator, guardian or trustee, and no per- son holding such stock as collateral security, shall be per- sonally subject to any liability as stockholder of such company ; but the person pledging such stock shall be considered as holding the same, and shall be liable as a stockholder accordingly ; and the estates and funds in the MANUFACTURING ACT AS AMENDED. 9 hands of such executor, administrator, guardian or trus- tee shall be liable in like manner, and to the same extent as the testator or intestate, or the ward or person in- terested in such trust fund would have been, if he had been living and competent to act, and held the same stock in his own name. Who to TOte at elections.— Section 17. Every such executor, administrator, guardian or trustee shall repre- sent the shares of stock in his hands at all meetings of the company, and may vote accordingly as a stockholder ; and every person who shall pledge his stock as aforesaid, may nevertheless represent the same at all such meetings, and may vote accordingly as a stockholder. Liability of stockholders to laborers, servants, etc. — Section 18. The stockholders of any company organized under the provisions of this act, shall be jointly and sev- erally individually liable for all debts that may be due and owing to all their laborers, servants and apprentices, for services performed for such corporation. Alteration or repeal of act. — Section 19. The Legis- lature may at any time alter, amend, or repeal this act, or may annul or repeal any incorporation formed or created under this act ; but such amendment or repeal shall not, nor shall the dissolution of any such company take away or impair any remedy given against any such corporation, its stockholders or officers, for any liability which shall have been previously incurred. Company may increase or diminish capital stock.— Section 20. Any corporation or company heretofore formed, either by special act or under the general law, and now existing for any manufacturing, mining, mechanical or chemical purposes, or any company which may be formed under this act, may increase or diminish its capital stock by complying with the provisions of this act, to any amount which may be deemed sufficient and proper for the pur- poses of the corporation, and may also extend its business 10 PROVISIOXS OP THE to any other manufacturing, mining, meclianioal or chemi- cal business, subject to the provisions and liabilities of this act. But before any corporation shall be entitled to diminish the amount of its capital stock, if the amount of its debts and liabilities shall exceed the amount of capital to which it is proposed to be reduced, such amount of debts and liabilities shall be satisfied and reduced so as not to exceed such diminished amount of capital ; and any existing company, heretofore formed under the general law, or any special act, may come under and avail itself of the privileges and provisions of this act, by complying with the following provisions, and thereupon such company, its officers and stockholders, shall be subject to all the restric- tions, duties and liabilities of this act. Meeting to increase or diminish capital, etc., how called. — Section 21. Whenever any company shall desire to call a meeting of the stockholders, for the purpose of availing itself of the privileges and provisions of this act, or for increasing or diminishing the amount of its capital stock, or for extending or changing its business, it shall be the duty of the trustees to publish a notice, signed by at least a majority of them, in a newspaper in the county, if any shall be published therein, at least three successive weeks, and to deposit a written or printed copy thereof in the post office, addressed to each stockholder at his usual place of residence, at least three weeks previous to the day fixed upon for holding such meeting, specifying the object of the meeting, the time and place when and where such meeting shall be held, and the amount to which it shall be proposed to increase or diminish the capital, and the business to which the company would be extended or changed ; and a vote of at least two-thirds of all the sh9,res of stock shall be necessary to an increase or diminution, of the amount of its capital stock, or the exten- sion or change of its business as aforesaid, or to enable a company to avail itself of the provisions of this act. MANDFACTOKING ACT AS AMENDED. 11 Meeting to increase or diminish capital, etc., how con- dacted.— Certificate to be filed.— Section 22. If, at any time and place specified in the notice provided for in the preceding section of this act, stockholders shall ap- pear, in person or by proxy, in number representing not less than two-thirds of all the shares of stock of the corporation, they shall organize by choosing one of the trustees chairman of the meeting, and also a suitable per- son for secretary, and proceed to a vote of those present, in person or by proxy ; and if, on canvassing the votes, it shall appear that a sufficient number of votes has been given in favor of increasing or diminishing the amount of capital, or of extending or changing its business as afore- said, or for availing itself of the privileges and provisions of this act, a certificate of the proceedings, showing a com- pliance with the provisions of this act, the amount of capital actually paid in, the business to which it is ex- tended or changed, the whole amount of debts and liabili- ties of the company, and the amount to which the capital stock shall be increased or diminished, shall be made out, signed and verified by the affidavit of the chairman, and be countersigned by the secretary ; and such certificate shall be acknowledged by the chairman, and filed as re- quired by the first section of this act ; and when so filed, the capital stock of such corporation shall be increased or diminished, to the amount specified in such certificate, and the business extended or changed as aforesaid, and the company shall be entitled to the privileges and provisions, and be subject to the liabilities of this act, as the case may be. Indebtedness of company not to exceed capital stock.— Section 23. If the indebtedness of any such company shall at any time exceed the amount of its capital stock the trustees of such company assenting thereto shall be personally and individually liable for such excess to the creditors of such company. 12 PROVISIONS OF THE When stockholders cease to be liable for debts. — Section 24. No stockholder shall be personally liable for the payment of any debt contracted by any company formed under this act, which is not to be paid within one year from the time the debt is contracted, nor unless a suit for the collection of such debt shall be brought against such company within one year after the debt shall become due ; and no suit shall be brought against any stockholder who shall cease to be a stockholder in any such company, for any debt so contracted, unless the same shall be commenced within two years from the time he shall have ceased to be a stockholder in such company, nor until an execution against the company shall have been returned unsatisfied in whole or in part. Stock books to be kept.— Section 25. It shall be the duty of the trustees of every such corporation or com- pany to cause a book to be kept by the treasurer or clerk thereof, containing the names of all persons, alpha- betically arranged, who are, or shall, within six years, have been stockholders of such company, and showing their places of residence, the number of shares of stock held by them respectively, and the time when they respectively became the owners of such shares, and the amount of stock actually paid in ; which book shall, during the usual busi- ness hours of the day, on every day except Sunday and the fourth day of July, be open for the inspection of stock- holders and creditors of the company and their personal representatives, at the office or principal place of business of such company in the county where its business opera- tions shall be located ; and any and every such stockholder, creditor or representative shall have a right to make ex- tracts from such book ; and no transfer of stock shall be valid for any purpose whatever, except to render the per- son to whom it shall be transferred liable for the debts of the company, according to the provisions of this act, until it shall have been entered therein as required by this sec- tion, by an entry showing to and from whom transferred. Such book shall be presumptive evidence of the facts MANDFACTORING ACT AS AMENDED. 13 therein stated, in favor of the plaintiff, in any suit or pro- ceeding against such company, or against any one or more stockholders. Every officer or agent of any such company, who shall neglect to make any proper entry in such book, or shall refuse or neglect to exhibit the same, or allow the same to be inspected, and extracts to be taken therefrom, as provided by this section, shall be deemed guilty of a misdemeanor ; and the company shall forfeit and pay to the party injured a penalty of fifty dollars for every such neglect or refusal, and all the damages resulting there- from : And every company that shall neglect to keep such book open for inspection as aforesaid, shall forfeit to the people the sum of fifty dollars for every day it shall so neglect, to be sued for and recovered in the name of the people, by the district attorney of the county in which the business of such corporation shall be located ; and when so recovered, the amount shall be paid into the treasury of such county for the use thereof. General powers of companies.— Section 26. Every corporation created under this act shall possess the gene- ral powers and privileges, and be subject to the liabilities and restrictions contained in title third, chapter eighteen of the first part of the Eevised Statutes, and the provi- sions of section six, article first, title two, chapter thirteen of the first part of the Eevised Statutes, shall apply to every such corporation. Statement of affairs of company on request.— Sec- tion 27. Whenever any person or persons owning five per cent, of the capital stock of any company, not ex- ceeding one hundred thousand dollars, or any person or persons owning three per cent, of the capital stock of any company exceeding one hundred thousand dollars, formed under the provisions of this act, shall present a written re- quest to the treasurer thereof, that they desire a statement of the affairs of such company, it shall be the duty of such ' As amended, L. 1861, c. 170. 14 PROVISIONS OF THE treasurer to make a statement of the affairs of said com- pany under oath, embracing a particular account of all its assets and liabilities, in minute detail, and to deliver such statement to the person who presented the said written request to said treasurer, within twenty days after such presentation, and shall also, at the same time, place and keep on file in his oflSce, for six months thereafter, a copy of such statement, which shall at all times, during busi- ness hours, be exhibited to any stockholder of said com- pany demanding an examination thereof ; such treasurer, however, shall not be required to deliver such statement, in the manner aforesaid, oftener than once in any six months. If such treasurer shall neglect or refuse to comply with any of the provisions of this act, he shall forfeit and pay to the person presenting said written re- quest the sum of fifty dollars, and the further sum of ten dollars for every twenty-four hours thereafter until such statement shall be furnished, to be sued for and recovered in any court having cognizance thereof.* Should not any such written statement, as is required by section one of this act,' be demanded during the year preceding the annual meeting of the stockholders of any company, formed under the provisions of this act, for the election of directors or trustees, it shall be the duty of the treasurer of every such company to prepare and exhibit to the stockholders then and there assembled, a general statement of the assets and liabilities of such company.' Supplementary Pbovisions. Laws 1853, Chapter 333. Places of business.— § 1. Any certificate hereafter filed under the provisions of the above entitled act may desig- nate one or more places where the company may carry on their business. > As amendeil, L. 1854, c. 201, and L. 1862, c. 472. » Section one of L. 1862, c. 472, which, by its terms, became § 27 of the Manufacturing Act. ' L. 1863, c. 473, § 2. MANDFACTUBING ACT AS AMENDED. 15 Trustees may issue stock for property.— § 2. The trus- , tees of such company may purchase mines, manufactories and other property necessary for their business, and issue stock to the amount of the value thereof in payment there- for ; and the stock so issued shall be declared and taken to be full stock, and not liable to any further calls; neither shall the holders thereof be liable for any further payments under the provisions of the tenth section of the said act, but in all statements and reports of the company, to be published, this stock shall not be stated or reported as being issued for cash paid into the company, but shall be reported in this respect according to the fact. Laws 1857, Chaptek 29. When capital of salt companies to he paid in.— § 1. No incorporated company organized or hereafter to be organ- ized for the manufacture of salt, under the " Act to authorize the formation of corporations for manufacturing, mining mechanical or chemical purposes," passed February seven- teenth, one thousand eight hundred and forty-eight, shall be deemed dissolved or shall be dissolved, on account of the capital stock of such company not being paid in, the one-half within one year, and the other half within two years from the incorporation of such company, provided that such stock shall be paid in within four years from the organization of such company. Extending duration of corporate; existence.— § 2 Whenever any company, formed under said act, shall have fixed the duration of its corporate existence for a less period than it was privileged to do by the first section of said act, it may, by a vote of the stockholders representing a majority of the stock, and upon executing and acknow- ledging a new or amended certificate under its corporate seal, signed by the president and two-thirds of its directors or trustees, and filing the same in the county where its business shall be carried on, and in the office of the secre- tary of state, extend the term of its corporate existence 16 PROVISIONS OF THE from time to time, to a period not longer in the aggregate than it could have originally fixed the same, and shall thereupon possess all the powers and privileges and be subject to all the liabilities mentioned in said act during such extension of its existence.^ Certiflcate to state place of business out of State.— § 3. If any company shall be formed under said act for the purpose of carrying on any part of its business in any place out of this State the said certificate shall so state, and shall also state the name of the town and county in which the principal part of the business of said company within this State is to be transacted ; and said town and county shall be deemed the town, place and county in which the operations and business of the company are to be carried on, and its principal place of business within the meaning of the provisions of this act. Laws 1860, Chapteb 269. § 1. Amends Section 3 of Act. Number of trustees, how increased or reduced.— § 2, The number of trustees in any corporation, organized before or since the eleventh day of April, eighteen hundred and sixty, or which shall hereafter be organized under the said act, may be increased to not more than thirteen, or may be reduced to not less than three, as follows : The existing trustees of any such corporation, or a majority of them, shall make and sign a certificate, declaring how many trustees the corporation shall have in the future management of its business, and, in case the number of trustees be increased, stating the names of the new or additional trustees, and in case the number of trustees be reduced, stating the number to which the trustees shall be reduced ; which certificate shall be acknowledged by the trustees signing the same, or proved by a subscribing wit- ness, and shall be filed in the office of the clerk of the county where the original certificate of incorporation was ' As amended, L. 1867, c. 12, § 1. MANUFACTURING ACT AS AMENDED. 17 filed, and a duplicate or transcript thereof, duly certified under the official seal of such clerk, filed in the office of the Secretary of State ; and in the case of an increase of the number of trustees, from and after the filing of such certificate and duplicate or transcript, the trustees of such corporation shall be deemed increased to the number therein stated, and the persons so named in such certificate shall be trustees until a new election of trustees shall be had, according to the said act, and the by-laws or regula- tions of such corporation. And in the case of the reducing of the number of trustees, the number stated in such cer- tificate as the number of trustees which shall manage the business of such corporation, shall be deemed the number of trustees of such corporation to be elected, according to said act, and the by-laws and regulations of such corpora- tion, at the next election and thereafter, after the filing of such certificate and duplicate or transcript ;, and in case a Tacancy or vacancies shall occur in the board of trustees of such corporation, by resignation or otherwise, after the filing of such certificate and duplicate or transcript reduc- ing the number of trustees, before the next election of trustees after such filing, no election shall be had in the meantime to fill such vacancy or vacancies while the num- ber of trustees remaining shall equal or exceed the num- ber to which the trustees are reduced in such certificate.^ Laws 1861, Chapteb 170. § 1. Amends Section 26 of Act. Taxable at principal place of business.— § 2. No com- pany organized under the provisions of said act to author- ize the formation of corporations for manufacturing, mining, mechanical or chemical purposes, shall be deemed or taken to have a principal office or place for transacting its financial concerns other than that at which the opera- tions of said company are carried on, unless, within the month of May in each year, the president and treasurer, or ■ As amended, L. 1867, c. 348, and L. 1878, c. 316, § 1. 2 18 PROVISIONS OE THE a majority of the trustees, shall make duplicate certificates, stating the amount of the then capital of said company, and the portion of such capital not invested in real estate, and stating that such company then has a principal office for transacting its financial concerns in a county other than that in which the operations of said company are carried on, stating the town or city and county in which such financial office is located, and that the president and treasurer and a majority of the trustees of said company are then actually residents of the town or city in which such financial office is then located, which duplicate certifi- cates shall be signed and sworn to by the persons making the same, and filed, the one in the clerk's office of the county where the operations of said company are carried on, and the other in the clerk's office of the county in which such financial office shall be. And in case in any year such du- plicate certificates shall be made and filed as aforesaid, then during the year succeeding the first day of June next after the filing of such certificates, the personal estate of such company shall be assessed only in the town or ward named in said certificates as that in which such financial office is located. Laws 1864, Chapteb 517. Change of place of business.— § 1. Any company formed under the act entitled, " An Act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seventeen, eighteen hundred and forty-eight, may change its place or places of business, by a vote of the stockholders representing two- thirds of the stock, at any meeting of the stockholders reg- ularly called, and executing and acknowledging an amend- ed certificate, specifying the names of the towns or cities from and to which the business location of the company is to be changed, and in other respects conforming to the original certificate, which amended certificate shall be signed by the president and two-thirds of the directors of the company, and shall be filed in the office of the Secretary MAKUFACTURING ACT AS AMENDED. 19 of State, and in the office of the clerk of the county where the business operations of the company are to be carried on, and published weekly in two papers in the towns or cities from and to which the business operations have been removed, and are to be carried on, for the term of three months. But the property of said company shall be liable to taxation in any county where such property may be, or in which its business may be done, to the extent of its property in any such county. Company may mortgage property to pay delbts.— § 2. Any corporation formed under the said act passed February seventeenth, eighteen hundred and forty-eight, or of the acts amending or extending the said act, may secure the pay- ment of any debt heretofore contracted, or which may be contracted by it in the business for which it was incor- porated, by mortgaging all or any part of the real or per- sonal estate of such corporation ; and every mortgage so made shall be as valid, to all intents and purposes, as if ex- ecuted by an individual owning such real or personal estate, provided, that the written assent of the stock- holders owning at least two-thirds of the capital stock of such corporation shall first be filed in the office of the clerk of the county where the mortgaged .property is sit- uated.^ Laws 1866, Chapter 73. Number of shares may be increased.— § 1. Any company formed under the act entitled "An act to authorize the formation of corporations for manufacturing, mining, me- chanical or chemical purposes," passed February seven- teenth, eighteen hundred and forty-eight, may increase the number of shares of which its capital stock consists; provid- ed the capital stock of such company shall not thereby be increased or diminished. § 2. Such increase shall be made by a vote of the stock- holders in favor thereof, representing two-thirds of the ' As amended, L. 1871, o. 481, § 8. 20 PROVISIONS OF THE capital stock, at any meeting of the stockholders called in the manner prescribed in the act hereby amended, and by ex- ecuting and acknowledging an amended certificate, specify- ing the number of shares of which the said capital stock of said company shall thereafter consist, and the par value of each share, and in other respects conforming to the original certificate, which amended certificate shall be signed by the president and two-thirds of the directors of the company, and shall be filed in the office of the Secretary of State, and in the clerk's office of the county where the original certificate was filed. § 3. Each stockholder shall be entitled to a certificate for such a number of shares of said capital stock after the whole number has been increased as aforesaid, as shall at their par value be equal to the par value of the shares theretofore held by him in such company, on surrendering the certificates for said shares so held by him to be can- celed ; provided that such increase shall not so divide the shares as to give the fractional part of a share to any stockholder. Laws 1866, Chapter 838. § 1. Amends Title of Act. § 2. Amends Section 1 of Act. Company may hold stock in other company. — § 3. It shall be lawful for any company, heretofore or here- after organized under the provisions of this act or the act hereby amended, to hold stock in the capital of any corporation engaged in the business of mining, manufac- turing or transporting such materials as are required in the prosecution of the business of such company, so long as they shall furnish or transport such materials for the use of such company, and for two years thereafter and no longer ; and also to hold stock in the capital of any cor- MANUFACTURING ACT AS AMENDED. 21 poration wliicli shall use or manufacture materials mined or produced by such company ; and the trustees of such company shall have the same power with respect *to the purchase of such stock and issuing stock therefor as are now given by the law with respect to the purchase of mines, manufactories and other property necessary to the business of manufacturing, mining and other companies. But the capital stock of such company shall not be increased without the consent of the owners of two-thirds of the stock, to be obtained as provided by sections twenty-one and twenty-two of the act hereby amended.^ § 4. When any such manufacturing company shall be a stockholder in any other corporation, its president or other officers shall be eligible to the office of trustee of such corporation, the same as if they were individually stockholders therein. Laws 1878, Chapteb 163. Company may mortgage property and franchise.—! 1. Any company formed under the act entitled " An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes," passed February seventeen, eighteen hundred and forty-eight, or of the acts amending or extending said act, may secure the payment of any debt heretofore contracted or which may be contracted by it, in the business for which it was incorporated, by mortgaging all or any part of the goods and chattels of such corporation, and also the franchises, privileges, rights and liberties thereof, provided that the written assent of a majority of the stockholders, owning at least two-thirds of the capital stock of such corpora- tion, shall first be filed in the office of the clerk of the county where the corporation has its principal place of ' As amended, L. 1876, c. 358. 22 PROVISIONS OP THE MANUFACTURING ACT. business, and also in the office of the clerk of the county where such goods and chattels are situated. Note. — In the foregoing statement of the Act of 1848, all the amend- ments to the original sections of the Act are embodied in the sections as printed, and the dates of these amendments are given in the notes. All Statutes amendatory of the Act, but not of particular sections thereof, then follow in chronological order. One amendment of this nature, however, has been taken from its place and put with the general statute of the State providing for the consolidation of companies. See pott, §§ 137, 137a. All extensions authorizing other companies than those specified in section one to come under the Act are noted in the Table contained in Chapter II, post, and are quoted in full in Appendix A, CHAPTER II. PURPOSES FOR "WHICH CORPORATIONS MAY BE FORMED UNDER THE MAJ^UFACTURING ACT. § 1. Scope of act. 3. Amendments to Section 1. 3. Extensions of act. — How shown in alpliabetical table. 4. As to the orga,nization of companies for " agricultural, horticul- tural, medical or curative business." 4a. As to the organization of news companies. 5. Table showing purposes for which corporations can be formed under the act, and its extensions. § 1. Scope of act.— The Law of 1 848, chapter 40, commonly known as " The General Manufacturing Act," differs widely from the Law of 1875, chapter 611, commonly known as "The Business Corporation Act," in the provisions regulating the objects for which corporations can be formed under it. Under the "Business Corporation, Act," corpora- tions may be organized for the carrying on of any law- ful business, except such kinds as are expressly named and excluded in the first section of that act. Under the " General Manufacturing Act," however, a corporation can be organized only for an object ex- pressly stated in that act, or some extension thereof Under this act, therefore, proposed corporators must look for a special provision authorizing corpora- tions to be formed for the exact business which they contemplate carrying on ; although, under eithe? of the general terms, " manufacturing, mining, mechanical or chemical business," many diverse corporations may, of course, be formed, any one of which can, if its certifi- 24 PURPOSES FOR WHICH § 2. cate of incorporation be properly drawn, carry on any branch or branches of business falling under the gen- eral head specified in its certificates as that under which it proposes to do business. Thus it was held that a corporation could be prop- erly organized under this act to mine for " gold, silver and lead," such object being duly set out in its certifi- cate of incorporation, and was not restricted to mining for one of those minerals only.^ The industries of any such corporation, however, must all fall under some one of these general heads. It cannot combine any two or more of these general purposes.^ There will be found at the end of this chapter an alphabetically arranged list of purposes for which cor- porations may be organized under L. 1S48, c. 40, as amended and extended. § 2. Amendments to Section 1.— Section 1 of the act as originally passed, has been frequently amended and modified in this regard, but at present exists, as stated in the amendment of 1888 (L. 1888, c. 313).* We have taken the amendment of 1882* as repeal- ' People ex rel. Belknap ». Beach, 19 Hun, 259. See, also, Cross ». Pinckney villa Mill Co. 17 111. 54. ' See preceding chapter, also § 6, post. s L. 1882, c. 309. An act to amend section one of chapter forty of the laws of eighteen hundred and forty-eight, entitled "An act to authorize the formation of corporations for manufacturing, mining, mechanical, chemical, agricultural, horticultural, medical or curative, mercantile or commercial purposes, as subsequently modified and amended. Passed June 6, 1882. Section 1. Section one of chapter forty of the laws of eighteen hund- red and forty-eight, entitled, " An act to authorize the formation of cor- porations for manufacturing, mining, mechanical, chemical, agricultural, horticultural, medical, curative, mercantile or commercial purposes," as § 2. COBPOEATIOKS MAY BE FOKMED. 25 ing ^ all previous inconsistent laws, passed as amend- ments to said Section 1, and upon that understanding have prepared the following table,^ heretofore amended and modified, is hereby amended so as to read as follows : § 1. At any time hereafter any three or more persons who may desire to form a company for the purpose of carrying on any kind of manu- facturing, mining, mechanical or chemical business, or the business of printing, publishing or selling books, pamphlets or newspapers, or the business of making butter or cheese, concentrated or condensed milk, or any other products of the dairy, or the business of erecting buildings for church sheds or laundry purposes, and the carrying on of laundry busi- ness, or the business of slaughtering animals or for the purpose of towing or propelling canal boats, vessels, rafts or floats on the canals and navi- gable rivers of the State of New York, by animal or steam power, their operations not to be confined to the county in which their certificate shall be filed, or the supplying of hot water or hot air or steam for motive power, heating, cooking or otlier useful applications in the streets and public and private buildings of any city, village or town in this State, may make, sign and acknowledge before some oflBcer competent to take the acknowledgment of deeds, and file in the office of the clerk of the county in which the business of the company shall be carried on, and a duplicate thereof in the office of the Secretary of State, a certifi- cate in writing in which shall be stated the corporate name of the said company and the objects for which the company shall be formed, the amount of the capital stock of said company, the time of its existence (not to exceed fifty years), the number of shares of which the said stock shall consist, the number of trustees and their names who shall manage the concerns of said company for the first year, and the name of the town and county in which the operations of the said company are to be carried on. This act shall take effect immediately. ' Moore v. Mausert, 49 N. Y. 332 ; Ely v. Holton, 15 N. Y. 595 ; Heck- mann, v. Pinkney, 81 N. Y. 311; The People v. Jaehne, 103 N. Y. 193, 195, and cases there cited; Eden Musee Am. Co. v. Carr, 86 Hun, 488. " The final clause in the recent amendments of Section 1 of the act, which reads : " But this act shall not be deemed to repeal or afiect in any way any act heretofore passed amendatory of, or supplementary to the said act of February 17, 1848, except as herein provided," came in to- gether with the provisions now contained in said section with references to companies " for the purpose of taking, purchasing, holding or possess- 26 PURPOSES FOE WHICH § 3. § 3. Extensions of act.— How shown in alphabetical table.— Other laws have, however, been passed, not as amendments to said section but by their terms as ex- tensions of the act.^ These remain in force, and the corporations whose formation they authorize are in- ing real estate and buildings, and selling, leasing and Improving the same," in 1884 (L. 1884, c. 267). It will be seen that said section does not now, and did not under the amendment of 1883, refer to the following kinds of business, viz.: Agricultural, horticaltiural, medical or curative, as to which, see § 4, post ; nor to the business of building or keeping hotels finserted by L. 1866, c. 799;am'd, L. 1871, c, 657; but doubtless intended to be specifically removed from the list of corporations organizable under the act of 1848, and confined exclusively to the special act of 1874. See L. 1874, c. 143, § 16, in which the reference to L. 1866, o. 371, would seem from the whole tenor of the act as intended for L. 1866, c. 799) ; nor to building and maintaining museums, or for curative pur- poses (inserted by L. 1866, c. 799) ; quarrying stone (inserted by L. 1867, c. 248) ; elevating, ware-housing, storing or milling (inserted by L. 1869, c. 605) ; and presei'ving and dealing in meats (inserted by L. 1871, c. 657, §2; am'd, L. 1872,0.426). The business of towing, or propelling canal boats, vessels, rafts or floats on the canals or navigable rivers of the State of New York, by animal or steam power, was first inserted in the above section by the Laws of 1877, c. 374, but omitted when the section was amended in 1879 (c. 290); and re-inserted by amendment of 1880, c. 241, § 1. Section 2 of said act of 1880 provides : " The organization of any corporation for the purpose of towing or propelling caual boats, vessels, rafts or floats on the canals and navigable rivers of the State of New York, by animal or steam power, their operations not to be confined t« the county in which their certificates shall be filed, formed since the passage of chapter three hundred and seventy-four, of the laws of eighteen hundred and seventy- seven, and all the acts of the trustees of any such corporation, organized In compliance with the provisions of such last-named chapter, are hereby made as legal in all respects as if the said last-named chapter had re- mained in full force, and every such corporation so organized is hereby declared to have existence and to have the same powers and privileges in all respects as if the said act, being chapter three hundred and seventy- four of the laws of eighteen hundred and seventy-seven, had been in full force in all respects at the time of the formation of any such corpora- tion "(L. 1880, c. 241, §2). ' Wakefield b. Fargo, 90 N. Y. 213. § 3. COEl'OEATIONS MAY BE FORMED. 27 eluded in the table, except where such laws have been directly repealed. These extensions frequently prescribe the same number of corporators as the original act, and provide that every corporation formed thereunder shall be sub- ject to all the provisions, duties and obligations con- tained in said act of 1848, and shall be entitled to all the benefits and privileges thereby conferred; many of them also providing that the corporations formed thereunder shall not be confined in their operations to the county in which their certificate shall be filed. Where the right to organize depends upon such an extension, the following table contains a reference to the particular session law, and the words, " not con- fined to county," where such a provision is contained in the extension. There are, however, still other extensions which, while authorizing the formation of additional corpora- tions under the General Act, and extending to them its provisions, yet make certain changes, or lay down additioi^al requirements. In these cases we have noted in the table that special provisions exist, and have pointed out the particular session laws, which should, in all such cases, be carefully consulted. For convenience of reference, we have given all these extensions of both classes in full in Appendix A, designating them therein by roman numerals, and re- ferring to them by notes to the table under the ap- propriate headings. In cases where no reference to any particular ses- sion law is found in the table, the authority to organ- ize is derived from the original act as amended. 28 PURPOSES FOE WHICH § 4. § 4. As to the organization of companies for " agricul- tural, horticultaral, medical or curative" business. — For the sake of completeness we have included in the table the above purposes, the organization of com- panies for which was authorized by the Legislature in L. 1866, c. 838, § 2. That act, as will appear by ref- erence to the foot notes, where it is given in full,^ is ' L. 1866, c. 833. An act to amend an act entitled "An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight. Passed April 28, 1866. Section 1. The title of the act entitled "An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight, is hereby amended so as to read as follows: "An act to authorize the formation of corporations for manufacturing, miniag, mechanical, chemical, agricultural, horticultural, medical or curative, mercantile or commercial purposes." I 2. At any time hereafter any three or more persons may form a cor- poration for the pui'pose of carrying on any kind of manufacturing, min- ing, mechanical, chemical, agricultural, horticultural, medical or curative business, may make, sign and acknowledge, before some officer compe- tent to take acknowledgment of deeds, and file the same in the office of the clerk of the county in which the business of the company shall be carried on, and a duplicate in the office of the Secretary of State, a cer- tificate in writing in which shall be stated the corporate name of said company, and the objects for which it shall be formed, the amount of its capital stock, the number of shares of which said stock shall consist, the term of its existence, not exceeding fifty years, the number of its trustees, and the names of those who shall manage the concerns of the company for the first year, and the names of the town or city and county in which the operations of said company shall be carried on. § 3. It shall be lawful for any manufacturing company heretofore or hereafter organized under the provisions of this act or the act hereby amended, to hold stock in the capital of any corporation engaged in the business of mining, manufacturing or transporting such materials as are required in the prosecution of the business of such company, so long as they shall furnish or transport such materials for the use of such com- pany, and for two years thereafter and no longer; and the trustees of such company shall have the same power with respect to the purchase of such stock, and issuing stock therefor, as are now given by law with § 4. CORPORATIOKS MAY BE FOEMED. 29 blindly stated. If its intent, as would appear, was to amend Section 1 of the original act, then by the very broad language of L. 1882, c. 309, this, as well as all other amendments and modifications of that section, prior to said law of 1882, and inconsistent therewith, is abrogated and no longer in force.^ If, however, it could be taken, not as an amend- ment,* but as an independent provision authorizing the formation of corporations for the purposes therein specified, then it will be seen that it does not in terms extend to such companies the provisions of the Act of 1848, whatever might be held as a matter of infer- ence. It is to be observed, however, that " agricultural " companies can be organized under the extension of 1865 (L. 1865, c. 234).^ By section 1 of said act of 1866, the title of the original act of 1848 was changed by inserting the words " agricultural, horticultural, medical or curative, mercantile or commercial purposes," and that title still respect to the purchase of mines, manufactories and other property necessary to the business of manufacturing companies. But the capital stock of such company shall not be increased without the consent of the owners of two-thirds of the stock, to be obtained as provided by sections twenty-one and twenty-two of the act hereby amended. § 4. When any such manufacturing company shall be a stockholder in any other corporation, its president or other officers shall be eligible to the office of trustee of such corporation, the same as if they were in- dividually stockholders therein. § 5. This act shall take effect immediately. ' See § 3, ante, of the text, and notes thereunder. " This act is nowhere recited, or specifically referred to as an amend- ment to said Section 1 in any of the acts subsequently passed as amend- ments to that Section. ' See Table «mJ wee " Cultivating." 30 PURPOSES FOR WHICH § 4a. exists as thus amended, though now incongruous with the text of the act. § 4a. As to the organization of news companies.— For a like reason we have included the " business of receiv- ing, obtaining, collecting and accumulating items and matters of news, and selling, vending, furnishing and supplying the same," companies for which were attempted to be authorized by L. 1883, c. 240. This act by its terms purports to amend L. 1857, c. 262, which in its turn was an amendment of Section 1 of the original act ; and it is to be observed that in none of the amendments by which that section has been re-stated since the passage of the act now under con- sideration, has this business been mentioned or in- cluded. If, however, on a comparison of this act^ with the one it purports to amend,^ the conclusion is reached > The acts above referred to read as follows : L. 1857, c. 263. An act to amend the "Act to authorize the forma- tion of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty- eight. Passed April 6, 1857. Section 1. The first section of the " Act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical pur- poses," passed February seventeenth, eighteen hundred and forty-eight, is hereby amended by inserting after the words " any kind of manufac- turing, mining, mechanical or chemical business, " the words, "or the business of printing and publishing books, pamphlets and newspapers." § 2. This act shall take effect immediately. L. 1883, c. 340. An act to amend chapter two hundred and sixty-two of the laws of eighteen hundred and fifty-seven, entitled " An act to amend the act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight. Passed April 16, 1883. Section 1. The first section of the act passed April sixth, eighteen hundred and fifty-seven, entitled "An act to amend an act to authorize the formation of corporations for manufacturing, mining, mechanical or § 5. OOEPOEATIONS MAT BE FORMED. 31 that L. 1883, c. 240 makes an independent provision authorizing any three or more persons, who may desire to form a company for the purposes therein stated, to make and file a certificate of a specified nature in a specified place. Then it will be observed that it con- tains no enactment distinctly constituting such persons a corporation, coming under the provisions of the Law of 1848 ; whatever inferences may be drawn as to the intent of the Legislature from the titles of the respective acts, or otherwise.^ § 5. TABLE showing purposes for which corporations can Ibe formed under the act, and its extensions.' Advertising books, pamphlets and newspapers, and other articles. chemical purposes, passed February seventeenth, eighteen hundred and forty-eight, is hereby amended so as to read as follows : § 1. At any time hereafter, any three or more persons who may desire to form a company for the purpose of carrying on any kind of manufac- turing, mining, mechanical or chemical business, or the business of print- ing and publishing books, pamphlets and newspapers, or the business of receiving, obtaining, collecting and accumulating items and matters of news, and selling, vending, furnishing and supplying the same, may make, sign and acknowledge before some officer competent to take the acknowl- edgment of deeds,' and file in the office of the clerk of the county in which the business of the company shall be carried on, and a duplicate thereof in the office of the Secretary of State, a certificate in writing, in which shall be stated the corporate name ef the said company, and the objects for which the company shall be formed, the amount of the capital stock of the said company, the term of its existence not to exceed fifty years, the number of shares of which the said stock shall consist, the number of trustees and their names who shall manage the concerns of said com- pany for the first year, and the names of the town and county in which the operations of the said company are to be carried on. § 2. This act shall take effect immediately. ' See Matter of Rochester Water Commissioners, 66 N. T. 413. " See § 3, ante, and notes thereunder, for statement as to certain cor- porations not included in this table, which were at various times author- ized by amendments to Section 1 of this act, but which are now omitted therefrom. See, also, preceding paragraphs, § 4 and § 4a. 32 PURPOSES FOR WHICH § 5. Agricultural purposes. (L. 1865, c. 234, not confined to county).^ Apartment houses. See Beal estate. Basins. See Elevators ; Wharves. Books. See Advertising ; Printing. Bottling. See Mineral water. Brandies, See Grape. Breeding cattle, &c. See Cattle. Buildings. See Real estate and buildings. Butter making. Canal boats. See Towing or propdling. Cattle, buying, breeding, grazing, pasturing, dealing in and selling cattle, sheep, hogs, horses and other live stock in the United States of America, British North America, and elsewhere. Cheese making. Chemical business. Church sheds, erecting buildings for. Coal, buying, storing, selling or shipping coal, mer- chandise and farm produce. Coal and peat of all kinds, buying, selling and trans- porting. (L. 1865, c. 307, not confined to county.)^ Concentrated or condensed milk, making. Cotton. See Gvltivating. Cultivating, sugar cane, cotton, rice, tobacco, indigo and other products of the earth, preparing, and transport- ing and disposing of the same. (L. 1865, c. 234, not con- fined to county.) ' See, also, Grape. Curative. See Medical. Dairy products, making. Docks. See Elevators, Dock-building. See Dredging machines. Dredging and filling of land, and dock-building, con- structing and using machines for. (L. 1875, c. 365.) * 'Appendix A. v. See, also, § 4, ante. '' Appendix A. vi. ' Appendix A. v. * Appendix A. xi. § 5. COEPORATIONS MAY BE FORMED. 33 Depots. See Union railway depots. Elevators, floating and stationary, or warehouses, con- structing, maintaining and using for all purposes apper- taining to or connected with trade or commerce in the several kinds of grain in the State of New York. (L. 1864, c. 887 ; as amended, L. 1868, c. 781.) * Elevators, warehouses, docks, wharves and basins, own- ing, constructing, maintaining, using and operating. (L. 1881, c. 650.) 2 Entertainments and amusements, buildings for. See Skating rinh. Fairs, &c., buildings for. See Skating rink. Farm produce, coal and merchandise, buying, storing, selling or shipping. Fertilizers. See Fish. Fish, catching non-edible fish in the salt waters of Suffolk County, to be used for or converted into fertilizers. (Special provisions.- Consult L. 1868, c. 161.) ' Floats. See Towing. Grape, propagating, cultivating and developing the different varieties of, and manufacturing wines and bran- dies therefrom, and preparing, transporting and disposing of the same. (L. 1865, c. 284, not confined to county.) * Grazing. See Cattle. Halls, public. See Beal estate. Hogs. See Cattle. Homesteads. See Beal estate. Horses. See Cattle. Horticultural. (L. 1866, c. 838.) ^ See Cultivating. Hot water, hot air, or steam, supplying for motive power, heating, cooking or other useful applications, in the ' Appendix A. iv. ' Appendix A. xiii. ' Appendix A. vii. * Appendix A. v. ' But see § 4, ante, and notes thereto as to tliis statute, and the com- panies which it authorized. 3 34 PURPOSES FOE ■WHICH § 5. streets and public and private buildings of any city, village or town in this State.* Ice, collecting, storing, preserving, preparing for sale, transporting and vending. (L. 1855, c. 301, not confined to county.) * Improving real estate and buildings. See ReoH estate,- also Heal estate and buildings. Indigo. See Cultivating. Inland wharves. See Wharves. Lands, filling in and improving. See Seal estate;- Dredging. Laundry purposes, erecting buildings for, and carrying on laundry business. Live stock. See Cattle. Locomotive engines, building, manufacturing, owning,, furnishing, letting, selling and maintaining locomotive engines, cars, rolling stock and railway machinery, or for one or more of these purposes. (There must be nine or more corporators. Special provisions. Consult L. 1873, c. 814.) » Manufacturing business. Merchandise, coal and farm produce, buying, storing, selling or shipping. Mechanical business. Medical or curative business. (L. 1866, c, 838.) * Milk, making concentrated or condensed. ' Authorized by the General Manufacturing Act as amended. L. 1879, c. 317, gives to any corporation organized under the General Manufac- turing Act, or any of its amendments, or under the Business Corporation Act, full power to manufacture, furnish and sell such quantities of hot water, hot air or steam, as may be required in the city, town or village where the same may be located. For this act, and for special powers, rights, privileges and restrictions conferred and imposed by special statutes on companies engaged in this business, see Appendix A. xvi. ' Appendix A. ii. ' Appendix A. ix. * But see § 4, ante, and notes thereto, as to this statute and the com- panies which it authorized. § 5. CORPORATIONS MAY BE FORMED. 35 Mineral water from any natural spring, bottling and selling. (L. 1863, c. 63.)i Mining business.* News, receiving, obtaining, collecting and accumulating items and matters of, and selling. Tending, furnishing and supplying the same. (L. 1883, c. 240.) * Newspapers. See Advertising; Printing. Oils. See Petroleum. Pamphlets. See Advertising; Printing. Peat. See Coal and peat. Petroleum and other oils, storage, conveyance and transportation of. (Special provisions. Consult L. 1875, c. 113.)* Printing, publishing or selling books, pamphlets or newspapers. Produce, farm. See Farm produce. Products of the dairy. See Dairy. Products of the earth. See Cultivating. Public halls. See Heal estate. Publishing. See Printing. Eafts. See Towing. Railway supplies. See Locomotives. Raising vessels or other heavy bodies, constructing and using machines for. (L. .1851, c. 14, not confined to county.) ^ Real estate, purchasing, acquiring, maintaining and im- proving, for residences, homesteads, apartment houses and public halls,and for filling in and improving lands. (Special provisions. Consult L. 1871, c. 535 ; amended, L. 1881, o. 589; also L. 1883, c. 71.) « ' Appendix A. iii. " Mining companies may also conduct the business of watercompanies by complying with the provisions of L. 1880, c. 85 ; amended, L. 1881, c. 472; am'd, L. 1887, c. 486. For these acts see Appendix A. xii. See Water. ' But see § 4a, ante. 'Appendix A, x. ' Appendix A. i. • Appendix A. viii. 36 PURPOSES FOR WHICH § 5. Eeal estate and buildings, purchasing, taking, holding and possessing, and selling, leasing and improving the same.^ Residences. See Becd estate. Bice. See Cultivating. Eink, skating. See Skating rink. Rolling stock. See Locomotive engines. Salvage. See Toioing. Sheds, church. See Church sheds. Sheep. See Cattle. Skating rink, purchasing a suitable lot, and erecting thereon a building for, and for fairs, meetings, exhibitions, or other lawful entertainments and amusements. (L. 1864, c. 337; as amended, L. 1868, c. 781.)* Slaughtering animals. Steam, supplying. See Hot water. Stock, live. See Cattle. Stock, rolling. See Locomotive engines. Sugar cane. See Cultivating. Tobacco. See Cultivating. Towing, &c., constructing, owning and using vessels and machines to be employed for hire in towing vessels carry- ing freight and passengers, and in aiding and protecting and saving vessels and their cargoes wrecked or in dis- tress. (Special provisions. Consult L. 1864, c. 337.) * Towing or propelling canal boats, vessels, rafts or floats on the canals and navigable rivers of New York, by animal or steam power. Union railway depots, purchasing, acquiring, building upon and improving real estate for, leasing, for filing the certificate of incorporation, under the General Manufactur- ing Act of 1848 ; and fifteen cents per folio of one hundred words for recording certificates, notices or other papers required by law to be re- corded. L. 1883, c. 156. § 7. FORMATION OP CORPORATIONS. 41 porated by any special act of the Legislature shall go into operation or exercise any corporate powers or privileges until said tax has been paid as aforesaid. But this act shall not apply to literary, scientific, med- ical and religious corporations or corporations organized under the banking laws of this State or under chapter one hundred and twenty-two of the laws of eighteen hundred and fifty-one, entitled, " An act for incorporation of build- ing, mutual loan and accumulating fund associations," and the acts amendatory thereof.'^ Section 2 of Act. — When the certificate shall have been filed as aforesaid, the persons who shall have signed and acknowledged the same, and their successors, shall be a body politic and corporate, in fact and^ in name, by the name stated in such certificate ; and by that name have succession, and shall be capable of suing and being sued in any court of law or equity in this State, and they and their successors may have a common seal, and may make and alter the same at pleasure ; and they shall, by their cor- porate name, be capable in law of purchasing, holding and conveying any real and personal estate whatever which may be necessary to enable the said company to carry on their operations named in such certificate, but shall not mortgage the same or give any lien thereon.'' § 7. Becjinisites of certificate of incorporation.— The provisions of this act in regard to tte formation of companies under it. are precise and clear. The corporators must be at least three, and can be any greater number. They must make, sign and ac- knovi^ledge the certificate, but need not verify it by oath. This certificate must state : (1.) The corporate name of the company. And ' As amended, L. 1887, c. 384. ° See De Vinne v. Rianhard, 9 Daly, 406. Companies may now mort- gage. Seepoat, §§ 134, 135. -42 FORMATION OF CORPOEATIONS. § 7. this should not be identical with, nor closely similar to, that of any previously incorporated company.^ (2.) The objects for which the company is formed. The objects so stated in the certificate must all fall tinder some one of the general heads set out in the act or its extensions. No two or more of these can be combined for general purposes, and a certificate at- tempting such a combination will be unauthorized, and can and should be rejected by the Secretary of State.* (3.) The amount of the capital stock of said com- pany, and the number of shares of which the stock shall consist. It will be observed that there is a complete absence of restrictions as to the amount of capital stock, the number of shares, or the par value of each share. It is therefore wholly at the discretion of the corporators to fix the capital at any amount, great or small, and to divide it into any number of shares. The recent law, however, imposing a license tax of one-eighth of one per cent, of the capital of the company, for the privilege of organization, tends to promote low capitalization.* (4.) The time of the company's existence (not to exceed fifty years).* (5.) The number of trustees and their names, who ' McLasher v. N. Y. Daily Standard, Daily Register, Jan. 3, 1884 ; Newby v. Oregon Central R. R. Co. Deady's Rep. 609 ; Holmes, Booth & Haydens v. The Holmes, Booth & Atwood Mfg. Co. 37 Conn. 378 ; The American Grocer v. The Grocer, 35 Hun, 398 ; Railway Age v. Garnett, 17 Weekly Dig. 250. s People ex rel. Belknap v. Beach, 19 Hun, 259. See, also, preceding chapter, and L. 1867, c. 960, § 7. 'Ante, § 6. * For manner in which corporate existence may subsequently be ex- tended, see^o**, § 140. §8. rOEMATIOU OF CORPORATIONS. 43 shall manage the affairs of the company for the first year. These trustees must be not less than three nor more than thirteen. A majority of them must be both citi- zens and residents of New York,^ and it is advisable that this fact should appear on the face of the certifi- cate. (6.) The name of the town and county in which the operations of the company are to be carried on. One or more places can be designated where the company may carry on business.^ Companies organized to carry on a part of their business out of the State must state that fact in their certificate, and specify also their intended place of busi- ness out of the State, as well as their principal place of business within this State, specifying this latter place by the name of the town and county, which are thereupon deemed the town and county in which the operations of the company are to be carried on.^ The precise, exact location of such place of busi- ness without the State is not required to be stated. The statute manifestly contemplates only certainty in this regard to a common intent.^ § 8. When incorporated. — Duplicate certificates. — It will be noticed that two certificates must be filed and recorded ; one in the office ,of the county clerk, and a duplicate in the office of the Secretary of State, and tlie organization into a corporation dejtore is wot effect- 1 See post, § 12. ' L. 1853, c. 333, § 1 ; ante, § 6. ' L. 1857, c, 39, § 3 ; ante, § 6. * People ex rel. Beiknap ®. Beach, 19 Hun, 359. See Duohe v. Buffalo Grape Sugar Co. 63 How. 516. 44 FOEMATIOK OF CORPORATIONS. §8. ed until both these certificates are filed and recorded.* The tax of one-eighth of one per centum of the capital of the company must, however, be paid to the State Treasurer before the certificate of incorporation will be filed and recorded by the Secretary of State or the county clerk. But the tax will not be accepted by the State Treasurer until the certificate has been approved by the Secretary of State's office. The proper course, therefore, is to submit the certificate first to the Secre- tary of State, and then, upon his approving the same, to pay the tax and present proof of this payment to the Secretary of State and to the county clerk. Where, however, the certificate is filed and recorded with the county clerk, a failure to file and record the duplicate certificate does not vitiate the incorporation so as to render the members partners inter se? Where such an imperfect filing and recording is made, immediately followed by user, a corporation de facto arises, and the members and officers thereof are subject to all the requirements, and under all the priv- ileges and restrictions given by the act in the case of corporations dejure.^ The production of a copy of the certificate recorded with the county clerk, and certified by him, being made evidence of the incorporation by the statute,* is suffi- cient proof of corporate existence, and sufficient answer to all allegations of non-incorporation, except in a direct proceeding by the State to annul the franchise.'' ' Childs V. Smith, 38 How. Pr. 328. ' Raisbeck ». Oesterricber, 4 Abb. N. C. 444; N. Y. Common Pleas, S. T. Consult Jessup c. Carnegie, 80 N. Y. 441. ' Meriden Tool Co. v. Morgan, 1 Abb. N. C. 125, note. * See post, § 10. 'Raisbeck o. Oesterricber, supra, and cases there cited. §9. FORMATION OF COEPOKATIONS. 45 As against the State in such a case, however, the omission to file and record the duplicate certificate would doubtless be fatal .^ § 9. Incorporators.— Promoters.— Questions have at times arisen as to the liability of one who has sub- scribed to the stock of a de facto company prior to and in co"ntemplation of its subs equent incorporation under this act, and the distinction has been taken that he is not liable for calls if he has simply made such subscription prior to the incorporation, and if at the time of actual imperfect incorporation or subse- quent thereto he has done no act, or taken no steps, which can be construed as constituting a ratification or estoppel.* Thus where a prior subscriber was one ot the incorporators, and as such signed and acknowledged the certificate of incorporation, he was held to be estopped from denying that the company was legally incorporated, and was held liable, in an action by its receiver, for the value of the shares subscribed for by him.* And the same rule would apply where such sub- scriber had taken part in acts of user on the part of a de facto corporation.* Where a company attempting to organize under the general law, has filed papers having a color of ' See, as to duplicate certificate, Eaton v. Aspinwall, 3 Abb. Pr. 417; affl'd 19 N. Y. 131. = Dorris V. Sweeny, 64 Barb. 636 ; s. c. 60 N. Y. 463. See, also, Poughkeepsie, &c., Plankroad Co. v. Griffin, 34 N. Y. 150; Buffalo & Jamestown R. R. o. GifEord, 87 N. Y. 394. ' Dorris i>. French, 4 Hun, 293 ; Lake Ontario R. R. Co. «. Munson, 16 N. Y. 451 ; Rensselaer, &c., Plankroad Co. ®. Barton, lb. 457, note. See, however, Dewitt v. Hastings, 69 N. Y. 518. » Eaton V. Aspinwall, 19 N. Y. 119. 46 FOBMATIOK OF CORPOKATIONS. ^ §9. compliance with the statute, but so defective as to be worthless against the people, it may yet, as against subsequent subscribers to its stock, be held a corporation de facto upon slight proof of user,^ and a subscription to a corporation cfe/acto is binding on the subscriber.^ The liability of promoters of such a corporation depends not upon any particular provisions of the act, but upon general rules governing the liability of all promoters, and hence does not come within the scope of this work.* It may be said in general, however, that as between them and general subscribers to the stock, scrupulous fairness and openness are required, and that they can- not, by concealment from such subscribers, make any profit for themselves; but will be held in all trans- actions as trustees for the subscribers' benefit.* They do not, however, represent the company in any relatiom of agency.** A corporation can be held on an agreement made; in its corporate name by its promoters, prior to its in- corporation, with one who supposes it to be at that, time a regularly organized corporation, if subsequent; to such incorporation it avails itself of and acts under such an agreement.^ And persons intending to form a company may agree among themselves as to the issue ■ Buffalo, &c., R. R. Co. c. Gary, 26 N. Y. 75. " Cayuga Lake R. R. Co. v. Kyle, 64 N. T. 185. = Consult, Morawetz on Corporations, § 234 ; Cook on Stock ani. Stockholders, § 651 ; Morgan s. Skiddy, 62 N. Y. 319. * Getty ®. Devlin, 54 N. Y. 403; 70 N. Y. 504; Brewster ». Hatch, 10^ Abb. N. C. 400 ; 4 N. Y. St. Rep. 617. =■ Munson t. Syracuse G. & Co. R. R. Co. 103 N. Y. 58. " Bommer ». Am. Spiral Spring Co. 81 N. Y. 468. §§ 10, 11. FOBMATIOK OP CORPOEATIONS. 47 of the stock and the future management of the com- pany.^ § 10. ProTisions making certified copy of certificate, endence. — Section 9 of Act. The copy of any certificate of incorporation, filed in pursuance of this act, certified by the county clerk or his deputy to be a true copy, and of the whole of such certificate, shall be received in all courts and places as presumptive legal evidence of the facts therein stated.' § II. Amended certificate.— L. 1870, ch. 135.— The di- rectors of any corporation organized under any general act for the formation of companies, in whose original certifi- cate of incorporation any informality may exist, by reason of an omission of any matter required to be therein stated, are hereby authorized to make and file ' an amended cer- tificate or certificates of incorporation, to conform to the general act under which said corporation may be organized; and upon the making and filing of such amended certifi- cate, the said corporation shall, for all purposes, be deemed and taken to be a corporation from the time of filing such original certificate. Nothing in this act contained shall in any manner afi'ect any suit or proceeding, at the time of filing such amended certificate, pending against said corporation, or impair any rights already accrued.* ' King V. Barnes, 109 N. Y. 267 ; Lorillard v. Clyde, 86 N. T. 384. ' N. T. Car. Oil Co. ». Richmond, 6 Bosw. 219. * ' The certificate should also be recorded. L. 1881, c. 22. Ante, § 6- * In re N. Y., L. & W. R'y Co. 25 Hun, 556. CHAPTER IV. TRUSTEES. § 12. Provisions as to number, qualifications, election, etc. 13. Who may be a trustee. 14. Annual election of trustees. 15. Provisions authorizing executor, pledgor, etc., to vote. 16. Trustees to manage company. 17. Trustees' meetings. 18. Provisions allowing election after proper date. — Trustees hold over. 19. Trustees may act until successors are chosen. 20. Provisions as to ofScers. 21. Trustees to select officers. 23. Duties and powers of officers. 23. Officers' unauthorized acts, how ratified. 24. Provisions as to by-laws. 35. General features of by-laws. 36. Duties of trustees under act. 27. How to increase or reduce number of trustees. § 12. FroTisions as to number, qualifications, election, etc. — Section '6 of Act. The stock, property and concerns of such company shall be managed by not less than three nor more than thirteen trustees, who shall respectively be stockholders in such company, and a majority of whom shall be citizens and residents of this State, who shall, except the first year, be annually elected by the stockholders, at such time and place as shall be directed by the by-laws of the company ; and public notice of the time and place of hold- ing such election shall be published, not less than ten days previous thereto, in the newspaper printed nearest to the place where the operations of the said company shall be carried on ; and the election shall be made by such of the stockholders as shall attend for that purpose, either in person or by proxy. All elections shall be by ballot, and each stockholder shall be entitled to as many votes as he g§ 13, 14. TEUSTEBS. 49 owns shares of stock in the said company, and the persons receiving the greatest number of votes shall be trustees ; and when any vacancy shall happen among the trustees, by death, resignation or otherwise, it shall be filled for the remainder of the year in such manner as may be provided for by the by-laws of the said company. § 13. Who may be a trustee.— Every trustee must be a stockholder in the company,^ and a majority of the trustees must be citizens and residents of the State of New York. Formerly it was also necessary that each trustee should be a citizen of the United States, but this re- quirement was abrogated by the laws of 1883.^ Any person therefore who acquires stock of the* -corporation is eligible for office, but under all circum- stances the majority of the board must consist of per- sons who are both citizens and residents of this State. § 14. Aunualelectionof trustees.— The trustees for the first year are named in the certificate of incorporation, a;id those named will be held responsible as such ; * thereafter and at the time and place specified in the by-laws, there should be an annual election of trustees.' The notice of the election must be published as is pro- vided by the statute. The stockholders who attend the meeting in person or by proxy ,^ whether or not they constitute a major- ' As amended, L. 1860, c. 369, and L. 1883, c. 332. " Herries v. Wesley, 13 Hun, 493. ' L. 1883, c. 333. * Craw V. Easterly, 4 Lans. 513. " Vanderburgh v. Broadway R. R. Co, 39 Hun, 348. "Phillips V. Wickham, 1 Paige, 590 ;.| People ». Twaddle, 18 IIud, 437 ; Reed v. Bank of Newburgh, 6 Paige, 387. Objections to proxies must be made at the time of the election, and parties objecting must 4 50 TRUSTEES. § 14. ity of all the stockholders, may proceed with the elec- tion, each stockholder being entitled to cast one vote for each share of stock he owns in the company ; and the persons receiving a majority of the votes cast will be the trustees for the ensuing year. If a full board is not elected those receiving a majority of the votes cast are legally elected.^ An election will not be set aside for a mere irregularity.^ To set aside an election on the ground that the votes were improperly rejected, it should appear that had they been received they would have changed the result of the election.^ The electi(m of unqualified persons is voidable but ^ot void.* If persons are held out to the world as trustees, and act as such, their acts within theip appar- ent authority are binding on the company.^ The right to vote is determined by the transfer books, and this is conclusive upon the inspectors.* stand upon the objections then taken. Matter of Lightall Mfg. Co. 47 Hun, 258. A proxy need not show that it was intended for a particular meeting; if it is in blank, it is good until challenged by the maker. Matter of White, 45 Hun, 580. See, also, Marie v. Garrison, 13 Abb. N. C. 335. 'In the Matter of Union Ins. Co. 22 Wend. 590; Vanderburgh v. Broadway R U. Co. 39 Hun, 348. " Matter of Hudson R. R. R. Co. 19 Wend. 135; Matter of Wheeler, 3 Abb. Pr. N. 8. 361. ' People V. Tuthill, 31 N. Y. 550 ; Matter of Long Island R. R. Co. 19 Wend. 37; Ex parte Murphy, 7 Cow. 153. ' People v. Albany R. R. Co. 38 How. Pr. 338 ; Lovett v. German Ref'd Ch. 13 Barb. 67. ' Partridge v. Badger, 25 Barb. 146 ; Vtrnon So. v. Hills, 6 Cow. 36. " Ex parte Willcocks, 7 Cow. 401 ; Matter of Empire City Bk. 18 N. Y. 199 ; Adderly v. Storm, 6 Hill, 624; Vails. Hamilton, 85 N. Y. 453 ; Strong 0. Smith, 15 Hun, 223. The statute evidently intends that there should be at least two inspectors of election. Matter of Lighthall Mfg. Co. 47 Hun, 258. § 14. TRUSTEES. 51 Administrators may vote without a transfer of stock.^ An executor, administrator, guardian or trustee may vote upon stock held by him in such capacity, and stockholders may vote upon pledged stock.^ One who has taken stock from the company as security for a loan made it, when he holds a certificate of stock and is a stockholder of record, may vote on stock so held,* although the company might not have been able to vote upon it. Married women may also vote upon stock held by them.* 1 E. S. 604, § 7. — " Tlie inspectors who may be appointed to conduct any election of directors or any other officer of any incorporated company of this State, shall be required, before entering on the duties of their appointment, to. take or subscribe the following oath or affirmation : ' I, A. B., do solemnly swear (or affirm, as the case may be) that I will execute the duties of an inspector for the election now to be held, with strict impartiality, and according to the best of my ability.' " 1 E. S. 603, § 6.=—" No by-law of the directors and managers of any incorporated company, regulating the election of directors or officers of such company, shall be valid, unless the same shall have been published for at least two weeks in some newspaper in the county where such election shall be held, at least thirty days before such ' Matter of North Shore & Ferry Co. 63 Barb. 556. » Post, § 15. = Vail V. Hamilton, 85 N. Y. 453 ; 30 Hun, 355 ; Ex parte Barker, 6 Wend. 509 ; Ex farte Desdoity, 1 Wend. 99. * It shall be lawful for any married woman, being a stockholder or member of any * * manufacturing company or other institution in- corporated under the laws of this State, to vote at any election for direc- tors or trustees, by proxy or otherwise, in such company of which she may be a stockholder or member. L. 1851, c. 321, § 6. 5 Consult L. 1880, c. 254; repealed by L. 1881, c. 116. 52 TRUSTEES. § 14. election : and in all cases where the right of Yotiug upon any share or shares of the stock of any incorporated com- pany of this State, shall be questioned, it shall be the duty of the inspectors of the elections to require the transfer books of said company as evidence of stock held in the said company ; and all such shares as may appear standing thereon in the name of any person or persons, shall be voted on by such person or persons, directly by themselves, or by proxy subject to the provisions of the act of incor- poration."^ 1 E. S. 603, § 5.—" It shall be the duty of the Supreme Court, upon the application of any person or persons or body corporate, that may be aggrieved by, or may complain of, any election, or any proceeding, act or matter, in or touching the same (reasonable notice having been given to the adverse party, or to those who are to be affected there- by, of such intended application), to proceed forthwith and in a summary way, to hear the affidavits, proofs and allegations of the parties, or otherwise inquire into the matters or causes of complaint, and thereupon to establish the election so complained of, or to order a new election, or make such order and give such relief in the premises, as right and justice may appear to the said Supreme Court to require : Provided, that the said Supreme Court may, if the case shall appear to require it, either order an issue or issues to be made up in such manner and form as the Su- preme Court may direct, in order to try the respective rights of the parties who may claim the same, to the office or offices or franchise in question ; or may give leave to exhibit, or direct the attorney-general to exhibit, one or more information or informations in the nature of a quo warranto in the premises."' ' see Beardsley v. Johnson, 16 N. Y. St. Rep. 773. " The court may, in an application under this provision, go behind the transfer books to determine who are shareholders. Strong e. Smith, lo Hun, 323. As to who may apply thereunder, see Matter, &c., Syracuse, C. & N. Y. R. R. Co. 91 N. Y. 1. For statutes, see R. S., 8th ed., vol. 3, p. 1739. §§ 15, 16. TRUSTEES. 53 § 16. Provisions auiliorizing executor, pledgor, etc., to Tote. — Section 17 of Act. Every such ^ executor, adminis- trator, guardian or trustee shall represent the share of stock in his hands at all meetings of the company, and may vote accordingly as a stockholder ; and every person who shall pledge his stock as aforesaid, may, nevertheless, represent the same at all such meetings, and may vote accordingly, as a stockholder. § 16. Trustees to manage company.— The stoct, prop- erty and concerns of every company shall be managed by its board of trustees. This power is exclusive and the ordinary business of the company can only be per- formed through its trustees.* Stockholders cannot in- terfere in the management of these, affairs.^ The trustees are, however, restricted by the charter and by- laws and must not exceed eithen They must endeavor to carry out the purposes for which the company was organized, and must do no act which will defeat such purposes. Thus it is held that they cannot dispose of all the assets of the company even with the consent of a majority of the stockholders.* Such a disposition is, however, valid, as to stockholders consenting thereto.^ Where also the stockholders acquiesce by their silence ' Post, § 139. Consult White ». Price, 39 Hun, 394. = Beveridge v. N. Y. Elevated R. R. Co. 112 K. Y. 1 ; Dabney v. Stevens, 40 How. Pr. 841 ; East N. Y. R. R. Co. v. Lighthall, 6 Robt. 407; Bank of U. S. ». Dandridge, 13 Wheat. 113. The trustees may, however, appoint an executive committee. Sheridan Electric L. Co. «. Chatham National Bank, 24 N. Y. St. Rep. 632; s. o. 52 Hun, 580; Cook, §§ 593, 715. See, also, Morrill e. C. T. Segar Mfg. Co. 32 Hun, 543. ^ Phillips V. Wickham, 1 Paige, 590 ; Conro v. Port Henry Iron Co. 12 Barb. 27; McCullough v. Moss, 5 Den. 567; Railway Co. ■». Allerton, 18 Wall. 333 ; People ». Metropolitan R. R. Co. 36 Hun, 82. "Rossie ». Lead M. Co. 5 Hill, 187; Abbott®. Hard Rubber Co. 11 Abb. Pr. 304; Smith «. N. Y. Consolidated Stage Co. 18 Abb. Pr. 419; Taylor e. Earl, 8 Hun, 1. " Webster v. Turner, 12 Hun, 264. 54 TRUSTEES. § 17. in sucli a transfer made in good faith in payment of a judgment against the company, it is valid.^ The trustees cannot vary the charter, and a legislative act passed upon their application, which enlarges the powers of the company, is void.^ They " are incompe- tent to release an original subscriber to its capital or to make any arrangement with him by which the com- pany, its creditors, or the State shall lose any of the benefits of his subscription." ^ They may, however, bor- row money for legitimate purposes within the powers of the company, and give notes or other security there- for.* They represent all the stockholders," and are trus- tees for them and in a certain sense for the creditors." Within the charter and by-laws they may do any act necessary for the furtherance of the proper interests of the company.'' Where there were but two trustees to constitute the board it was held that, although the act requires every company to have at least three trustees, a transfer of property made by such two in satisfaction of a debt was binding upon the company as well as upon third persons.^ § 17. Trustees' meetings.— Although, no provision of the act requires that the trustees shall meet to conduct the affairs of the company, it is necessary that- they ' Sheldon Hat Blocking Co. ». Eickenmeyer Hat B. Co. 90 N. Y. 607. " Ang. & Ames on Corporations, p. 271. 'Burke v. Smith, 16 Wall. 195; Jones v. Terre Haute, etc., R. R. Co. 57 N. Y. 196 ; Howe «. Deuel, 43 Barb. 504. ' Curtis 0. Leavitt, 15 N. Y. 9; Smith ». Law, 31 N. Y. 296; Kent v. Quicksilver M. Co. 78 N. Y. 159; Mahoney Mfg. Co. v. Anglo-Cal. Bk. 104 U. S. 192; Meed v. Keeler, 24 Barb. 20. ' Chase n. Vanderbilt, 62 N. Y. 307. " Bliss v. Matteson, 45 N. Y. 22. ' Field on Corporations, § 150. ^Castle V. Lewis, 78 N. Y. 131; 13 Hun, 298. § 18. TRUSTEES. 55 should do so to properly manage its affairs. To act as trustees they must assemble as such, and obtaining the consent of each individual trustee to^ any specified act is not obtaining the consent of the board of trus- tees.' Unless t-he by-laws otherwise specify a majority of the entire number of trustees of the company must be present at a meeting to constitute a quorum.^ It has been stated to be the law of this State that trustees' meetings must be held within the State creat- ing the corporation, therefore the meetings of trustees of the companies of which we are treating should be held within New York State.® If, however, a part of the business of the company is carried on out of this State and the certificate of incorporation so provides, it would seem proper for meetings to be also held in those places in which the companies are, by the law itself, authorized to carry on their operations. § 18. Provisions allowing elections after proper date. — Trustees hold over. — Section 4 of Act. In case it shall happen at any time that an election of trustees shall not be made on the day designated by the by-laws of said com- pany, when it ought to have been made, the company for that reason shall not be dissolved, but it shall be lawful on any other day to hold an election for trustees, in such ' McCuHough V. Moss, 5 Denio, 575, 577 ; Livingston v. Lynch, 4 Johns. Ch. 596, 597. ' •' When the corporate powers of any corporation are directed by its charter to be exercised by any particular body, or number of persons, a majority of such body, or persons, if it be not otherwise provided in the charter, shall be a sufficient number to form a board for the transaction of business ; and every decision of a majority of the persons duly as- sembled as such board, shall be valid as a corporate act." (1 Rev. Stat. 600, § 6.) See Hoyt v. Thompson, 19 N. Y. 207. 'Orrnsby^. Vermont Copper Co. 56 N. Y. 633; affl'g 8 J. & S. 406. See, however, Morawetz, § 533; Waterman, vol. 1, p. 312; Cook, § 592. 56 TRUSTEES. § 19. manner as shall be provided for by the said by-laws, and all acts of trustees shall be valid and binding as against such company until their successors shall be elected. § 19. Trustees may act until successors are chosen.— The provisions of the Revised Statutes ^ authorizing the president and directors of an incorporated company to cause an election within sixty days after the prescribed time for holding such annual election, apply to the act novr under consideration, and in case no regular election is held at the proper time it is the duty of the trustees to call a meeting and have the elec- tion within the time specified in the statutes, and a stockholder may obtain a peremptory mandamus com- pelling the trustees to hold such election.^ The notice to be given stockholders, for a meeting to be held subsequent to the regular time of holding the an- nual meeting, should be that required by section 3.* All lawful acts of the old board, until their successors are selected, are binding on the company, and they act ' 1. R. S. 604, § 8. — " If, at any time hereafter, the election for direc- tors of any bank or other incorporated company of this State, shall not be duly held on the day designated and appointed by the act incorporating such bank or other incorporated company, it shall be the duty of the pres- ident and directors of such bank or other incorporated company to notify and cause an election for directors to be held within sixty days immedi- ately thereafter ; and in all cases, no share or shares shall be voted upon, except by such person or persona who may have appeared on the trans- fer books of said company to have had the right to voite thereon, on the day when, by the act of incorporation of such company, the election ought to have been held ; which said right so to vote shall be exercised by the persons so appearing as aforesaid upon the transfer books of suoh company, on any day when such election may be held." Vanderburgh V. Broadway R. R. Co. 29 Hun, 348. « People ex rel. ■». Cummings, 73 N. Y. 433. See post, § 9a, note. ^ Ante, § 12. Matter of Application of Junius R. Van Vechten, 9 Weekly Dig. 158, Gen. Term, 1st District, §§ 20-22. TEUSTEES. 57 as trustees de jure under this section.^ There is how- ever no obligation to so continue to act resting upon a trustee, and he need not provide for the election of his successors ; he is presumed by the law to retire at the expiration of his terra of office, and to hold him as a trustee thereafter positive action on his part must be proven.^ § 20. Provision as to oiftcers.— Section 5 of Act. There shall be a president of the company who shall be designated from the number of the trustees, and also such subordinate of&cers as the company by its by- laws may designate, who may be elected Or appointed and required to give such security for the faithful perform- ance of the duties of their office as the company by its by- laws may require. § 21. Trustees to select officers.— The trustees must select from their number a president. The question as to what subordinate officers the company shall have lests in the discretion of the trustees, and should be provided for by them in the by-laws of the company ; and it seems such officers need not be trustees.^ § 22. Duties and powers of offtcers.— The by-laws should provide in what the duties of the officers of the company consist, and if they do so the officers are bound by and derive power from such by-laws.* Officers by reason of their titles have no general power whatsoever. An officer who is also a trustee ' Phila. Coal and Iron Co. v. Hotchkiss, 83 N. Y. 471. "Seepos*, as to acceptance of trusteeship and resignation of office, §§ 60, 63. ^ Bolen ». Crosby, 49 N. Y. 183. ' The act requires the treasurer to exhibit books, and also to render statement annually and upon proper demand. Pos4, §§ 88, 91. 58 TliUSTEES. § 22. has only such authority as he obtains from the charter and by-laws ; ' in all other respects he is like any other trustee. A president as such has no authority to bind the company ; he cannot borrow money for it nor can he authorize tlie treasurer to do so ; nor can he with another officer mortgage, assign and dispose of the prop- erty of the company.^ A treasurer has no authority upon the payment of a debt to assign the security therefor without directions from the trustees.^ A pres- ident or secretary has no power to make drafts unless authorized by the by-laws, or the trustees, so to do.'* And where a secretary is authorized " in the prosecu- tion of the business to draw, indorse, and accept notes and bills of exchange," he has no authority to accept a bill for tlie accommodation of the drawer." Where there was a resolution on the books of the company prohibiting the president from purchasing goods required in the business of the company, it was held that the company was not liable for such pur- chases made by him." And proof that a note purport- ing to be made by a corporation, was signed by its president and secretary is not sufficient to make it a ' Adnance ». Roome, 52 Barb. 399 ; Dabney v. Stevens, 40 How. Pr. 341. " Partridge v. Badger, 25 Barb. 146 ; Hoyt v. Thompson, 5 N. Y. 330 ; Bisley ®. I. B. & W. Rw. Co. 1 Hun, 202 ; Life and F. Ins. Co. v. The Me. Fire Ins. Co. 7 Wend. 31. 3 Jackson v. Campbell, 5 Wend. 571. "^ •N. Y. Iron Mine v. F. Natl. Bk. 18 Alb. L.J. 489; McCullough v. Moss, 5 Den. 575; Dabney ». Stevens, 40 How. Pr. 341; Claflin v. Farmers' and Cit. Bk. 35 N. Y. 293. ' Far. & Me. Bank v. Empire S. Dressing Co. 5 Bosw. 375. See, also, Davis Sewing Machine Co. v. Best, 105 N. Y. 59 ; Nat. Park Bank v. G. A. M. W. & S. Co. 116 N. Y. 381 ; rev'g 53 Super. Ct. 367. " Westerfield v. Radde, 55 How. Pr. 369. § 23. TRUSTEES. 59 company note ; there must be proof of the authority of the officers.^ Persons dealing with officers or agents of a corpo- ration are bound to know their powers and the extent of their authority ; they are also chargeable with notice of the purpose for which the company is formed, and the company will only be held liable when the officers act within this purpose and within their authority. " It can never be presumed that an agent of a corporation had authority to transact business which the corpora- tion itself was not, by its charter, authorized to engage in." ^ § 23. Officers' unauthorized acts, how ratified.— The benefits which stockholders and trustees should derive from the legal limitations upon powers of officers as such, are frequently nullified by the careless inattention of the trustees to the affairs of the company, or their express concurrence in the unauthorized acts of officers. For where a note is signed by an agent who has cus- tomarily signed in the same manner for a long period, the company will be held thereon,^ and so where money is borrowed by a treasurer, with knowledge of the directors, for the uses of the company.* ' People's Bank v. St. Anthony's R. C. Church, 109 N. Y. 512. See, also, Middlesex Bank «. Hirsch, 24 N. Y. St. Rep. 297 ; Smith v. Co- operative Dress Ass. 13 Daly, 304. The president of a company may bring an action to interfere with the wrongful acts of a majority of the trustees. Recamier Mfg. Co. v. Seymour, 24 N. Y. St. Rep. 54. = Alexander v. Cauldwell, 83 N. Y. 480; French «. O'Brien, 53 How. Pr. 394. " Partridge v. Badger, 25 Barb. 146 ; Mead v. Keeler, 24 Barb. 20. See, also, Kraft v. Freeman, &c., Ass'n, 87 N. Y. 628 ; Martin v. Niagara Falls Paper Mfg. Co. 44 Hun, 180; Martin «. Webb, HON. S. 7; Marine Bank «. Butler Col. Co. 23 St. Rep. 318. * Beers v. Phoenix Glass Co. 14 Barb. 358 ; Lee ». Pittsburgh C, & M. 60 TRUSTEES. §§ 24, 25. And ordinarily where the trustees have a subse- quent knowledge of unauthorized acts of officers and do not promptly disaffirm them, or where the company has kept the proceeds or retained the benefits of the acts, or where the conduct of trustees is such as to create a well founded belief that the officer has the power to perform the act complained of, the company will be held liable.^ § 24. Provisions as to by-laws.— Section 7 of Act. The trustees of such company shall have power to make such prudential by-laws as they shall deem proper for the man- agement and disposition of the stock and business affairs of such company, not inconsistent with the laws of this State ; and prescribing the duties of officers, artificers and servants that may be employed ; for the appointment of all officers and for carrying on all kinds of business within the objects and purposes of such company.^ § 25. General features of by-laws.— The power to make by-laws is the power to legislate within the charter of the company, and when they are thus properly made they " are equally as binding on all their members and others acquainted with their method of doing business as any other public law of the State," * and they have the same eflFect as though they had been enacted by the legislature.* Co. 56 How. Pr. 373. See, also. Bank of Attica v. Pottier and Stymus Mfg. Co. 28 Week. Dig. 531. ' Dabney v. Stevens, 40 How. Pr. 341 ; Elwell '■. Dodge, 33 Barb. 336 ; Field on Corp. §§ 162-167; Moss v. Averell, 10 N. Y. 449 ; Corning «. Southland, 8 Hill,' 552; Scott b. Middletown R. R. Co. 86 N. Y. 200; Ellis v. Howe Machine Co. 9 Daly, 406. ' Post, § 182. ' Ang. & Ames on Corp. § 325. • McDermott v. Board of Police, 5 Abb. Pr. 442; Brick Church «. The Mayor, 5 Cow. 538; Kent v. Quicksilver M. Co. 78 N. Y. 159. § 26. TBUSTEBS. 61 Such laws, however, must be in accord with the law of the land, viz.: The constitution of the United States, the coustitution and statute law of New York and the common law as here interpreted.^ They must also be in accord with the charter of the company, and any which are opposed to such charter are void.^ Moreover to be legal they should be reasonable, equal and fair.^ A by-law w^hich excludes one of the trustees from a knowledge of the business affairs of the company is not reasonable and is void.* A by-law which imposes a personal liability upon a stockholder is also void.^ A by-law which provides that no stock shall be al- lowed to be transferred on the books of the company if the person in whose name the stock shall stand shall be indebted to the company, unless with the con. sent of the president and treasurer or by a vote of the board of trustees, was held to be ultra vires and void and opposed to the law of the land, as it was not au- thorized by the Revised Statutes or by the General Manufacturing Act ; and also an unreasonable by-law, as it interfered unduly with the transfer of stock.** § 26. Duties of trustees under act.— The duties of trus- ' Ang. & Ames on Corp. § 333 ; Grant on Corp. 76 ; People v. Med. Soc'y, 24 Barb. 570. ''Ang. & Ames on Corp § 345; Curtain v. Father Matthew So. 3 Daly, 20. ' People «. Sailors' Snug Harbor, 54 Barb. 533 ; Ang. & Ames on Corp. § 347; Dunham v. Village, &c. 5 Cow. 463. * People V. Throop, 12 Wend. 183. = Trustees, &c. v. Flint, 13 Mete. 539. "Driscoll V. West Bradley & Gary Mfg. Co. 59 N. Y. 96; affi'g 8 J. & S. 488. See, also, Thomas v. Musical Mutual Pro. Union, 49 Uun, 171 ; People «. Fire Underwriters, 7 Hun, 348. 62 TRUSTEES. § 27. tees as prescribed by the act may be briefly enumerated as follows : To organize the board by the election of officers. To adopt by-laws. To publish specified notices of meetings of stock- holders for the election of trustees or other purposes. To call in and demand subscriptions from stock- holders. To record certificate of payment of capital stock. To cause stock books to be kept and entries to be made therein and the same to be open to inspection. To make, file and publish an annual report. To refrain from signing false reports, certificates or notices. To prevent the indebtedness of tbe company from exceeding the capital stock. To refrain from paying dividends when the com- pany is insolvent. To refrain from making loans of company funds to a stockholder. To make and execute certificates, when the act em- powers them so to do, showing some action taken by stockholders. To refrain from purchasing stock of other compa- nies with corporate funds except as statutes authorize. § 27. How to increase or reduce number of trustees.— L. 1860, c. 269, § 2.' — The number of trustees in any cor- poration organized before or since the eleventh day of April, eighteen hundred and sixty, or which shall hereafter be organized under the said act, may be increased to not ' As amended, L. 1867, c. 248, § 3, and L. 1878, c. 316, § 2. It is noticeable that by this section the power to increase or reduce the number of trustees of a company rests wholly with the existing board of trustees. § 27. TRUSTEES. 63 more than thirteen, or may be reduced to not less than three, as follows : The existing trustees of any such corporation, or a majority of them, shall make and sign a certificate de- claring how many trustees the corporation shall have in the future management of its business, and, in case the number of trustees be increased, stating the names of the new or additional trustees, and in case the number of trus- tees be reduced, stating the number to which the trustees shall be reduced ; which certificate shall be acknowledged by the trustees signing the same, or proved by a subscrib- ing witness, and shall be filed in the office of the clerk of the county where the original certificate of incorporation was- filed ; and a duplicate or transcript thereof, duly certi- tified under the official seal of such clerk, filed in the office of the secretary of state ; and in the case of an increase of the number of trustees, from and after the filing of such certificate and duplicate, or transcript, the trustees of such corporation shall be deemed increased to the number therein stated, and the persons so named in such certificate shall be trustees until a new election of trustees shall be had, according to the said act, and the by-laws or regula- tions of such corporation. And in the case of the reducing of the number of trus- tees, the number stated in such certificate as the number of trustees which shall manage the business of such corpora- tion, shall be deemed the number of trustees of such cor- poration to be elected, according to said act, and the by- laws and regulations of such corporation, at the next election and thereafter, after the filing of such certificate and duplicate or transcript ; and in case a vacancy or va- 6^ancies shall occur in the board of trustees of such corpo- ration, by resignation or otherwise, after the filing of such certificate and duplicate or transcript reducing the number of trustees, before the next election of trustees after such filing, no election shall be had in the meantime to fill such vacancy or vacancies while the number of trustees remain- ing shall equal or exceed the number to which the trustees are reduced in such certificate. CHAPTER V. INDIVIDUAL LIABILITY OF TRUSTEES.— ANNUAL REPORT. § 38. Provisions as to annual report. 39. Section 13 a penal statute. •SO. Nature of trustees' liability. 31. Contents of the report. 33. Who must sign report. 33. Who to verify report. 34. Time within which report must be made, filed, and published. 35. Debts for which trustees are liable. 36. Effect of prior judgment against company. 37. An accrued liability necessary. 38. Who liable under section 13. 39. Different boards may be liable for same debt. 40. Liability once fixed not affected by subsequent defaults. 41. Liability as to renewal notes, and notes given for preceding in- debtedness. 43. When assignee and executor may sue, 43. Cause of action does not survive against executor of deceased trustee. 44. Fellow-stockholder may, but co-trustee cannot sue. 45. Suits not maintainable without the State. 46. Plaintiff held to great strictness in pleading and proof. — Examples, 47. Requisites of complaint. 47a. Two or more trustees can be joined as parties defendant. 48. As to joinder of actions under sections 10, 13, 15, and 33. 49. In what county action should be brought. 50. Compulsory reference cannot be ordered, nor trustee arrested. * 51. Summons, how indorsed. § 38. ProTisions as to annual report.— Section 12 of Act.^ Every such company shall, within twenty days from the first day of January, if a year from the time of the 'As amended, L. 1871, c. 657, § 3; L. 1875, c. 510. § 29. LIABILITY OF TRUSTEES. 65 filing of the certificate of incorporation shall then have expired, and if so long a time shall not have expired, then within twenty days from the first day of January in each year after the expiration of a year from the time of filing such certificate, make a report, which shall be published in some newspaper published in the town, city or village, or if there be no newspaper published in said town, city or village, then in some newspaper published nearest the place where the business of the company is carried on, which shall state the amount of capital, and of the proportion actually paid in, and the amount of its existing debts ; which report shall be signed by the president and a majority of the trustees, and shall be verified by the oath of the president or secretary of said company, and filed in the office of the clerk of the county where the business of the company shall be carried on ; and if any of said companies shall fail so to do, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be made ; but whenever, under this section, a judgment shall be recovered against a trustee severally, all the trustees of the company shall contribute a ratable share of the amount paid by such trustee on such judg- ment, and such trustee shall have a right of action against his co-trustees, jointly or severally, to recover from them their proportion of the amount so paid on such judgment ; provided that nothing in this act contained shall affect any action now pending. § 29. Section Twelve a penal statute.— It has been fre- quently decided that this section is a penal statute, and it is construed as such.^ An action brought upon it to enforce the liability imposed is not brought to recover a debt or damages,^ but is based upon a statute ' Gadsden v. Woodward, 103 N. Y. 341 ; Veeder «. Baker, 83 N. Y. 156; Knox ®. Baldwin, 80 N. Y. 610; Garrison v. Howe, 17 N. Y. 458. ' McHarg v. Eastman, 7 Robt. 137. ,5 66 LIABILITY OF TRUSTEES. § 30. imposing a penalty.^ The amount of the penalty in each case is the amount of the corporate debt,^ but the creditor, when pursuing a trustee under this section, is never obliged to show special pecuniary damage by reason of the trustees' neglect to file the report.^ The law assumes that the trustees commit a wrong when they fail to file a report showing the condition of the company ; and for this wrong they are compelled ta pay the debts of the company which are extinguished by such payment.* Because the statute gives this new remedy to- creditors it is sometimes termed " remedial." ^ That it is a penal statute, however, is abundantly settled by authority.* The statute is not for the benefit of creditors alone.' " The purpose for which the annual reports are required to be published is that the public may be correctly informed of the financial condition and re- sources of these companies in order that they may j udge of the credit to which they are entitled." ® § 30. Nature of trustees' liability.— The trustees are liable jointly and severally — they may be sued togeth- er, or one only may be held responsible for all of the ' Merchants' Bank v. Bliss, 35 N. Y. 413 ; Wiles v. Suydam, 64 N. Y. 173. " Jones s. Barlow, 63 N. Y. 203. ' Merchants' Bank v. Bliss {supra.) * Wiles V. Suydam {supra); Miller v. White, 50 N. Y. 142. ' Jones s. Barlow, 63 N. Y. 303, 205. • See further upon this point, Bruce v. Piatt, 80 N. Y. 381 ; Bonnell s. Griswold, 80 N. Y. 138; Mitchell v. Hotchkiss, 48 Conu. 9. ' Sanborn ». Lefferts, 58 N. Y. 179. " Pier V. Hanmore, 86 N. Y. 95, 101. See, also, Knight v. Dederick, 6 Weekly Dig. 150. § 30. LIABILITY OF TRUSTEES. 67 debts whicTi are enforceable under this section.^ All the creditors need not be joined in an action against the trustees, but a single one may pursue the remedy.* The liability of the trustees is original and primary, and is not dependent upon or controlled by any pro- ceedings to enforce the debt against the company.* A judgment against the corporation is not necessary to the enforcement of the penalty.* The trustees are in no sense sureties for the company.^ It is wholly by the force of the amendment of 1871 that contribution as between trustees can be compelled.® From ' the strict construction which is placed upon the statute it would seem to follow that in no other case than that specified in the amendment can its provisions be useful, and that a "judgment " must be obtained against a trustee before he can ask contribution. The trustees have no recourse over against the company, no right of subrogation exists in favor of a trustee who may pay the penalty.'' He is in the sight of the law a wrong-doer, and no such right exists in behalf of such an one ; the right to subroga- tion rests upon equity.^ The creditor has a contenapo- • Roach V. Duckworth, 95 N. T. p. 399 ; Strong «. 8pr6ul, 4 Daly, 326. " Wiles ». Suydam, 10 Hun, 578. " Deming v. Puleston,55 N. T. 655; affi'g 3 J. & S. 309. * McHarg v. Eastman, 7 Robt. 137; Eorke v. Thomas, 56 N. Y. 559". • Jones ». Barlow, 63 N. Y. 203; Miller s. White, 50 N. Y. 137. ' Miller v. Penton, 11 Paige, 18; Andrews v. Murray, 33 Barb. 354; Wiles V Suydam, 64 N. Y. 173. ' Miller v. White, 50 N. Y. 137. See, however, Jonea v. Barlaw (supra); opinion, Davis, P. J., Tyng v. Clarke, 9 Hun, 269. * Mathews v. Aiken, 1 N. Y. 595. 68 LIABILITY OF TRUSTEES. § 31. raneous and concurrent remedy against the defaulting trustees and the company.^ It is not necessary for a corporation, organized since the amendment of 1875, to report until the January next succeeding the expiration of one year from the date of the filing of the certificate of incor- poration.* The section was not further affected by the amendment, the effect of its restatement being to hold those provisions unchanged, in force from the date of the original enactment.^ By the repeal of the original clause relative to the time of filing the annual reports, the right of action, for any penalty which had been incurred before the repeal, was taken away, unless such action had already been commenced.* That a company has not commenced active busi- ness is no excuse for not filing the first report." But if the enterprise has been abandoned the company need not report.^ The amendment of 1875 does not excuse a corpora- tion organized since that date from reporting annually.'' § 31. Contents of the report.— The report called for by this section must be the r-eport of the company and should state : 1. The amount of capital of the company. 2. The proportion actually paid in. 3. The amount of its existing debts. ' Jones ®. Barlow, 62 N. Y. 202. See as to the rights of creditors hold- ing collateral security, Roach v. Puck worth, 95 N. Y. 400. " Nay V. Levy, 13 Weekly Dig. 428. See notes 3 and 4. " Moore v. Mansert, 49 N. Y. 332 ; Bonnell v. Griswold, 80 N. Y. 128. * Victory Webb Printing Co. ■». Beecher, 97 N. Y. 651; 26 Hun, 48; Knox V. Baldwin, 80 N. Y. 610; Carr«. Risher, 50 Hun, 157. ' Jones V. Barlow, 62 N. Y. 202. • Kirkland v. Kille, 99 N. Y. 390; rev'g 16 Weekly Big. 227. ■■ Vernon v. Palmer, 14 Weekly Dig. 824; 45 Super. Ct. 231. § 31. LIABILITY OP TRUSTEES. 69 These facts need not be stated " with technical or grammatical precision or accuracy, but they must sub- stantially appear." If the court can read these require- ments in the report in any manner, it will do so, and where a report is made and filed pursuant to the law, and there is no evidence indicating bad faith on the part of the trustees, the report will be liberally con- strued, the benefit of any doubt being given the trustees, and it will be brought within the statute if possible.^ Until recently it has been supposed that the report must show the proportion of capital actually paid in in cash,^ but in a late case in the Court of Appeals * it was held that the words, " the proportion actually paid in," mean simply the proportion of the stock that has been issued either for cash or for property, and that it is unnecessary to discriminate between the cash stock and the property stock in the annual report. It is difficult to harmonize this decision with the inter- pretation given these same words by Mr. Justice Ea- pallo in Pier v. Hanmore,* or with the fact that when they were used but one method of paying in stock was allowed ; but the case is conclusive upon the question.* Any positive statement in the report which de- clares the proportion of the capital " actually paid in," whether it be true or false, meets the requirements of • Whitney Arms Co. v. Barlow, 63 N. Y. 62 ; reversing 6 J. «& S. 554, = Pier V. Hanmore, 86 N. Y. 95 ; Glen's Falls Paper Mfg. Co. v. White, 18Hun, 314;81N. Y. 649. ' Whitaker v. Masterton, 106 N. Y. 377. * 86 N. Y. 95. ' The case of Glen's Falls Paper Co. v. White, 18 Hun, 214 ; appeal dismissed, 81 N. Y. 649 ; is practically overruled by Whitaker v. Master- ton (supra). 70 LIABILITY OF TRUSTEES. § 31. this section in this particular; and the trustees can- not be held liable for the penalty imposed for the neglect to file a report where a statement is filed which in form complies with the statute.^ Where the report is false the officers signing it are made liable under another section to be hereafter con- sidered.** A statement that the capital stock "has been paid up in full " is " equivalent to, if it is not literally a statement of the proportion actually paid in." ^ If the report states that the " existing debts " do not exceed a specified sum, that is a substantial compliance with the statute.* It can also be said of the report in this particular, that where there is any statement of the amount of the debts the statute is satisfied and a report is made. A creditor, therefore, when a report containing such a statement is made, cannot pursue the trustees under this section ; his remedy is against those signing the report on the ground that it is false.'' Where the trustees endeavor, therefore, in good faith to state the amount of the debts they incur no penalty, even though by mistake they should name an amount which in fact should be less than the actual debt of the company. They do not in such a case violate this section because the amount of the debts is stated, and they do not violate section 15 and incur the penalty therein imposed unless they willfully swear to a false report.* ' Bonnell v. Griswold, 80 N. T. 128 ; Pier v. Hanmore, 86 N. Y. 95. " Post, §§ 65, 66. ' Bonnell v. Griswold (supra). * Glen's Palls Paper Co. v. White, 18 Hun, 314. " Post, §§ 65, 66. • Post, § 66. § 32. LIABILITY OF TRUSTEES. 71 § 32. Who miist sign report.— The president and a majority of the trustees of the company must sign the report. By the phrase " a majority of the trustees " was undoubtedly meant a majority of the number of trus- tees which the company was authorized to have by its certificate of incorporation — and in case a corporation decreases its number of trustees without complying with the provisions of the act in reference thereto, the report should still be made by a majority of the origi- nal number specified in the certificate of incorporation.^ The statute has not provided for a minority report, and in view of the strict interpretation which is given it and its penal character, it may be concluded that no proper report can be made under this section unless it is signed by the president and a majority of the trustees of the corporation. Minority trustees should resign be • fore the liability attaches. If they do not they become liable equally with those who have it in their power to report and fail to do so,* Where a company has five trustees, including the presidentft^a" report signed by the president as such and by two other trustees, is properly made and the statute is complied with.* The report is to be the act of the company. The duty of making it is a corporate duty put upon the ' Moore v. Kector, etc., St. Thomas, 4 Abb. N. C. 51. But see Wallace & Sons V. Walsh, 52 Hun, 338; s. c. 23 St. Rep. 64. " Miller v. White, 50 N. T. 137; Chandler d. Hoag, 3 Hun, 613; affi'd 63 N. T. 634; Westerfleld ®. Radde, 67 How. Pr. 204; L. 1887, c. 86, legalize a defective annual report of the United States Telephone Mfg. Co. = Glen's Falls Paper Co. ». White, 18 Hun, 314. 72 LIABILITY OF TRUSTEES. §§ 33, 34. trustees.^ The secretary of a company has no authority to make the report, and cannot be held responsible for not making it. " He might, under the direction of the trustees, prepare the paper and verify it by his oath in place of the president, but he could not subscribe to it the names of the trustees or verify it in any way to make it the act of the corporation and a compliance with the statute so as to relieve the trustees from their duty, or the liability resulting from an omission to perform it." ^ § 33. Who to reriftr report.— The report must be verified " by the oath of the president or secretary of the company ; and it must be so stated and verified that the officer verifying it could be held for perjury if it is untrue."® It is not necessary, however, that there should be an affidavit as to its contents ; if it is verified before a proper officer this is sufficient, and the simple statement "sworn to before me this 13th day of January, 1870," followed by the notary's official signature, shows a compliance with the statute.* If the president or secretary swears to the report upon information and belief, this is sufficient.' § 34. Time within which report must be made, filed, and published.— The report must be made, that is pre- pared, signed and verified, within twenty days from ' Cornell B. Roach, 101 N. T. 373. "^ Bolen V. Crosby, 49 N. Y. 183; Vincent s. Sands, 11 Abb. Pr. N. S. 366. ' Whitney Arms Co. v. Barlow, 63 N. Y. 63. ' Bonnelle. Griswold, 80 N. Y. 128; reversing 18 Hun, 496. ' Glen's Falls Paper Co. ». White, 18 Hun, 314. § 34. LIABILITY OF TRUSTEKS. 73 the first day of January in each year.^ The rule for computing statute time in this State is, that the first day shall be excluded, and the last included ; ^ so that a corporation would have the wl^ole of the twenty- first day of January within which to complete the making of the report.^ Should the last day, however, fall upon Sunday or a legal holiday, it would still be included.* If the report is made within the first twenty days of January, it may be filed and published within a rea- sonable time after the expiration of the twenty days, and this will be a compliance with the direction contained in the section.^ The trustees, however, must use dis- j)atch, and in the words of the court there must be " prompt performance and diligent action." What will be considered such performance and action must de- pend on the circumstances of each case.^ If no paper is published at the place of business of the corporation, and two cities are equally near thereto, the trustees may publish in a newspaper of either one of the cities, and there is a substantial compliance with the act.^ ' Cameron v. Seamen, 69 N. Y. 396. Filing a report before the first day of January is not a compliance with the Act. Cincinnati Cooper- age Co. V. O'Keefe, 44 Hun, 64 ; Guggenheimer v. O'Keefe, 1 N. Y. St. Rep. 295, reversing Zoiler ». O'Keefe, 15 Abb. N. C. 483. ' Judd V. Fulton, 4 How. Pr. 398; People «. N. Y. C. & H. R. R. Co. 28 Barb. 384. » Cornell v. Moulton, 3 Den. 13 ; Huguenot Natl. Bk. v. Studwell, 74 N. Y. 631. * People V. Luther, 1 Wend. 43 ; Ex parte Dodge, 7 Cow. 147 ; Bissell V. Bissell, 11 Barb. 96. ' Cameron v. Seamen (supra) overrules Gildersleeve v, Dixon, 6 Daly, 76. ' See Butler v. Smalley, 101 N. Y. 71, where a liberal construction was given this phrase. 74 LIABILITY OF TKUSTEBS. §§ 35, 36. The report is properly filed when it is handed to the deputy accustomed to receive such documents in the county clerk's office.^ It may be noticed here that a company is hot required to report after the appoint- ment of a receiver or after its virtual dissolution.^ § 35. Debts for which trustees are liahle.— It has been recently decided that every debt which has been in- curred by the company during the year, should be in- cluded in the statement made in the annual report, and that the use of the word " contracted " by the legislature in reference to these debts was not intended to define their character ; ^ and in the case where these principles were asserted it was held that a judgment against the company for costs in an action brought by it for tres- pass, was a debt for which the trustees were liable.* § 36. Efltect of prior judgment against company.— Where, however, a judgment against the company is based upon some prior existing claim, it is this claim, and not the judgment, that is the debt.* The judg- ment is not even prima facie evidence of the debt in an action against the trustees.® And as to the trustee the original claim is never merged in the judgment ;* though it is so merged, and properly may be, as against the creditors.''' ' WyckofE v. LawBon, N. Y. Trans. Aug. 32, 1870, p. 2. " Post, § 59. » Allen v. Clark, 108 N. Y. 269. " Miller ». White, 50 N. Y. 137; Rorke t>. Thomas, 56 N. Y. 559; Esmond v. BuUard, 16 Hun, 65; McHarg. «. Eastman, 7 Eobt. 137. See, however, Andrews b. Murray, 9 Abb. Pr. 8 ; Lewis a. Armstrong, 8 Abb. N. C. 885. 5 Miller ». White (supra). ' Revere Copper Co., etc. v. Dimock, 90 N. Y. 33, 37 ; Byers v. Frank- lin Coal Co. 106 Mass. 131. ' Bolen v. Crosby, 49 N. Y. 183. § 36. LIABILITY OF TRUSTEES. 75 Although a creditor is not required to obtain a judgment against, or to endeavor in any manner to collect his claim from the company, the fact that he makes such efforts and obtains such judgment in no way prejudices him in his action against the trustee.^ The costs of the action against the company he must bear himself.^ The benefit of the statute is to be given to those trusting to the credit of the company, and not to one who may be injured by its negligence, therefore a claim based upon a tort is not within its terms or spirit.^ "The- statute in question, no doubt, intended to include all ordinary debts which might be contracted in the prosecution of the legitimate business of the company, but does not, I think, embrace such as might be imposed upon the company by fraud or improper practices of the creditor. It evidently meant that the honest creditor who had trusted the company in good faith, in connection with its business transactions, should be entitled to prosecute any of the trustees for the failure of its officers to perform the duty required by the section cited." * In one case,^ where it appeared that five bonds of $1,000 had come into the possession of the holder as a valid gift from the corporation, and there was de- fault in the filing of the report, it was held, in an action against a trustee of the company, that such bonds did. not constitute a debt. It was said, " The evidence 1 Deming v. Puleston, 55 N. Y. 655. ' Korke v. Thomas, 58 N. Y. 559. " Esmond v. Bullard, 16 Hun, 65. ' Adams v. Mills, 60 N. Y. 533. See, however, Allen v. Clark, 108 N. Y. 369. ° Norris d. De Wolf, 13 Hun, 666; affi'd 76 N. Y. 597. 76 LTABILITT OP TRUSTEES. § 37. wholly failed to establish such debt, on the contrary- showed that the bonds in question were a gratuity to Wetmore, and hence had no inception in the sense re- quired to constitute a debt against the company, so as to justify a recovery in this action." § 37. An accrued liability necessary.— It was early settled by. the Court of Appeals that an executory contract entered into by a corporation did not, from the time it was made, constitute a debt of the com- pany within this statute.^ There must be a debt payable, either presently or in the future. A mere executory and contingent ob- ligation which, if performed by the other party, might grow into a debt, is not within the statute. Such a contract is not an existing indebtedness, and the " lia- bility of the trustees cannot be extended by implica- tion to contracts and contingent and conditional obli- gations not clearly within the terms of the act." ^ It has also been held that actions for breaches of contracts, and causes incidentally arising or resulting from such breaches to recover damages, are beyond the terms of the penalty.* From these cases it follows that no obligations of suretyship can be termed " existing debts " within this statute, as they are in their nature " contingent and conditional obligations." So, also, while the precise point has not been settled by the courts of this State, promissory notes indorsed by the company, which have not matured at the time of default, and accepted bills ■ Ganison v. Howe, 17 N. T. 458. = Whitney Arms Co. v. Barlow, 68 N. Y. 34; Oviatt v. Hughes, 41 Barb. 541. Consult Rector, etc. v. Vanderbilt, 98 N. Y. 171. ' Victory Webb Printing Co. v. Beecher, 36 Hun, 48; 97 N. T. 651. § 37. LIABILITY OP TKUSTEBS. 77 of exchange drawn by it still outstanding, are not, it would seem, " existing debts " which, under this section, may, be recovered from the trustees. Although the obligation of the indorser of a note is defined, and his contract made at the time of the indorsement, yet he is contingently liable, and only becomes absolutely liable when he is charged as indorser. His engagement is dependent upon the default of the maker in the pay- ment of the note upon due demand and reasonable notice of such default to himself. He does not become a debtor until his liability is fixed and certain.^ It must, however, be noticed, that where there is an outstanding note or bill which matures during the continuance of the default of the trustees, though they may not be held for the contingent liability, as soon as the debt is fixed upon the maturity of the paper, there is no longer a question of their responsibility.* It is not necessary that the debt should be payable in presenti? Where there is a fixed or completed money obliga- tion, there is an existing debt within the statute ; and although the right of action against the trustees in a case where the debt is payable in the future, does not accrue until the maturity of the debt,* yet the debt exists ; and upon its maturity the trustees who neg- lected to conform to the statute, while it was out- standing, may be held under this section. ' Leggett ». The Bank of Sing Sing, 24 N. Y. 391. See Byers v. Franklin Coal Co. 106 Mass. 131 ; Thompson on Liability of OflScers, page 436. '' National Bank, &c. ■». Fenton, 23 Hun, 309. ° Leggett ». Bank of Sing Sing (supra). ' Jones V. Barlow, 62 N. Y, 202 ; Vernon «. Palmer, 14 Weekly Dig. 324 ; 48 N. Y. Super. 231. 78 I/IABILITY OF TRUSTEES. § 38. § 38 Who lialble under section 12.— It was early- established by tlie Court of Appeals, that three circum- stances must concur in point of time to render a trus- tee liable under section 12 : (1.) The existence of the debt ; (2.) The existence of the default in making the report ; (3.) The trusteeship.^ Where any one of this trinity is absent no liabil- ity attaches to a trustee. Where, however, these concur, the courts have recognized a distinction between a trustee who was in office at the time the report should have been filed, and to whom the default is primarily chargeable, and a trustee who was not in office at the time of default, but became such afterward, and while the default continued. In the former case the trustee so defaulting is liable for all debts existing at the time of the default, absolutely, and for all other and future debts con- tracted while he is in office, and the default continues. In the latter case, the trustee, coming in after and dur- ing a default, is liable only for the debts which are contracted while he is in office, and while the default continues.* A new board of trustees, coming in dur- ing such a default, can therefore protect themselves from all liability by promptly making, filing, and pub- lishing the statutory report. And it is their duty so to do.^ K they omit to do so and continue the default until the next January, and no longer, they are liable for the debts contracted after their election and before the next annual report, and for no other.* ' The SLaler & Hall Quarry Co. v. Bliss, 27 N. T. 297 ; Garrison v^ Howe, 17 N. Y. 458; Chandler v. Hoag, 2 Hun, 613. " Boughton B. Otis, 21 N. Y. 261 ; Shaler & Hall Quarry Co. o. Brew- ster, 10 Abb. 464. = Chandler v. Hoag, 2 Hun, 613. §§ 39, 40. LIABILITY OF TRUSTEES. 79 If, however, they, remaining in office, omit to make the statutory report in the January succeeding their election, for this new and active default they become liable for all debts then existing whenever contracted ; and for all further debts contracted while they are in office and the default continues. § .39. Different boards may be liable for same debt.— It may thus happen that two or more totally different boards of trustees may be liable for the same debt. If the outgoing board has omitted to report, its members are liable for all debts existing at, or con- tracted before, the expiration of their term of office, but for no future ones. If, then, the incoming board omits, in the succeeding January, to file the required report, it, as we have seen, also becomes liable for all debts existing at the time of such active default; which will manifestly include not only the debts of the past year, but all such as existed at its begin- ning, save so far as they may have meantime been satisfied or affected by the statue of limitations.^ In such a case, then, the holder of such a debt against the corporation can sue any member of either board. § 40. Liability once fixed not aflfected by subsequent defaults. — If, however, the same board, or any portion thereof, remains in office during a period of years in which successive defaults occur, the defaults sub- sequent to the first do not in any way affect or enlarge the liability of the trustees so continuing, in respect to debts existing at the time of the first default. Where a trustee has once become liable for a debt of the cor- Vincent v. Sands, IJ. & S. 511. 80 LIABILITY OF TRUSTEES. § 41. poration, because of failure to make and file and publish the annual report, the statute of limitations then begins to run as to that debt, and the right ot action is barred in three years thereafter, although the default is continued through successive years. The continuance of the default does not revive the liability or create a new one.^ § 41. Liability as to renewal notes, and notes given for preceding indebtedness.— If the company's note be given for an existing indebtedness, or in renewal of another note or notes which have fallen due, this will not so far merge the previous indebtedness as to exonerate a trustee who, by reason of a default, was personally liable on the original claim ; although, as we shall see hereafter, there can be no recovery as against the trustee until there is a present right of action against the company. Until such a note becomes due, the right of action against the trustee on the original indebtedness is suspended merely, not wholly de- stroyed, and on the maturity of the note he can be held liable under this section. If, then, an indebtedness is contracted during a de- fault, or exists at the time of a default, and the time note of the company is subsequently given for it, the trustees who were in office and default at the time such original debt was contracted, or who made default when it was in existence, are liable under section 12, though their liability cannot be enforced until the note becomes due ; while subsequent trustees, if they have duly complied with the statutory re- ' Losee o. Ballard, 79 N. Y. 404; Knox v. Baldwin, 80 N. Y. 610; Jones V. Barlow, 63 N. Y. 303. § 42. LIABILITY OF TBUSTEES. 81 quiretnent as to reports, would be free from all liability thereupon.^ If, however, such subsequent trustees, remaining in office, by omitting the annual report in January commit an active default, they, too, will be liable for the original debt which will be held to be existing at the time of such default, even though the renewal note has not matured at the time of the default ; although, as with their predecessors, an action to enforce such liability cannot be begun before the note in question has matured.* § 42. When assignee and executor may sue.— Not only may the original creditor of the company, who still retains his claims against the corporation unsatisfied, bring action against the trustees under section 12 ; but an assignee of the original claim against the company has all the right against the trustees, under this section, which his assignor had, and can in his own name bring suit thereunder against the trustees or any of them fop the amount of the assigned claim.* If the creditor dies prior to a default, upon the happening of such default his executor or administra- tor has a perfect right of action against the trustees so defaulting;* but such an action cannot be brought by an executor or administrator, where the liability of the trustee arose and was fixed during the lifetime of their testator or intestate.^ " Deming o. Puleston, 55 N. Y. 655 ; s. c. 3 J & S. 309. ' Jagger Iron Co. c. Walker, 76 N. Y. 521 ; Jones v. Barlow, 62 N. Y. 303. " Pier 9. George, 86 N. Y. 613 ; Hoag «. Lamont, 60 N. Y. 96 ; Code Civil Procedure, § 1910. * Carley v. Hodges, 19 Hun, 187. " Brackett v. Griswold, 103 N. Y. 425 ; Reynolds v. Mason, 6 Weekly Dig. 531 ; affi'g s. c. 5 Weekly Dig. 338. 6 82 LIABILITY OF TRUSTEES. §§ 43, 44. Where, however, the plaintiff in such an action dies after the rendition of judgment, the action does not abate; the cause of action is merged in the judgment, which passes as assets to the representatives of the de- ceased; and they are entitled to be substituted in his place on appeal.^ § 43. Cause of action does not survive against executor of deceased trustee. — The action against the trustee be- ing ex delicto, and not in any respect based upon the theory of affording compensation to the plaintiff for damage sustained by reason of the omission complained of, it abates upon the death of either pai'ty.^ It is not within the provisions of the statute authorizing the survivorship of certain actions for torts, not being for " wrongs done to the property rights or interests of another," and upon the death of the defendant the ac- tion cannot be revived against his personal repre- sentatives.^ § 44. Fellow-stockholder may, but co-trustee cannot sue.— While a creditor, who is a stockholder in the company, may sue a trustee in default,* the courts have held that a creditor of the corporation, who was also a trustee thereof at the time the default occurred, cannot sue a co-trustee under this section for their common de- fault,^ and that the assignee of such a creditor-trustee > Blake v. Griswold, 104 N. T. 613, and cases there cited. " Brackett v. Griswold, 103 N. T. 425; Blake v. Griswold, 104 N. Y. 618. ' Stokes u. Stickney, 96 N. Y. 323 ; Bank of California v. Collins, 5 Hun, 209. See Mitchell d. Hotchkisa, 48 Conn. 9. • Sanborn b. Lefferts, 58 N. Y. 179. ' Estes v. Bums, 5 J. & S. 1 ; Oviatt o. Hughes, 41 Barb. 543. § 44. LIABILITY OP TRUSTEES. 83 is in no better position than his assignor.^ And the executor of such a trustee would, of course, be equally unable to maintain such an action. It is not essential that such creditor-trustee should be a trustee de jure at the time of the default. He and his assignee are equally deprived of this action if at that time he was a trustee de facto? Audit seems that where the corporation is indebted to a firm, one member of which is a trustee of the 'corporation, and a default takes place during his trus- teeship, neither the members of the firm jointly, nor the other members to whom the trustee has transferred his interest, can maintain an action against another trustee, under section 12; the court arguing that the creditor-trustee being, equally with the other trustees, charged with the duty of seeing to it that the annual report is made, and so being chargeable with the de- fault, he cannot alone, nor in connection with his asso- ciates, nor can his assignees, pursue a remedy which if enforced would enable him to profit by his own wrong or negligence.* Wbere,. however, a debt against a corporation owned by a trustee is assigned by him absolutely for value, the assignee, on a default by the company, mJi- sequently occurring^ to make a report, may proceed under the twelfth section although the assignor con- tinued to be a trustee up to the time of the default.* And it has been held that under the general principles as to commercial paper, one who purchases without ' Knox 9. Baldwin, 80 N. T. 610 ; Bronson v. Dimock, 4 Hun, 614 ; Briggs «. Easterly, 63 Barb. 51. = Easterly ». Barber, 65 N. Y. 353; Knox v. Baldwin, 80 N. Y. 610. » Knox V. Baldwin, 80 N. Y. 610. ^ Cornell «. Roach, 101 N. Y. 373. 84 LIABILITY OF TRUSTEES. §§ 45, 46. notice, in good faith and for value, prior to its maturity, a note of the corporation from a trustee thereof, may proceed against the trustees under said section, although the default existed at the time of the purchase.^ § 45. Suits not maintainable without the State. — This section being a penal statute is controlled by the ordi- nary rules governing such statutes, and the penalty imposed by it cannot be enforced without this State.^ § 46. Plaintiff held to great strictness in pleading and" proof. — Examples. — ^The coui'ts have always held the plaintiff to great strictness, both in pleading and proof, under this section ; on the ground that the liability thereunder was in the nature of a penalty for miscon- duct in office, the amount of the penalty being the corpo- rate debts, and that every fact necessary to constitute such liability must therefore be pleaded and proved. Thus, the complaint must show that the penalty was incurred when the defendant was in office.^ He is presumed to have left office at the end of his term, and to charge him for anything occurring thereafter it must be alleged that he held over and continued to act, if such prior termination appears by the complaint ; and in any event such holding over and continuance, if at issue, must be affirmatively proved by the plaint- iff.* Proof of election to the trusteeship is not suf- ficient in itself to establish that the defendant was a ' Chemical Nat. Bank v. Colwell, 14 N. Y. State Reporter, 682. " Cuykendall v. Corning, 10 Fed. Rep. 342 ; Cable «. McCune, 26 Mo. 371; Thompson's Liability of Stockholders, § 84 ; Flash v. Conn, 109 U. S. 371; 3 Supreme Ct. Reporter, 263; Bird v. Hayden, 1 Robt. 383; First Nat. Bank v. Peric, 33 Md. 487. ' McHarg v. Eastman, 7 Rob. 137. ' Phila. & Reading, &c. Co. v. Hotchkiss, 82 N. Y. 471; Van Amburgh n. Baker, 81 N. Y. 46. § 46. LIABILITY OF TRUSTEES. 85 trustee. There must be also proof of acceptance by him/ though this need not have been expressed, but may be implied from the circumstances of tbe case.* The burden of proof is upon the plaintiff to establisb that the debt which he holds was contracted by the corporation, and is at the time of tbe action a valid claim against it.^ And proof of the recovery of a judg- ment thereon against the corporation is, in an action against the trustee under this section, neither conclu- sive nor even prima facie evidence of the debt.^ And in such an action, an allegation in the complaint of re- covery of such a judgment thereon, and execution re- turned unsatisfied, will be stricken out on motion as irrelevant.^ The action against the trustee must always be on the original claim. And in such an action the costs of a preceding action against the corporation for the same debt cannot be recovered against the trustee.® It has recently been held, however, by the Court of Appeals, that a judgment for costs, recovered against a manufacturing corporation in an action brought by it, whether that action be for a tort or on contract, is a debt for which trustees are liable under this section. In such a case it is evident that the judgment creates the original claim against the company, and is at least prima faoie evidence of the existence of the debt in an action against a trustee; although it is doubtless open ' Cameron v. Seaman, 69 N. Y. 396. ° Nimmons ». Tappan, 2 Sw. 653. ' Dabney «. Stevens, 3 Sw. 415 ; Tovey v. Culver, 54 Super. Ct. 404. * Miller v. White, 50 N. Y. 137; Craft v. Cuykendall, 34 Hun, 385 ; Esmond ». BuUard, 16 Hun, 65. = Weymouth v. Dimock, 41 How. Pr. 93. • Rorke ». Thomas, 56 N. Y. 559 ; Tovey «. Culver, 54 Super. Ct. 404. 86 LIABILITY OF TKUSTBES. § 47 to him to show that the recovery was either collusive or fraudulent.' § 47. Requisites of complaint.— The plaintiff's com- plaint must therefore contain all the allegations which would be necessary to charge the corporation in a suit • against it for the collection of the debt ; and, in addition, must contain all the allegations necessary to show that a default was committed or existed when the debt ex- isted or arose ;^ and, also, that the particular defendant was in office when the penalty was incurred. If the complaint is defective in either one of these three branches it will be demurrable; and while in general the plaintiff need set up only one default to charge a trustee, and is not compelled to anticipate and avoid the defense of the statute of limitations, by al: leging that there were no prior defaults, or that de- fendant was not in office when prior defaults occurred, yet if the complaint alleges several defaults subsequent to the debt, it will, as we have seen, be demurrable if the first of the defaults alleged was more than three years before action brought against defendant as trus- tee, if said defendant is also therein alleged to have been in office at the time of such alleged default, or if that fact can be inferred from the complaint.* It is evident that too great care cannot be exer- cised in preparing the complaint ; and that, in especial, every fact requisite to establish that the statutory requirements as to the annual report have not been complied with should be distinctly stated. It has, however, been held, that where the complaint set out ' Allen V. Clark, 108 N. T. 369. ■■■ Chambers s. Lewis, 28 N. Y. 455. =• Cornell v. Roach, 9 Abb. N. C. 275. §§ 47a, 48. LIABILITY OP TRUSTEES. 87 a copy of an anual report as published, and averred that it did not comply with the statute, it was suffi- cient, and did not need to point out the specific defects in said report.^ If it appears, either by the pleadings or the proof, that the report was duly made, the burden is upon the plaintiff to establish that it was not " filed and pub- lished," and the defendant is not bound in the first instance to introduce any proof that it was so published or filed.'' § 47a. Two or more trustees can be joined as parties defendant. — If there are three or more trustees, and the action is brought against but two, the non-joinder of the others constitutes no defense.^ So, if the action is brought against three, and two only are served, the action can be brought to trial against these two only.* § 48. As to joinder of actions under sections 10, 12, 15 and 23.— An action against all the trustees under section 15 or section 23, is no bar to an action against one of them under section 12 ; ® but an action under section 12 cannot be joined with one under section 23; and if causes of action against trustees under sec- tions 12 and 15 may in any event ever be united in one action, which is by no means certain, it can only be when each of the causes of action affects all the parties to it.^ ' Glen's Falls Co. d. White, 18 Hun, 214. See, also, Botaford «. Dodge, 65 How. Pr. 145. = Whitney Arms Co. ®. Barlow, 68 N. Y. 34. « Halstead v. Dodge, 51 N. Y. Super. 169. * Geisenheimer v. Dodge, 1 How. Pr. N. S. 364. ' Nimmons v. Tappan, 3 Sw. 653. ' Bonnell v. Griswold, 68 N. Y. 294. See, however, Sterne v. Her- mann, 11 Abb. Pr. N. S. 376. 88 LIABILITY OF TRUSTEES. §49. As an action against a stockholder under sections 10 and 24, is upon contract,^ and not for a penalty, it follows that a cause of action under section 10, cannot be united with one under section 12 ; ^ and an action against a defendant as stockholder under section 10, is no bar to an action against him on the same debt as a trustee under section 12.' § 49. In what county action should be brought. — It has been decided by the Court of Appeals that an action against a trustee under section 15 is penal, local, and should be tried in the county where the false report was made and filed, though the debt may have originated elsewhere.* The reasoning in the case would apply with equal force to an action under section 1 2, and it would ap- pear that such action, if brought in the Supreme Court, should be brought in the county where the report should have been filed.^ If, however, the action is brought in the Supreme Court, and the county designated in the complaint as the place of trial is not the proper county, the action may notwithstanding be tried therein unless the place of trial is changed to the proper county upon the de- mand of the defendant, followed by the consent of the plaintiff or the order of the court.* And if such order has been granted, it seems that the plaintiff may then move in the county to which ' Poit, §§ 116, 127. ' Wiles B. Suydam, 64 N. T. 173. ' Douglass v. Ireland, 73 N. T. 100. * Veeder v. Baker, 83 N. Y. 156. " Code of Civil Procedure, § 983. « Code of Civil Procedure, §§ 985, 986. §§ 50, 51. LIABILITY OF TEDSTEES. 89 the action has been transferred,^ upon affidavits which the defendant can be prepared to meet, if he desires a further change to the former county, or to any other, on the grounds upon which such change is authorized by the Code.^ § 50. Compulsory reference cannot be ordered, nor trustee arrested. — A compulsory reference of such an action cannot be ordered, although the only issue is as to the indebtedness of the corporation on a long ac- count.* No counterclaim will be allowed as against the trustees' liability.* It was held at special term, that the liability of a trustee under this section is not for such a fine or penalty as to subject the said trustee to arrest under the provisions of the Code.® This holding is questionable, as the answer need not be verified, even when the complaint is, and the trustee is not compelled to answer questions which will tend to expose him to this penalty.® § 51. Summons, how indorsed.— The action against the trustee under this section being for a penalty, given by statute, if a copy of the complaint is not served upon the defendant together with and accom- panying the copy summons, " a general reference to the statute must be indorsed upon the copy of the ' Moulton V. Beecher, 1 Abb. N. C. 193, 335. " Veeder v. Baker 68 N. Y. 156 ; Code Civil Procedure, § 987. ' Hyatt v. Roach, 1 Abb. N. C. 135. " Clapp B. Wright, 31 Hun, 340 ; Morey v. Ford, 33 Hun, 446. " Glen's Falls Paper Co. «. White, 58 How. Pr. 173. Apparently dis- missed on appeal by Court of Appeals, vide s. p. 81 N. Y. 649. See, however, Wiles ». Suydam, 64 N. Y. 173, 177. ' Gadsden v. Woodward, 103 N. Y. 341; Hughen ». Woodward, 3 How. Pr. (N. S.) 137; Code of Civil Procedure, §§ 533, 837. 90 LIABILITY OF TBUSTBES. § 51. summons so delivered in the following form, ' accord- ing to the provisions of,' etc., adding such a description, of the statute as will identify it with convenient cer- tainty, and also specifying the section," under which plaintiff claims.^ If the copy summons is served alone and without such indorsement, it may be disregarded by the de- fendant, as by such service the court acquires no jurisdiction;^ and a subsequent service of the com- plaint would not cure this defect, which would be waived, however, by a general appearance on the part of defendant.^ ' Code of Civil Procedure, § 1897. ' Bissell V. N. Y. C. & H. R. R. R. Co. 67 Barb. 385 ; Cox v. N. Y. C. & H. R. R. Co. 61 Barb. 615 ; The Mayor, &c. ■». Eisler, 2 Civ. Proc. R. 125 ; Vernon v. Palmer, 48 N. Y. Super. 231 ; Schoonmaker v. Brooks, 24 Hun, 553; People v. Bull, 42 N. Y. Super. 19; Matter of Bethune, 4 Demarest, 392. CHAPTER VI. INDIVIDUAL LIABILITY OF TRUSTEES,— Continued. § 53. Ti-ustee sued under section 13, has three main defenses. 53. First. Denial of the debt. 54. Judgment against company not evidence against trustee. 55. Judgment in favor of company conclusive in favor of trustee. 56. Defenses denying corporate indebtedness. 57. Defenses based on time debt arose or existed. 58. Second. Denial of the default. 59. Defense established by proof of dissolution. 60. Third. Denial of trusteeship. 61. Liabilities of trustees holding over. 63. De facto trustees. 63. Besignation and its effect. 64. Limitation of actions. 65. Provisions as to false reports, statements, etc. 66. Application and construction of section 15. 67. Provisions as to certain dividends. 68. Liability of trustees for paying prohibited dividends. 69. Provisions as to indebtedness exceeding capital. 70. Action, how brought thereunder. 71. Loans to stockholders. 73. Other liabilities of trustees. § 53. Trustee sned under section 12, has three main defenses. — Bearing in mind what we have already seen, that the plaintiff must allege and prove that three things concurred in point of time, viz. : (1.) The debt ; (2.) The default ; and (3.) The trusteeship, in order to charge the defendant under this section, — it follows that three main defenses, either singly or in combina- tion, are open to the defendant. (1.) He may deny the debt. (2.) He may deny that he was then in default. (3.) He may deny that 92 LIABILITY OF TRUSTEES. §53. t he was then a trustee. If either one of these proposi- tions is found in his favor, he is free from all liability under this statute. § 53. First. Denial of the debt.— This may consist of: (a.) A denial that the alleged claim against the company is a " debt " within the terms of the statutory penalty imposed upon the trustees. In reference to this proposition, inasmuch as we have already discussed the nature of this penalty, it is sufficient here to say, that it is always open to the trustee to claim the strict construction of this penal statute, and to show that the demand upon which he is sued is not within its terms.^ It is to be observed that the statute makes no dis- tinction as to the place where such debt shall have been contracted, nor does it distinguish between credi- tors residing in this or in other states.* (^.) A denial that there is any obligation upon which the corporation is liable. As regards this latter defense, the trustee occupies exactly the same position that the corporation would occupy were the suit directly against it. He can set up any facts and interpose any plea which would be available to the corporation if then sued on the debt, and no other.^ The liability imposed on trustees by section 12 is subject to the same conditions and qualifications, so far as the allegation and proof of the debt are con- cerned, that attach to the original indebtedness; and ' See ante, §§ 35, 36, 37. " Sears v. Waters, 44 Hun, 101. 3 Whitney Arms Co. v. Barlow, 63 N. Y. 62; Jones v. Barlow, 63 N. Y. 202. § 54. LIABILITY OF TRUSTEES, 93 whatever will defeat or abate an action against the corporation will be a defense to the trustees. They are only liable in any given suit for debts actually due at the time such suit was begun, and for which a present right of action then existed against the cor- poration. It was accordingly held where an indebted- ness of the company fell due during the time its trustees were in default for not making the statutory report, and notes were given by the company for such debt, which were renewed, that, in an action which was commenced under this section prior to the maturity of a portion of the renewed notes, the plaint- iff was only entitled to recover the sum actually due from the corporation at the commencement of the action, and this although the defendant was in office and default at the time the original note against the corporation fell due.^ § 54. Judgment against company not evidence against trustee. — We have already seen, that in an action against a trustee a judgment against the corporation on the same debt is neither conclusive not* prima facie evidence of it against him, but the original claim must be set out and proved de novo. Where, however, in such an action, the original claim against the company was contracted at a period which would apparently bring such claim within the statute of limitations, a judgment thereon against the corporation could doubtless be set up, not as establishing the validity of the claim, nor as tending to do so, but for the sole purpose of removing the statutory bar.^ ' Jones V. Barlow, 63 N. Y. 203. = Van Cott V. Van Brunt, 3 Abb. N. 0. 383, 294. 94 LIABILITY OF TRUSTEES. §§ 55, 56. § 55. Judgment in fayor of company conclusive in fayor of trustee.— While such judgment against the corporation is not even prima facie evidence of the debt as against the trustee/ it has been held that a judgment in favor of the corporation upon the merits is conclusive in favor of a trustee thereof afterwards sued under this section on the same debt, and that the trustee could give the judgment roll in such prior action in evidence after the plaintiff had opened, but before any evidence had been introduced by him.^ § 66. Defenses denying corporate indebtedness.— The particular defenses possible under this head, and attacking exclusively the validity of the claim as against the corporation, it is no part of this work to consider. They vary in each case, and are to be determined from the circumstances of it, considered under the general rules of law and such special statutory provisions as apply to all corporations.^ But while it is true, as we have seen, that a trustee sued under this section can interpose any plea, and avail himself of any defense which would be open to the corporation, if the suit were against it on its original indebtedness, it is none the less true, as a general proposition, that in such an action the trustee cannot avail himself of a defense not personal to him, but going to the foundation of the claim and cause of action against the corporation which Avould not be available in its favor. Where a valid debt exists against it, to which it has no good defense, legal or ' Miller «. White, 50 N. T. 137. " Tyng V. Clarke, 9 Hun, 269, Daniels, J., dissenting. ' See Alexander t. Cauldwell, 8.3 N. T. 480 ; Adams v. Mills, 60 N. Y. 533, and cases there cited. § 57. LIABILITY OB" TRUSTEES. 95 equitable, the trustee, if then in ofBce and default, becomes chargeable with its payment,' Thus, in an action brought under section 12 by one corporation against the trustees of another, to re- cover the contract price for goods sold and delivered to defendant's corporation, the objection was raised that the plaintiff was not authorized to manufacture or sell the goods or enter into the contract, which was alleged to be wholly uif/ra vires. But the court held that where a corporation has fully performed a contract on its part to manufacture and deliver certain articles, it is no defense to an action brought to recover the pur- chase price, that the contract was not within nor inci- dental to its charter powers and privileges or the pur- poses for which it was created, and that as in such a state of facts the defendant's corporation could not have interposed the plea oi ultra vwea^^e defendants them- selves could not when sued on their statutory liability under section 12? § 57. Defenses based on time debt arose or existed. — In regard to the validity of the debt as a claim against the corporation, then, the trustee can only interpose such pleas or defenses as would be open to the cor- poration itself; but a further defense may be open to him based upon the time when such debt was con- tracted or existed. Once more, bearing in min.d that a default to charge a trustee must concur in point of time with the exist- ence of the alleged debt, it is evident that the defense is good which establishes that, at the time of the al- leged default, or at the expiration of the defendant's ' Whitney Arms Co. v. Barlow, 63 N. Y. 63. 2 Whitney Arms Co. ». Barlow, 63 N. Y. 63. 96 LIABILITY OF TRUSTEES, § 58. term of office, the debt was not in existence. This lat- ter is to be distinguished from a denial that the debt ever existed, which however could be joined with it. It must always be remembered that the relation in time of the three things necessary to charge a trustee is of the very essence of the action, and that the exist- ence of any one alone is no authority for such action. If, then, the plaintiff alleges and establishes, without denial, that the defendant was a trustee ; that at a given date default was made, and that the corporation is in- debted to plaintiff on a contract, his complaint will be demurrable, or he will be nonsuited on the trial, if his complaint does not show, or his proof does not prima facie establish, that at some one instant of time all these things were in existence together.^ §58. Second. Denial of the default.— This defense, it is obvious, is personal to the defendant trustee, and is admissible whether the debt against the corporation is admitted or denied. In its simplest form this would of course be sus- tained by proof that a proper statutory report was duly and timely made, filed, and published; or rather, the bur- den in this, as in all other branches of his case, being on the plaintiff, it would in practice in the great major- ity of instances be good in the absence of satisfactory affirmative proof on behalf of the plaintiff that such report had not been duly made, filed, and published. It should be remembered that while proof that either of these three requisites — making, filing or publication — was not duly complied with, will establish plaintiff's case so far as the default is concerned, the plaintiff must ■ See anU, % 38. § 59. LIABILia?Y OP TRUSTEES. 97 establish them affirmatively ; and that the trustee is no more compelled in the first instance, and in ab- sence of affirmative evidence to the contrary, to estab- lish that the report was properly filed or properly published, than that it was properly made. The presumption is that the law was complied with ; and the burden is on the plaintiff to establish the con- trary, even though this throws upon him the burden of proving a negative. If, then, the plaintiff has confined himself to proof that the report was not duly made and it appears on the part of the trustee that a proper report was so made, the trustee is not compelled further to establish its filing or publication, but in the absence of any testimony bearing on those points is entitled to a verdict.^ It should also be noticed, that the limitation of twenty days prescribed in this section is held to apply only to the making, that is, the preparing, signing and verifying of the report, and if such report is so made within the twenty days, and is filed and published as soon as practicable thereafter, the trustees being held in this regard to prompt performance and diligent ac- tion, it is sufficient.'^ § 59. Defense established by proof of dissolution.— But this defense may also be established by pleading and proving that prior to the time when the annual report should have been made, as alleged in the complaint, the corporation was dissolved. ' Whitney Arms Co. v. Barlow, 68 N. Y. 34 ; Chase «. Lord, 77 N. Y. 1. ' Cameron 8. Seaman, 69 N. Y. 396, rev'g s. c. 7 Hun, 601, over- ruling Grildersleeve «. Dixon, 6 Daly, 76; Butler v. Smalley, 101 N. Y. 71. And see § 34, ante. 7 98 LIABILITY OF TRUSTEES. § 59. If such dissolution was technical and complete, there being no corporation, either de facto or dejure, there could of course be no requirement to report. The courts have, however, gone furthei-, and have held that a practical dissolution and abandonment of the corporation is sufficient to terminate the necessity of further reports.^ The mere fact that the company had ceased to do business, and was engaged simply in paying off its debts, and winding up its affairs, at the time when the leport was due, does not exonerate the trustees from reporting in the absence of any legal dissolution.* But after the appointment of a receiver,* or after bankruptcy and assignment of all its property,^ no report is required from the corporation or its trustees. As to what constitutes such a practical abandon- ment and dissolution as to render further reports un- necessary, the reader is referred to the learned and elaborate' opinion of Danforth, J., in Bruce v. Piatt, 80 N. Y. 379, where this question is discussed at much length, and the cases bearing on it are collated. In general it may be said, that where the company's suspension is complete and not temporary,* where it has not only ceased to do business, but is incapable of transacting any,^ and where it is no longer possessed ' Losee v. Bullard, 79 N. T. 404; Bruce ». Piatt, 80 N. T. 379; Kirk- land V. Kille, 99 N. Y. 390 ; Hollingshead v. Woodward, 107 N. Y. 96 ; Garrison r. Howe, 17 N. Y. 458. ' Sanborn ■b. Lefferts, 58 N. Y. 179; Bradt v. Benedict, 17 N. Y. 93; Kirkland «. Kille, 16 Weekly Dig. 227 ; G. T. Supreme Ct. 1st. Dept. = Huguenot Natl. Bank v. Studwell, 74 N. Y. 621. * Bonnell v. Griswold, 80 N. Y. 128. " Brinkerhoff v. Brown, 7 John. Ch. 217. • Losee v. Bullard {supra). § 60. LIABILITY OF TRUSTEES. 99 of any property/ it will be held to be practically dis- solved, so as to excuse further reports. § 60. Third. Denial of trusteeship.— Like the denial of the default this defense is personal to the trustee. It should be observed that the liability of a trustee does not depend upon the fact that he was such when the debt was contracted, but upon his being a trustee when the alleged default occurred ; ^ except in the case of a trustee going into office subsequent to and during a default, when, as we have seen, the existence of the default, and his trusteeship at the time the debt was contracted, must both be established to charge him, in the absence of any subsequent active default on his ' part.^ Under this head it may be said in general, that all facts necessary to establish the trusteeship, and its ex- istence at the time of the alleged default, must be strictly proved by the plaintiff, and that the law will not for the benefit of creditors presume either its original assumption by the defendant, or its continuance be- yond the original term. On the contrary, it is necessa- ry to prove acceptance of the office as Avell as election as trustee,* and the trustee is presumed to have left office at the expiration of such term, and the burden is on the plaintiff to establish his continuance in it.* A default of the company after the expiration of a 1 Slee V. Bloom, 19 J. R. 456 ; 20 Id. 669 ; Penniman v. Briggs, Hopk. 300; Bauk, &c. v. Ibbotson, 24 Wend. 473. " Garrison ». Howe, 17 N. Y. 458 ; Bougtton?). Otis, 21 N. Y. 261 ; Brace ». Plait, 80 N. Y. 379. ' See ante, § 38. * Cameron v. Seaman, 69 N. Y. 396; Osborne & Cheeseman Co. V. Croome, 14 Hun, 164. 6 Van Amburgh v. Baker, 81 N. Y. 46 ; afE'g Wade a. Baker, 14 Hun, «15; P. & R. C. & I. Co. V. Hotchkiss, 82 N. Y. 471. 100 LIABILITY OP TRUSTEES. §§ 61, 62. trustee's term cannot for want of a subsequent elec- tion to fill his place be charged upon such trustee, ex- cept by proof of his continuance in office, by his after- wards assuming to act and acting as such trustee.^ Where, however, a trustee sued under section 12 testi- fied that at a given date his term of office expired, and also testified that after that date he was present at trustees' meetings, referred to himself as trustee, took part in the company's financial management^ and did various acts only proper to be done by a trustee, it was held that his statement that he had ceased to be a trustee was a mere legal conclusion, and that upon this issue there was no question of fact for the jury .^ § 61. Liabilities of trustees holding over.— The pre- sumption then is, that for defaults occurring or debts accruing after the expiration of his term the trustee is not responsible. If, however, the plaintiff can establish by competent evidence that the defendant acted as trustee after such term, then for defaults occurring and debts accruing or contracted during the period in which he so acted, he is liable under the conditions already referred to.^ In other words, where no new board is elected, members of the old board by continuing to act prolong their trusteeship, with all its incidental liabilities, s» long as they continue to act,* and no longer.^ § 62. De facto trustees.— So where a totally invalid ' Vincent v. Sands, IJ. & S. 511. " Sanborn v. Lefferts, 58 N. T. 179. » Deming v. Puleston, 3 J. & S. 309 ; s. c. 55 N. Y. 655 ; Reed o. Keese. 60 N. Y. 616. * Easterly o. Barber, 65 N. Y. 252. ' Craw V. Easterly, 54 N. Y. 680 ; s. c. 4 Lans. 513. § 63. LIABILITY OP TRUSTEES. 101 election of a trustee took place and he accepted, and assumed to act thereunder as trustee, it was held that having voluntarily assumed that character he was estopped from denying it, and was responsible under section 12 for acts and omissions occurring while he so acted ; ^ but that he was not bound to continue to act, and was not responsible for a failure to report occur- ring after he had ceased acting.^ § 63. Resignation and its eflfects.— A trustee can at any time terminate his trusteeship by resignation ; * and will not thereafter be liable for any defaults, acts, or omissions occurring after such resignation. The causes of action against him under section 12, if any, existing at the time of his resignation, remain, and on them he is liable, but nothing which may occur subse- quent to such resignation can create a cause of action under said section against him.* Thus, if there was no default existing when he resigned, a subsequent default will not render him personally liable for any debt, even for one existing or contracted during his trusteeship;* nor, if a default existed at the time of his resignation, will he be liable for debts subsequently contracted.® The mere tendering of his resignation with intent that it should be accepted, is sufficient to terminate ' Easterly v. Barber, 65 N. Y. 252 ; Halstcad v. Dodge, 51 Super. Ct. 169. ^ Craw V. Easterly, 54 N. Y. 680. ' Bruce v. Piatt, 80 N. Y. 379. 'Chandler v. Hoag, 2 Hun, 613; affi'd 63 N. Y. 624; Blake v. Wheeler, 18 Hun, 496. " Squires v. Brown, 22 How. Pr. 35; Bruce v. Piatt, 80 N. Y. 379. ' Shaler & Hall Quarry Co. v. Bliss, 27 N. Y. 297 ; Chandler v. Hoag (supra). 102 LIABILITY OF TRUSTEES. § 64. his trusteeship, and exonerate him from future lia- bility, providing, of course, that he does not subse- quently withdraw it ; and that he ceases thereupon to act. And the burden of proof, that he did so with- draw it, or continue to act, would be upon the plaintiff.^ It is not necessary that the resignation should be accepted by the company, acted on by the trustees as a board, or entered on the minutes;^ neither is it es- sential that any public notice of it should be given.^ It is suflBcient that it should be tendered in good faith to one authorized to receive it.* And a trustee may resign after the company has been declared to be dissolved by resolution of the board of trustees.^ And all the trustees may resign simultaneously.^ § 64. Limitation of actions.— An action against a trustee under section 12, for failing to file an annual report, is one " upon a statute for a penalty, whei'e the action is given to the party aggrieved," and, there- fore, it must be brought within three years from the time the cause of action accrued; and, if such action is brought subsequent to that timo, the statute of limita- tions can be pleaded as a bar.^ ' Chandler®. Hoag, 2 Hun, 613; affl'd 63 N. Y. 634. " Blake v. Wheeler, 18 Hun, 496 ; rev'd on other points, 80 N. Y. 138. ' Bruce v. Piatt, 80 N. Y. 379. * Consult Kindberg ». Mudgett, 34 Week. Dig. 239. ' Erwin v. Navigation Co. 33 Hun, .598. " Smith V. Danzig, 3 N. Y. Civil Pro. Rep. 139. ' Merchants' Bank v. Bliss, 35 N. Y. 413; Code of Civil Procedure, § 383, sec. 3 ; Losee ®. BuUard, 79 N. Y. 404 ; McHarg v. Eastman, 7 Robt. 137 Knox e. Baldwin, 80 N. Y. 610. § G4. LIABILITY OP TEUSTJEES. 103 It is to be observed, that the statute can only commence to run from the time the cause of action accrues. It does not begin to run from the time of the default in making the report, else upon a continued default of three years or more, no action would lie against continuing trustees for debts contracted after that time.^ Neither does it begin to run from the time the debt of the company arose. It is immaterial when that debt arose, if it exists and might be the subject of an action at the time the default is made.^ But the statute begins to run in favor of any trus- tee from the moment he becomes liable under section 12 ; that is, in general, from the first moment when, he being then a trustee, both the debt and the default exist together. If he is in default when the debt is incurred, the statute runs from the incurring of the debt. If, however, there is no default when the debt is incurred, the statute runs from his first subsequent default; and, if he fails during successive years to file the annual report, the right of action is barred by the statute of limitations when three years have elapsed since the first default, and the continuance of the default does not create a new liability or revive an old one.^ Where the default takes place while a debt payable in futuro is outstanding, the statute begins to run ■ Jones ». Barlow, 63 N. Y. 203. 2 Duckworth v. Koach, 81 N. Y. 49. ' Rector, etc., of Trinity Church v. Vanderbilt, 15 Weekly Dig. 499, affd 98 N. Y. 170; and cases undernote 7, page 103. As to form of pleading in cases of continuing default, see Cornell «. Roach, 101 N. Y. 373 ; rev'g s. c. 9 Abb. N. 0. 275. 104 LIABILITY OF TRUSTEES. § 65. in favor of the defaulting trustees from the maturity of the debt ; that is from the first moment that an action coald have been brought thereon against the company.^ If, however, the complaint counts on a default in a given year, it will not be presumed that a default occurred in a prior year. If that is a fact, and is to be relied upon, it should be pleaded and proved on be- half of the trustee. Hence, where a debt having been incurred in 1873, and an action having been brought in 1877, on a complaint alleging a default in 1875, the defendant setup on appeal a default in 1874, this was held inadmissible ; the fact not being alleged in the pleadings and nowhere appearing in the proceed- ings at the trial.^ So, too, a trustee is liable for a debt existing at the time of a default, although a report was duly made in a previous year after the debt against the corporation had accrued.^ § 65. Provisions as to false reports, statements, etc. — Section 15 of Act. If any certificate or report made, or public notice given, by the officers of any such com- pany, in pursuance of the provisions of this act, shall be false in any material representation, all the officers who shall have signed the same, knowing it to be false, shall be jointly and severally liable for all the debts of the company contracted while they are stockholders or officers thereof.* ' Rector, etc., of Trinity Church v. Vanderbilt, 98 N. T. 170, 175. See § 37, ante, and last note thereunder. " Duckworth o. Roach, 81 N. Y. 49. ' Duckworth v. Roach, 8 Daly, 159. * An officer, director or agent of a company, who knowingly concurs in making or publishing a written report of the aflfairs, or pecuniary con- dition of the company containing any material statement which is false, is guilty of a misdemeanor. See Penal Cod«, § 603. § 66. LIABILITY OP TRDSa?ERS. 105 § 66. Application and construction of section 15.— It will be noticed, that the above section applies not only to the annual report of the company, but to any certificate or report made, or public notice given, by the -officers of any company under the act. And those officers who sign such report, certificate, or notice, are the only persons rendered liable there- under.^ And the action does not survive.^ This term " officers " includes the trustees ; and may include persons who are not trustees. An action under the section is penal in its nature, and must be tried in the county where the report was made and filed.* To be held liable to the penalty imposed, a person signing the false statement must know that it is false when he signs it. Scienter must be proven.* To state, in the annual report, that the stock of a company has all been " paid in full," when a portion of it has been issued for property, is to make a false statement upon a material point, as stock issued for property must in all reports of the company be stated as so issued ; ' but to charge a trustee signing a report stating that all the capital of a company has been "paid in," when some of the stock has been issued for property ; bad faith must be shown, or some circum- stance showing that it was made willfully, or for some ' Bonnell «. Griswold, 68 N. Y. 294; Bolz v. Bidder, 19 Week. Dig. 463; Huntington v. Attrill, 43 Hun, 459. » Blake v. Griswold, 104 N. Y. 613 ; Brackett v. Griswold, 103 N. Y. ' 425. = Veeder v. Baker, 88 N. Y. 156. * Blake v. Griswold, 103 N. Y. 429; Butler ». Smalley, 101 N. Y. 71 ; Arthur v. Griswold, 55 N. Y. 400. ' Bonnell v. Griswold, 80 N. Y. 128. But see ante, § 31. 106 LIABILITY OF TKDSTEES. § 67. fraudulent purpose ; and it is not enough to prove "that it was ignorantly or inadvertently signed.^ A cause of action against officers under this sec- tion should be prosecuted separately ; as only under peculiar circumstances, if at all, can it be joined vrith a cause of action under section 12.^ The penalty imposed here is much less severe than that which trustees who fail to make any report in- cur, but the present statute is highly penal and cases cited under section 12 apply to it and explain its general character and the nature of the debts for which the officers are liable. It has been held, that an action under the present section is no bar to an action under section 12.* A complaint under this section must allege, that the debt was contracted while the defend- ant was a trustee of the company.* § 67. Provisions as to certain dividends.— Section 13 •of Act. If the trustees of any such company shall ■declare and pay any dividend when the company is insol- vent, or any dividend the payment of which would render it insolvent, or which would diminish the amount of its capital stock, they shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be thereafter contracted while they shall respec- tively continue in office ; provided, that if any of the trus- tees shall object to the declaring of such dividend, or to the payment of the same, and shall, at any time before the time fixed for the payment thereof, file a certificate of their objection in writing with the clerk of the company ' Pier V. Hanmore, 86 N. Y. 95 ; Wickens v. Foster, 32 Week. Dig. 426. " Ante, § 48. ' Nimmons «. Tappan, 2 Sw. 652. * Anderson v. Speers, 8 Abb. N. C. 382. § 68. LIABILITY OF TRUSTEES. 107 and with the clerk of the county, they shall be exempt from the said liability. § 68. Liability of trustees for paying prohibited divi- dends.— This section imposes the only penalty which trustees, who pay a dividend which decreases the capital stock of a company, incur.^ They cannot be sued by the corporation under the Revised Statutes.^ It is said in regard to this section that : " The object of the statute is to prevent the dissipation of the fund designed for the security of creditors, and all who have occasion to deal with these corporations; and, although the statute is highly penal, and a clear case must be established, yet the substance of the act and not the mere form must be tlie test of liability. The trustees have no right as against creditors to appro- priate to themselves any portion of the assets consti- tuting the capital, and where they do so they will be held liable under this section. The liability, how- ever, cannot be extended beyond the strict terms of the statute, and as a judgment against the company is not necessary in order to enforce the claim against the trustees, and as they are not bound by it, they cannot be made liable for the costs of recovering such judg- ment." ^ An action under this section must be brought within three years from the time when the prohibited dividend is declared.* ' Excelsior Petroleum Co. v. Lacey, 63 N. Y. 423 ; Excelsior Petro- leum Co. ■». Embury, 4 Hun, 648. ' 1 R. S. 601, § 2 ; Consult Williams «. Western Union Tel. Co. 93 N. T. 163. 3 Rorke v. Thomas, 56 N. Y. 559. * Merchants' Bank ». Bliss, 35 N. Y. 412. Any director who concurs in a vote or act of his co-directors, or any of them, by which it is in- tended to make a dividend except from the surplus profits arising from 108 LIABILITY OF TRUSTEES. §§ 69-71. § 69. Provisions as to indebtedness exceeding capital. — Section 23 of Act. If the indebtedness of any such company shall at any time exceed the amount of its capital stock, the trustees of such company assenting thereto, shall be personally and individually liable for such excess to the creditors of such company. § 70. Action, how brought thereunder.— To recover in an action under this section, plaintiff must aver, that the excess of indebtedness over the capital stock was equal to or exceeded his claim.^ It has been held, however, that a single creditor cannot maintain an action at law against a trustee under this section to recover the amount of his debt ; but, that the action must be brought by all creditors jointly, or by one on behalf of all, and that each creditor can recover only such proportion of the excess of debts over the capital, as his debt bears to the whole amount of the debts of the company.* The liability imposed by this section is on contract and the action survives.^ § 71. loan to stockholders.— By section 14,* every company is prohibited from making loans to any of its stockholders,^ and any officer who shall make such a the business of the corporation ; or to divide, or in any manner pay to the stoclsholders, or any of them, any part of the capital stoclc of the company, is guilty of a misdemeanor. See Penal Code, § 594. ' Chambers v. Lewis, 28 N. Y. 455. Consult 3 R. S. 8th ed. p. 1728, §3. 2 Anderson ■b. Speers, 31 Hun, 568. See, also, Hornor ». Henning et. al. 103 U. S. 328; as to what debts are included in estimating whether capital is exceeded, see McClave o. Thompson, 36 Hun, 365. Consult, also, Patterson v. Robinson, 36 N. Y. St. Rep. 685 ; s. c. 36 Hun, 622 ; McComb V. Kellogg, 28 Week. Dig. 495; 16 St. Rep. 16. 'McComb 0. Kellogg, 16 N. Y. St. Rep. 16. •" See post, § 78. " Twin Lock Oil Co. v. Marbury, 18 Alb. L. J. 113; Clark s. Acosta, 9 Bosw. 158. § 72. LIABILITY OF TRUSTEES. 109 loan, "or who shall assent thereto, shall be jointly and severally liable to the extent of such loan and interest for all the debts of the company contracted before the repayment of the sum so loaned." This section also imposes a penalty ; there must be " a loan of money, both in law and in fact," to enable a creditor to hold those making the alleged loan to the punishment pre- scribed ; and a receiver of a corporation cannot enforce the penalty." § 72. Other liabilities of trustees.— The foregoing sections comprise all the statutory penalties which are imposed upon trustees of companies under the present act.^ It may, however, be remarked, that such trustees have the general liabilities of all trustees of corpora- tions, and are under the ordinary obligations incident to this office. They will therefore, for example, become liable to make good any loss which is occasioned by their mal- feasance in office, or their gross negligence, or inatten- tion to the affairs of the company; and may be re- sponsible to creditors, shareholders, or the company, as the case may warrant.^ Merely being a trustee is not, however, sufficient j>er se to hold one liable for the ' Billings V. Trask, 30 Hun, 314. " As to penalty for refusing to exhibit transfer book, see post, § 88 ; as to penalty for refusing to give statement to stockholder, seejjosi, § 91. ' Robinson «. Smith, 3 Paige, 351 ; Brinckerhoff ®. Bostwick, Rec'r, 88 N. Y. 53; Gray v. N. Y. & Virginia S. S. Co. 3 Hun, 10; Ziegler *. Hoagland, 34 N. Y. St. Rep. 453. 110 LIABILITY OF TEOSTEES. § 72. frauds of the active managers of a company; there must be personal wrongdoings.^ ■ Arthur v. Griswold, 55 N. Y. 400; Wakeman v. Dalley, 51 N. Y. 37. A general manager cannot be held responsible in damages for errors of judgment; Holmes, Booth & Haydens e. Willard, 34 N. T. St. Rep. 260. See as to impropriety of trustees making contracts in which they have a personal interest, Cornell v. Clark, 104 N. Y. 451 ; Munson «. Syracuse, &c., R. R. Co. 103 N. Y. 58; Reed v. Hoyt, 51 Super. Ct. 121 ; Kelsey v. Sargent, 40 Hun, 150; MacNaughton v. Osgood, 41 Hun, 109; Copeland ». Johnson M'f g Co. 47 Hun, 235 ; Atlanta Hill Mining Co. «. Andrews, 55 Super. Ct. 93; Inglehart v. Thousand Island Hotel Cq^ 109 N. Y. 454. Note. — The penal code specifies various acts and omissions on tha part of directors, officers and agents of corporations, for which they are thereby declared criminally liable. These provisions will be found in appendix B. CHAPTER VII. STOCK AND STOCK CERTIFICATES. § 73. Provisions as to stock and its transfer. 74. Nature of stock. 75. Certificates, how transferable. 76. Corporate liens on shares. 77. Lost or destroyed certificates, how replaced. 78. Provisions as to issuing capital stock. 79. Capital stock, how issued. 80. Certificate of payment of capital stock to be recorded. 81. Provisions as to increase or diminution of capital stock. 82. Increasing or diminishing capital stock. § 73. Provisions as to stock and its transfer. — Section" 8 of Act. The stock of such company shall be deemed personal estate, and shall be transferable in such manner as shall be prescribed by the by-laws of the company ; but no shares shall be transferable until all previous calls thereon shall have been fully paid in, or shall have been declared forfeited for the non-payment of calls thereon : and it shall not be lawful for such company to use any of their funds in the purchase of any stock in any other corporation.' § 74. Nature of Stock. — The word " stock " as used in this section evidently means the scrip. It is the cer- tificates of stock which are declared to be personal property, and transferable, and not the corporate fund of the company. Capital stock has been defined to be " the property of the corporation contributed by its stockholders, or otherwise obtained by it to the extent ' Consult Amendments, post, § 139. 112 STOCK AND STOCK CERTIFICATES. § 75. required by its charter."^ The certificates of stock are quite distinct from the stock itself, and are merely evidence of the holder's interest in the corporate fund ; and this evidence is all that one who purchases such interest may obtain, as he cannot vsrithdravv the stock itself from the corporate fund.^ Certificates of stock are not negotiable and the rules governing commercial paper do not apply thereto.^ A vendor, however, who has received from the owner of the stock all the indicia of ownership, may give a good title to a hona fide purchaser for value, even though he has no title himself.* This rule, however, rests upon the doctrine of estoppel.^ But one who surrenders such indicia of ownership does not thereby empower the person who obtains them to borrow money on the stock in the name of the owner, and if he does so borrow, the real owner will not be estopped from repudiating the trans- action, and claiming his stock,® § 75. Certificates, how transferable. — The by-laws should regulate the transfer of certificates, and it is usual for them to provide that in cases of transfer no new certificates shall issue, except on the production and surrender of the old certificates. ' Williams v. Western Union T. Co. 93 N. Y. 103; s. c. 9 Abb. N. C. 437. See, also, Christensen v. Eno, 106 N. Y. 97 ; Cook on Stock, Stockholders, &c. § 3. ' Burrall ». Bushwick R. R. Co. 75 N. Y. 211. ' Weaver «. Harden, 49 N. Y. 286 ; Cook, § 412. ' McNeil «. Tenth Nat. Bk. 46 N. Y. 331 ; Leitch s. Wells, 48 N. Y. 585; Moore n. Met. Nat. Bk. 55 N. Y. 41. • Weaver r>. Barden, 49 N. Y. 286; Ballard v. Burgett, 40 N. Y. 314, and cases under note 4. ■ Merchants' Bank v. Livingston, 74 N. Y. 223. § 75. STOCK AND STOCK CERTIFICATES. 113 Where it is so provided, if a company issues new certificates, without such protection and surrender, it may be held liable thereon.^ Making and mailing to the proper person a stock certificate is an issuing thereof.^ Section 25 provides that all transfers must be entered in the stock book which is to be kept by the company, and states that without such entry no " trans- fer of stock shall be valid for any purpose whatever, except to render the person to whom it shall be transferred liable for the debts of the company."* This regulation is, however, wholly for the benefit of the company, and may be asserted or waived by it at its pleasure.* It may hold the transferrer liable for the debts of the company until such entry is made ; unless, indeed, the company has no transfer book, in which case the company would not be allowed to take ad- vantage of its own negligence:^ and the transferee will have no right or power to vote at corporate elec- tions or meetings until he obtains a transfer of the certificate on the books of the company.* The legal title will be regarded by the company to be held by the vendor, and he stands as a trustee for the purchaser. '^ In case the company waives its ■ Brisbane v. D., L. & W. R. R. Co. 94 N. Y. 204. • Jones V. Terre Haute, &c., E. R. Co. 57 N. T. 196. 3 Post, § 88. • McNeil ■». Tenth Nat. Bk. 46 N. T. 331. See Hyatt v. Swivel, 52 N. T. Super. Ct.l. ' Isham V. Buckingham, 49 N. Y. 216. • Campbell v. American Zylonite Co. 55 N. Y. Super. Ct. 562. As to rights respecting dividends, see post, § 90. ' Johnson v. Underbill, 52 N. Y. 210; Brisbane v. D., L. & W. R. R. Co. 94N. Y. 304; Robinson ». The National Bank of New Berne, 17 Weekly Dig. 259. Consult Appeal of Linnard (Penn.), 6 East. Rep. 877. 8 114 STOCK AKD STOCK CERTIFICATES. § 75. right to the production and surrender of the old cer- tificate the transferee may lose his stock, by a sale made by his vendor to a lona fide purchaser;^ the transferee would, however, have his action against the company for damages, as it is the duty of the company to insist upon such surrender.^ The proper course, both for the safety of the vendor and the vendee, is to secure at once the required trans- fer in the corporate books, and this the vendee may compel, as soon as he receives the certificate with the power indorsed in blank ; ^ the company must decide whether or not the power is genuine, and if it issues a new certificate upon a forged power it will be held responsible for such action.^ Between the parties, however, when one has Sur- rendered his certificate and has executed the power authorizing a transfer on the books of the company, he has parted with his entire interest, both legal and equi- table, and the sale is effectual and valid, and the pur- chaser is the sole owner, notwithstanding the broad statement contained in section 25.* The power to transfer on the books of the company is not exhausted until an actual transfer is made, and it enures to the benefit of each bona fide holder of the " N. T. & N. H. K. R. Co. ■b. Schuyler, 34 N. Y. 80. See Jarvis v. Man- hattan Beach Co. 53 Hun, 863. "^ Cushman v. Thayer Mfg. Jewelry Co. 76 N. Y. 365. ' DriscollB. West B. & C. Mfg. Co. 59 N. Y. 101 ; Smith ». Am. C. C, &c. 7 Lans. 317; Webster v. Upton, 1 Otto, 65. * Pollok v. Nat. Bank, 3 Seld. 274. ' Johnson v. Underhill, 52 N. Y. 210 ; Middlebrook v. Merchants' Bk. 41 Barb. 481 ; Bank of Buffalo c. Kortright, 22 Wend. 348 ; Cutting v. Damerel, 88 N. Y. 410; Robinson b. The National Bank of New] Berne, 17 Weekly Dig. 259 ; Dunn v. Star Fire Ins. Co. 19 W. D. 531. § 76. STOCK AND STOCK OEBTIFICATES. 115 certificate.^ If a vendor is held liable for the debts of the company by reason of his remaining a stock- holder of record, he may obtain indemnity from his purchaser.^ Where a certificate is delivered by the ovpner with, the power to transfer indorsed in blank as collateral security, as between the parties, the pledgor has part- ed with his entire interest, and the pledgee is the owner.^ A mere written assignment of a certain number of specified shares of stock, without any transfer of the certificates, will give an equitable title to the assignee, which he may enforce ;* and by mere delivery of the certificate, the title to stock will pass as a gift causa mortis or inter vivos? A sale of stock in good faith and properly registered relieves the vendor from further liability thereon.® § 76. Corporate liens on shares.— Section 8 ^ provides, that " no shares shall be transferable until all previous calls thereon shall have been fully paid in, or shall have been declared forfeited for the non-payment of calls thereon." By virtue of this provision the com- pany secures for itself a lien upon its stock until such calls are paid, and no transfer on the books need be permitted until such calls are paid. This provision of the act, however, excludes any other limitation upon ' Leavitt ». Fisher, 4 Duer. 1. 2 Johnson ®. Underbill, 52 N. Y. 310. ' Smith V. American Coal Co., &c. 7 Lans. 317. * Grynes «. None, 49 N. Y. 17 ; De Caumontu. Bogert, 36 Hun, 383. ' Westelo «. Dewitt, 36 N. Y. 340; Walsh a. Sexton, 55 Barb. 351. » Billingas. Robinson, 94 N. Y. 415. Post, § 103. See, as to conflict- ing claims to stock, Buffalo Grape Sugar Co. ■». Alburger, 32 Hun, 349. ' Arde. § 73. 116 STOCK AND STOCK CERTIFICATES. § 77. the transfer of the shares, and a by-law which attempts to prevent such transfer until all the debts of a stock- holder to the company are paid is, as we have seen, void.^ § 77. Lost or destroyed certificates, how replaced. — L. 1873, c. 151. — Whenever any company incorporated under the laws of this State shall have refused to issue a new certificate of stock in place of one theretofore issued by it, but which is alleged to have been lost or destroyed, the owner of such lost or destroyed certificate, or his legal rep- resentatives, may apply to the Supreme Court, at any special term thereof appointed to be held in the judicial district where such owner resides, for an order requiring such corporation to show cause why it should not be re- quired to issue a new certificate of stock in place of the one so lost or destroyed. Such application shall be by peti- tion, duly verified by the owner, in which shall be stated the name of the corporation, the number and date of the certificate, if known or can be ascertained by the petitioner, the number of shares of stock named therein, and to whom issued, and as particular a state of the circumstances at- tending such loss or destruction as such petitioner shall be able to give. Upon the presentation of said petition, said court shall make an order requiring said corporation to show" cause, at a time and place therein mentioned, why it should not be required to issue a new certificate of stock in place of the one described in said petition. A copy of said petition and of said order, shall be served upon the president or other head of such corporation, or on the cashier, secretary, or treasurer thereof, personally, at least ten days before the time designated in said order for show- ing cause. At the time and place specified in said order, and on proof of due service thereof, the said court shall proceed in a summary manner, and in such mode as it may deem ' Ante, § 25. As to forfeiture of shares, see post, § 87. § 77. STOCK AND STOCK CERTIFICATES. 117 advisable, to inquire into the truth of the facts stated in said petition, and shall hear such proofs and allegations as may be offered by or in behalf of the petitioner, or by or in behalf of said corporation, or other party relative to the subject-matter of said inquiry, and if, upon such in- quiry, said court shall be satisfied that such petitioner is the lawful owner of the number of shares of the capital stock, or any part thereof, described in said petition, and that the certificate therefor has been lost or destroyed, and cannot after due diligence be found, and that no sufficient cause has been shown why a new certificate should not be issued in place thereof, it shall make an order requiring said cor- poration or other party, within such time as shall be there- in designated, to issue and deliver to such petitioner a new certificate for the number of shares of the capital stock of said corporation, which shall be specified in said order as owned by said petitioner, and the certificate for which shall have been lost or destroyed. In making such order the court shall direct that said petitioner deposit such secur- ity, or file such a bond in such form and with such sureties as to the court shall appear sufficient to indemnify any per- son other than the petitioner who shall thereafter appear to be the lawful owner of such certificate stated to be lost or stolen ; and the court may also direct the publication of such notice, either preceding or succeeding the making of such final order, as it shall deem proper. Any person or persons who shall thereafter claim any rights under said certificate so alleged to have been lost or destroyed, shall have recourse to said indemnity, and the said corporation shall be discharged of and from all liability to such person or persons by reason of compliance with the order afore- said ; and obedience to said order may be enforced by said court, by attachments against the officer or officers of such corporation, on proof of his or their refusal to comply with the same.^ ' See Matter of Biglin v. 'Friendship Ass'n, 46 Hun, 233. 118 STOCK AND STOCK CERTIFICATES. §§ 78, 7!). § 78. ProTisions as to issuing capital stock.— Section 14 of Act. Nothing but money shall be considered as pay- ment of any part of the capital stock, and no loan of money shall be made by any such company to any stockholder therein ; and if any such loan shall be made to a stock- holder, the officers who shall make it, or who shall assent thereto, shall be jointly and severally liable to the extent of such loan and interest, for all the debts of the company contracted before the repayment of the sum so loaned.* L. 1853, c. 333, § 2. — The trustees of such company may purchase mines, manufactories, and other property neces- sary for their business, and issue stock to the amount of the value thereof in payment therefor ; and the stock so issued shall be declared and taken to be full stock, and not liable to any further calls ; neither shall the holders thereof be liable for any further payments under the provisions of the ' tenth section of the said act ; but in all statements and re- ports of the company, to be published, this stock shall not be stated or reported as being issued for cash paid into the company, but shall be reported in this respect accord- ing to the fact.^ § 79. Capital stock, how issued.— Under the above provisions of the act regulating the issue of capital stock of companies organized thereunder, it will be seen that each share of the stock must be issued for money, or for property necessary for the business of the company.^ It has recently been held by the Court of Appeals, that stock, issued in payment of a debt due from the company for work in constructing its furnaces, was is- " See ante, § 71. ' Seej)os«, § 124. ' People V. Troy House Co. 44 Barb. 635. See Battershall ®. Davis, 31 Barb. 323 ; Haviland v. Chace, 39 Barb. 283 ; Veeder v. Mudgett, 95 N. Y. 295; American Silk Works ». Salomon, 4 Hun, 135. § 79. STOCIS: AND STOCK CBKTIFIOATES. 119 sued for money under section 14, as this transaction was equivalent in substance to the company's paying its creditor in money, and receiving back from him the same amount of money in payment for the stock so issued.^ An agreement between the company and its stock- holders, to issue and take the stock for a less amount than its par value, is void as against creditors, as the capital stock is a trust fund for their benefit.^ The capital stock of companies under this act must be paid in, one-half within one year and the other half within two years from the incorporation of each com- pany.^ If the capital is not so paid in, section 10 pro- vides that the corporation " shall be dissolved." * Judgment of ouster by the State would be neces- sary to effect a dissolution, for the company is not dis- solved ipso facto? The entire stock of a company may be issued for properties under the amendment of 1853, provided such properties are necessary for the business of the company. And the trustees have the exclusive right to issue the stock, or any part of it, for the purposes authorized by the statute. In issuing it, however, they must act in good faith, and must not fraudulently overvalue the property ' Veeder «. Mudgett, 95 N. Y. 295. See, also, Beach v. Smith, 30 N. Y. Sie ; Green's Brice's Ultra Vires, p. 148. " Knowlton v. Congress & Empire S. Co. 57 N. Y. 648. See, also. Otter ». Brevoort Petroleum Co. 50 Barb. 247 ; Sturgis v. Stetson, 1 Biss. 246 ; Scoville ». Thayer, 105 U. S. 143. ' Exception as to salt companies. See L. 1857, c. 29, § 1. * Post, § 99. ' Baker a. Backus, 32 111. 79; post, § 152. 120 STOCK AND STOCK CERTIFICATES. § 80. \ taken by the company. Stock properly issued by them for such properties is full paid, and possesses some ad- vantages over stock issued for money. Stockholders suffer for the fi-aud of trustees in making these pur- chases, for the holders of stock originally issued for property may become liable to' creditors in case such fraud is discovered and proven.^ While trustees may thus issue stock for property, they cannot surrender property of the company and take up its stock to the value of the property.* It may also be noticed that the trustees may issue stock for the purpose of purchasing the stock of cer- tain other specified companies,* and that under proper circumstances they may issue stock in the shape of a stock dividend.* § 80. Certificate of payment of capital stock to be re- corded. — The president and trustees must, within thirty days from the date of the payment of the last instalment of the capital stock, execute and record a certificate stating that the stock has all been paid in.* In case the certificate is not recorded, stockholders who hold stock which has been issued for money may suffer serious loss.® They cannot be held liable, however, if the fail- ure to properly record the certificate is wholly due to the negligence of the county clerk.'' The certificate must be sworn to, as a mere acknowledgment is not ' See^os*, §§ 134, 125. = Johnson v. Bush, 3 Barb. Ch. 240. ' Post, § 139. ' Williams v. Western Union Telegraph Co. 93 N. Y. 163; Wood v. Lary, 47 Hun, 550; Railroad Co. v. Nickals, 119 U. S. 296. ' See section 11 ; post, §§ 99, 100. ' Bruce v. Driggs, 25 How. Pr. 71. ' Sutherland v. Olcott, 39 Hun, 161; 93 N. T. 93. § 81. STOCK AND STOCK CERTIFICATES. 121 suflSfcient; and, where the certificate was properly re- corded, but was acknowledged and not sworn to, it was held that this was a fatal defect.^ It is held, that stockholders who own stock which was originally issued for properties at their fair valua- tion, are not liable to creditors in case the certificate required by this section is not recorded.^ But, never- theless, it is advisable to make and record the certifi- cate as the law provides, even in a case where all the stock is issued for properties. § 81. Provisions as to increase or diminution of capital stock. — Section 20 of Act. Any corporation or company heretofore formed, either by special act or under the general law, and now existing, for any manufacturing, min- ing, mechanical or chemical purposes, or any company which may be formed under this act, may increase or diminish its capital stock, by complying with the provis- ions of this act, to any amount which may be deemed suffi- cient and proper for the purposes of the corporation, and may also extend its business to any other manufacturing, mining, mechanical or chemical business, subject to the provisions and liabilities of this act. But before any cor- poration shall be entitled to diminish the amount of its capital stock, if the amount of its debts and liabilities shall exceed the amount of capital to which it is proposed to be reduced, such amount of debts and liabilities shall be satisfied and reduced so as not to exceed such dimin- ished amount of capital ; and any existing company, heretofore formed under the general law, or any special act, may come under and avail itself of the privileges and provisions of this act, by complying with the following provisions, and thereupon such company, its officers and stockholders, shall be subject to all the restrictions, duties, and liabilities of this act. ' Brown v. Smith, 13 Hun, 408; aflB'd, Ct of Appeals. = Post, § 134. 122 STOCK AND STOCK CERTIFICATES. § 81. Section 21 of Act. Whenever any company shall de- sire to call a meeting of the stockholders, for the purpose of availing itself of the privileges and provisions of this act, or for increasing or diminishing the amount of its capital stock, or for extending or changing its business, it shall be the duty of the trustees to publish a notice, signed by at least a majority of them, in a newspaper in the county, if any shall be published therein, at least three successive weeks, and to deposit a written or printed copy thereof in the post office, addressed to each stockholder at his usual place of residence, at least three weeks previous to the day fixed upon for holding such meeting ; specifying the object of the meeting, the time and place when and where such meeting shall be held, and the amount to which it shall be proposed to increase or diminish the capital, and the business to which the company would be extended or changed, and a vote of at least two-thirds of all the shares of stock shall be necessary to an increase or diminu- tion of the amount of its capital stock, or the extension or change of its business as aforesaid, or to enable a company to avail itself of the provisions of this act,^ Section 22 of Act. If at any time and place specified in the notice provided for in the preceding section of this act, stockholders shall appear in person or br proxy, in number representing not less than two-thirds of all the shares of stock of the corporation, they shall organize by choosing one of the trustees chairman of the meeting, and also a suitable person for secretary, and proceed to a vote of those present, in person or by proxy, and if, on canvass- ing the votes, it shall appear that a sufficient number of votes has been given in favor of increasing or diminishing the amount of capital, or of extending or changing its business, as aforesaid, or for availing itself of the privileges and provisions of this act, a certificate of the proceedings, showing a compliance with the provisions of this act, the See The Freeman's Natl. Bank, etc. v. Smith, 13 Blatch. C. Ct. 220. § 81. STOCK ATST) STOCK CERTIFICATES. 123 amount of capital actually paid in, the business to which it is extended or changed, the whole amount of debts and liabilities of the company, and the amount to which the capital stock shall be increased or diminished, shall be made out, signed and verified by the affidavit of the chair- man, and be countersigned by the secretary, and such cer- tificate shall be acknowledged by the chairman, and filed as required by the first section of this act, and when so filed, the capital stock of such corporation shall be in- creased or diminished to the amount specified in such certificate, and the business extended or changed, as afore- said, and the company shall be entitled to the privileges and provisions, and be subject to the liabilities of this act, as the case may be.^ ' By an act passed May 15, 1878 (L. 1878, c. 264, as amended, L. 1883, c. 306), it was provided, as follows: § 1. Any corporation or company organized under general or a special law of this State, and now existing, or which may hereafter be organized under such general or special law, may diminish its capital stock, by complying with the provisions of this act, to any amount which may be deemed sufficient and proper for the purposes of the corporation. But nothing in this act shall be so con- strued as to relieve any holder or owner of stock in such corporation from any personal liability existing prior to such reduction: provided, that nothing in this act contained shall be construed to in any manner interfere with or affect any law now in existence authorizing any corpo- ration heretofore organized to reduce its capital stock. § 2. Whenever any company shall desire to call a meeting of the stock- holders for the purpose of diminishing the amount of its capital stock, it shall be the duty of the trustees or directors to publish a notice, signed by at least a majority of them, in a newspaper in the county in which the business of the company is carried on, or its principal office is located, if any shall be published therein, at least three successive weeks, and to deposit a written or printed copy thereof in the post office, ad- dressed to each stockholder, at his usual place of residence, at least three weeks previous to the day fixed upon for holding such meeting, specify- ing the object of the meeting, the time and place when and where such meeting shall beheld, and the amount to which it shall be proposed to diminish the capital; and a vote of at least two thirds of all the shares of stock shall be necessary to a diminution of the amount of its capital stock. § 3. If, at the time and place specified in the notice provided for in the 124 STOCK AND STOCK CERTIFICATES. § 82. § 82. Increasing or diminishing capital stoclc. — Every company may, under the foregoing provisions, increase its capital stock to any extent that may be desired, but it cannot decrease it so that the debts of the com- pany will exceed its capital.^ preceding section of this act, the stockholders shall appear in person or by proxy, in numbers representing not less than two-thirds of all the shares of stock of the corporation, they shall organize by choosing one of the trustees chairman of the meeting, and also a suitable person for secretary, and proceed to a vote of those present in person or by proxy, and if in canvassing the votes it shall be found that a sufficient number of votes has been given in favor of diminishing the amount of capital, a certificate of the proceedings, showing a compliance with the provisions of this act, the amount of capital actually paid in, the whole amount of debts and liabilities of the company, and the amount to which the capital stock shall be diminished, shall be made, signed and verified by the chairman, and such certificate shall be acknowledged by the chair- man and filed in the office of the clerk of the county in which the busi- ness of the company shall be carried on, and a duplicate thereof in the office of the Secretary of State, with the approval of the controller in- dorsed thereon, to the effect that the reduced capital is sufficient for the pro- per purposes of the company, and is in excess of all debts and liabilities of the company, exclusive of debts secured by trust mortgages, and that the actual market value of the stock of the company prior to the reduc- tion of the capital was less than the par value of the same, and when so filed the capital stock of such corporation shall be reduced to the amount specified in such certificate, and the amount of capital left in the posses- sion of the company, over and above the amount to which the capital shall be so reduced, shall be returned to the stockholders pro rata at such times and in such manner as the trustees or directors shall deter- mine. Companies formed since May 15, 1878, must comply with the pro- visions of this act. It is therefore advisable for such companies in diminishing their capital stock to follow both the Law of 1848, sections 30, 31, 33. and the Law of 1878 (supra). A form designed to comply with the provis- ions of both of said laws will be found in appendix C. Consult Strong V. Brooklyn Cross Town R. R, Co. 93 N. T. 436; People v. CaiT, 36 Hun, 488. ' A company can only increase or diminish its stock as authorized by statute or its charter. Sutherland v. Olcott, 95 N. Y. 93 ; a tax of one- § 82. STOCK AND STOCK CBKTIFICATBS. 125 To effect such a change the statutes above set forth must be closely followed. The notice required to be published and mailed to the stockholders must comply with the law in all respects, and every detail as to publishing and mailing must be observed. As proof that the requirements of the act have been complied with, it is advisable that there should be presented to the chairman of the meeting an affidavit from the publication office, that the notice of the meeting has been properly published, and also an affi- davit of the person who has mailed the notices to each stockholder, that he has complied with the law in this respect. In mailing the notice to stockholders the addresses should be taken from the stock book which the com- pany is required to keep. No meeting can be held unless two-thirds of all the shares of stock are represented either in person or by proxy, and less than that number, it is believed, could not adjourn the meeting to a later date. The officers and stockholders who are interested in the change of the capital should see to it that enough shares of stock are represented, at the time and place specified for the meeting, so that at all events the meeting may properly organize. For even this it cannot do unless two-thirds of the stock is represented. The chairman of the meeting must be a trustee of the company, and he must make, sign, verify and acknowledge the required certificate, and the secretary must countersign it.^ eighth of one per cent, for every increase of capital must now be paid. See ante, § 6. ' Cuykendall ». Douglass, 19 Hud, 577. 126 STOCK AND STOCK CEETIFICATES. §82. When a proper notice of meeting is published as is provided by the statute, and two-thirds of the stock- holders attend, it must appear by positive proof that the notice was not mailed to each stockholder in order to invalidate the acts of the meeting.^ When the required certificate has been filed and recorded in the office of the clerk of the county where the company has its principal place of business, and a duplicate thereof has been filed and recorded in the office of the Secretary of State, the stock is thereupon increased or decreased as is specified therein; new stock should be issued by the trustees and the old certificates called in. Increased stock to become full paid must be issued for money or properly, and an agreement between original stockholders to increase the capital, and issue the stock as full paid stock among themselves upon paying eighty per cent, of the par value thereof, is illegal and a fraud.^ Where the original capital of a company is fully paid in, and the proper certificate is recoded,* the liability of the stockholders of the original stock is not revived by a failure to pay in the increased stock ; but stock- holders who have voted for the increase of stock, and have accepted their shares thereof and dividends there- on, cannot question the validity of the increase.* Upon the payment of the increased capital stock a new certificate of payment of stock should be recorded." 'Id. ' Knowlton v. Congress & Empire Spring Co. 57 N. T. 518. ' Post, §§ 99, 100. * Veeder t. Mudgett, 95 N. Y. 295. '- Veeder «. Mudgett {supra) ; post, § 100. § 82. ^TOCK AND STOCK OBETTFICATES. 127 Where a company has no power to increase its capital beyond a specified limit, stock issued beyond sucli limit is void and creates no liability on the part of holders thereof, and ^ives no rights, and acquiescence of stockholders gives no validity to it. A mere in- formality in the issue of lawful stock may, however, be cured.-' In diminishing their capital stock, as we have seen, companies organized since May 15, 1878, must com- ply with the statute of that date.^ How to increase number of shares of capital stock. — L. 1866, c. 73. — § 1. Any company formed under the act en- titled, " An act fco authorize the formation of corporations for manufacturing, mining, mechanical or chemical pur- poses," passed February seventeenth, eighteen hundred and forty-eight, may increase the number of shares of which its capital stock consists ; provided the capital stock of such company shall not thereby be increased or di- minished. § 2. Such increase shall be made by a vote of the stockholders in favor thereof, representing two-thirds of the capital stock, at any meeting of the stockholders called in the manner prescribed in the act hereby amended, and by executing and acknowledging an amended certificate specifying the number of shares of which the said capital stock of said company shall thereafter consist, and the par value of each share, and in other respects conforming to the original certificate ; which amBnded certificate shall be signed by the president and two-thirds of the directors of the company, and shall be filed in the office of the Sec- retary of State, and in the clerk's office of the county where the original certificate was filed. § 3. Each stockholder shall be entitled to a certificate ' Scoville V. Thayer, 105 U. S. 143. ^ § 81, note, page 95, ante. 128 STOCK AND STOCK CERTIFICATES. §82. for such a number of shares of said capital stock after the whole number has been increased, as aforesaid, as shall, at their par value, be equal to the par value of the shares theretofore held by him in such company, on surrender- ing the certificates for said shares so held by him to be canceled ; provided that such increase shall not so divide the shares as to give the fractional part of a share to any stockholder. CHAPTEE VIII. STOCKHOLDERS. § 83. Provisions as to calls upon stockholders, etc. 84. Subscribers. 85. When subscribers relieved from subscriptions. 86. Unpaid subscriptions. 87. Forfeiture of shares. 88. Provisions as to stock books and entries therein. 89. Stock books. 90. Stockholders' right to dividends. 91. Provisions authorizing stockholders to demand statement. 92. Stockholders' privileges. § 83. Provisions as to calls upon stockholders, etc.— Section 6 of Act. It shall be lawful for the trustees to call " iu and demand from tlie stockholders respectively, all such sums of money by them subscribed, at such times and in such payments or installments as the trustees shall deem proper, under the penalty of forfeiting the shares of stock subscribed for, and all previous payments made thereon, if payment shall not be made by the stockholders within sixty days after a personal demand or notice requiring such payment shall have been published for six successive weeks in the newspaper nearest to the place where the business of the company shall be carried on as aforesaid. § 84. Subscribers.— One who becomes a subscriber to the stock of a corporation to be thereafter organized, under the act we are considering, assumes the liabili- ties and acquires the rights of a stockholder in such a corporation upon its organization.^ He undertakes to ' Rutter V. Kilpatrick, 63 N. Y. 604 ; Spear v. Crawford, 14 Wend. 20; Burr v. Wilcox, 22 N. Y. 551; Lake Ontario, &c., R. R. Co. v. Mason, 16 N. Y. 461. 9 130 STOCKHOLDERS. § 84. pay for his shares according to the conditions of the general law and the articles of association/ and his subscription may be enforced against him by the com- pany,^ and, although he may have paid nothing on his stock, he is liable as a stockholder to creditors.* It is noticeable that in the above section, sub- scribers to the stock are designated " stockholders." It is not necessary that one should have a certifi- cate of stock or be registered in the books of tbe com- pany to constitute him a stockholder : * if he acts as a stockholder, has subscribed to the stock, and is recog- nized as a stockholder by the company, there is no question of his liability as such, although he has never paid in full for his stock.® The placing opposite one's name in tbe certificate of .incorporation tbe number of shares taken by the signer is a suflScient subscription to the stock of the company, and it takes effect as such upon the filing of the certifi- cate.* A subscription of a fictitious or a firm name is valid, as the individual subscription of the signer.'' Where subscriptions are unconditional, agreements be- ' Palmer v. Lawrence, 3 Sandf. Ch. 161. ' Phoenix Warehouse Co. o. Badger, 67 N. Y. 294 ; Dorris v. French, 4 Hun, 292. An agreement to repurchase his stocli within a year at his option is void, Meyer v. Blair, 19 Abb. N. C. 214. " Spear v. Crawford, 14 Wend. 20; Wheeler v. Millar, 90 N. Y. 353. ' Burr 0. Wilcox, 23 N. Y. 551. See Halstead v. Dodge, 51 N. Y. Super. Ct. 169. ' Wheeler v. Millar (supra). ' Phoenix Warehouse Co. v. Badger, 67 N. Y. 294 ; Cole v. Ryan, 52 Barb. 168. ' Union Hotel Co. o. Hersee, 79 N. Y. 454. It is a misdemeanor to sign the name of a fictitious person to a subscription for stock, or to sign the name of any person in bad faith. See Penal Code, § 590. § 85. STOCKHOLDERS. 131 tween subscribers limiting the same are of no effect.^ A bond and mortgage given to secure a subscription to stock rests upon sufficient consideration.^ The above section gives to the trustees the dis- cretionary right of making calls upon the subscribers in such amounts, and at such times as they shall deem proper ; and to this subscribers assent, as they are " bound to take notice of the requirements of the charter articles and by-laws of the company, and of the obligations thereby imposed upon them." ^ Trustees are prohibited by statute from receiving or discounting " any note or other evidence of debt in payment of any installment actually called in and re- quired to be paid, or any part thereof, due or to become due on any stock ; " oi- receiving or discounting "any note or other evidence of debt with the intent of enabling any stockholder to withdraw any part of the money paid in by him on his stock." * § 85. When subscribers relieved from subscriptions.— Where there is any material departure by the managers of a company from the proposed purposes for which it was organized, subscribers will be relieved from their subscriptions.* Where, also, a corporation does not obtain the franchise contemplated by its promoters, but engages in business other than that specified in the subscrip- ' Whitehall, &c. R. R. Uo. v. Meyers, 16 Abb. Pr. N. S. 34. = Battershall ». Davis, 31 Barb. 323. ' Field on Corporations, p. 93 ; Dayton v. Borst, 31 N. Y. 435 ; Bil- lings V. Robinson, 38 Hun, 133, affi'd 94 N. T. 415 ; as to calls, see, also, Green's Brice's Ultra Vires, pp. 150-153. * 1 R. S. 603, § 2. And any director who concurs in a vote to do any of these things is guilty of a misdemeanor. See Penal Code, § 594. ' Field on Corporations, p. 110. 132 STOCKHOLDEKS. § 86. tion agreement, those not consenting to the change will be freed from their subscriptions.^ One, however, who subscribes to the stock of a company, and thereafter takes part in its management, is estopped as against creditors, or its receiver, from claiming that ttere was no legal incorporation.^ The contract of subscription is a several contract, and the release of one subscriber does not fer se discharge any other.^ A subscriber to stock of a corporation formed under the law we are considering may, by an unquali- fied sale made in good faith, transfer his interest and prevent liability for future calls, upon complying with the act.* Where a company keeps no transfer book it will not be allowed to take advantage of its own negligence, and hold one who has sold his stock liable on the gi'ound that he has not transferred his stock according to the provisions of the law." § 86. Unpaid subscriptions.— The balance unpaid on a subscription to the stock of a company, is a claim subject to sequestration in proceedings taken on a judgment, recovered against the company." The right to collect unpaid subscriptions is trans- ferable to a receiver of the company.'' They can only " Dorris «. Sweeny, CO N. Y. 463. ' Ruggles V. Brock, 6 Hun, 164 ; Dorris v. French, 4 Hun, 292 ; Sodus Bay, &c., R. R. Co. v. Hamlin, 24 Hun, 390. ' Whittlesey ». Frantz, 74 N. Y. 456. '- Billings v. Robinson, 28 Hun, 122; 94 N. Y. 415; Mann ». Currie, 2 Barb. 294; Veiller v. Brown, 18 Hun, 271. See, under other laws, Wintringham v. Rosenthal, 25 Hun, 580 ; Cutting v. Damerel, 88 N. Y. 410. • ■ Isham «. Buckingham, 49 N. Y. 216. 6 Dean ». Biggs, 25 Hun, 132. ' Phoenix Warehouse Co. v. Badger, 67 N. Y. 294 ; Van Wagenen «. § 87. STOCKHOLDERS. 133 be enforced against " such persons as may stand in the relation of shareholders to the association." ^ Unpaid subscriptions are " assets of the company- bound in equity for the payment of its debts, and a creditor may maintain an action, after exhausting his remedy at law, to reach these assets, and be subro- gated to the right of the company ; and without join- ing other stockholders or creditors.'' ^ § 87. Forfeiture of shares.— The right to forfeit, shares given to the trustees does not take away their right to sue for subscriptions; it is a cumulative remedy.* After forfeiture is declared, however, the stockholder cannot be proceeded against either by the company,* or by its creditors, to recover unpaid calls upon the stock.* For forfeiture is a full satisfaction of the subscriber's obligation to pay calls.® After forfeiture the stock is the absolute property of the company, and may be sold by it ; ' the sale must be strictly under the terms of the charter.® Clark, 22 Hud, 497; Cutting v. Damerel, 88 N. Y. 410; Wait on Insol- vent Corporations, § 235. But see Tucker ». Grilman, 45 Hun, 193. ' Billings «. Robinson, 28 Hun, 122; 94 N. Y. 415. " Finch, J., Wheeler v. Millar, 90 N. Y. 353; citing Briggs «. Penni- man, 8 Cow. 396 ; 2 Story's Eq. Jur. § 1252; Hatch «. Dana, 101 U. S. Cir. Ct. 205 ; Bartlett v. Drew, 57 N. Y. 587. ^ Mann e. Currie, 2 Barb. 294 ; Field on Corporations, § 96 ; Duchess Cotton Mfg. Co. V. Davis, 14 Johns. 238 ; Green's Bricc's Ultra Vires, p. 152, note c. See, also, Williams e. Meyer, 41 Hun, 545 ; Weeks v. Silver Islet Co. 54 J. & S. 1 ; Cook, §§ 124, 125. * Small ». Herkimer Mfg. Co. 2 N. Y. 330. ' Mills v. Stewart, 41 N. Y. 384 ; Wheeler ». Millar, 90 N. Y. 353. ' Small V. Herkimer, &c. {mpra). ' People V. A. & S. R. R. Co. 7 Abb. Pr. N. S. 291. " Mitchell V. Vermont Copper Co. 67 N. Y. 280. When a subscriber forfeits his rights the remaining stockholders acquire them, and the trustees cannot extend the time of payment. Weeks ». Silver Islet Co. 8 N. Y. St. Rep. 110; Morawetz, § 316. 134 STOCKHOLDERS. § 88. § 88. Provisions as to stock books and entries therein. — Section 25 of Act. It shall be the duty of the trustees of every such corporation or company to cause a book to be kept by the treasurer or clerk thereof, containing the names of all persons, alphabetically arranged, who are or shall within six years have been stockholders of such com- pany, and showing their places of residence, the number of shares of stock held by them respectively, and the time when they respectively became the owners of such shares ; and the amount of stock actually paid in ; which book shall, during the usual business hours of the day, on every day except Sunday and the fourth day of July, be open for the inspection of stockholders and creditors of the com- pany, and their personal representatives, at the office or principal place of business of such company, in the county where its business operations shall be located ; and any and every such stockholder, creditor, or representative shall have a right to make extracts from such book ; and no transfer of stock shall be valid for any purpose what- ever, except to render the person to whom it shall be. transferred liable for the debts of the company, according to the provisions of this act, until it shall have been en- tered therein, as required by this section, by an entry showing to and from whom transferred. Such book shall be presumptive evidence of the facts therein stated, in favor of the plaintiff, in any suit or proceeding against such company, or against any one or more stockholders. Every officer or agent of any such company who shall neglect to make any proper entry in such book, or shall refuse or neglect to exhibit the same or allow the same to be inspected, and extracts to be taken therefrom, as pro- vided by this section, shall be deemed guilty of a mis- demeanor, and the company shall forfeit and pay to the party injured a penalty of fifty dollars for every such neg- lect or refusal and all the damages resulting therefrom : And every company that shall neglect to keep such book open for inspection, as aforesaid, shall forfeit to the people the sum of fifty dollars for every day it shall so neglect, to §§ 89, 90, STOOKHOLDEKS. 135 be sued for and recovered, in the name of tlie people, by the district-attorney of the county in which the business of such corporation shall be located; and, when so re- covered, the amount shall be paid into the treasury of such county for the use thereof. § 89. Stock books.— The above section making the books presumptive evidence does not constitute them the best evidence or the only evidence of the facts specified.^ The company must keep the book referred to, and " it is doubtless within the power of any stockholder to compel the officers of the corporation to keep such a book as the statute requires ; and if it has been casu- ally destroyed, its place should be supplied, if those who might avail themselves of the fact that they have ceased to be stockholders desire to protect them- selves." * The books must be open for inspection as the Statute provides, but the Statute will be reason- ably construed.^ § 90. Stockholders' right to dividends.— As between the corporations and its members, the rule is that those who are registered in the books of the company as stockholders are entitled to all the privileges, and sub- ject to all the liabilities of shareholders of those com- panies. Perhaps the most important of these privileges, and ' Blake «. Griswold, 103 N. Y. 429 ; Hemes «. Wesley, 13 Hun, 492. Consult 3 K. S. 8th ed., p. 1728. " Shellington e. Howland, 67 Barb. 14. See Kelsey v. Pfaulder Pro- cess Fermentation Co. 5 Ry. & Corp. L. J. 302; General Term, 5th Dept. ^ People ex rel. McDonald v. U. S. Mercantile Rep. Co. 20 Abb. N. C. 192 ; Kelsey v. Pfaulder Process, &c. Co. 41 Hun, 20 ; Fenlon «. Dempsey, 50 Hun, 131 ; French v. McMillan, 43 Hun, 189. 136 STOCKHOLDERS. § 90. the one of most general interest to stockholders, is the right to share in the profits of the association. Dividends upon stock are payable to the stock- holder of record, and may be properly paid to him without production of the certificate of stock, if the company has no reason to believe he is not the owner thereof.^ And w^here the administrator of a stockholder of record who had transferred his stock, but had himself remained the registered stockholder, collected divi- dends declared prior to the death of such stockholder, and which were credited to him on the books of the company, it was held that the books of the company " furnished an authentic record upon which it could lawfully act," and that the company was not liable to the real owner of the stock for the dividends so paid.* Where a company pays dividends to a recognized stockholder, one claiming such dividends, or a part thereof, must first establish his position as a stock- holder in proceedings against the company, and he cannot follow the assets of the company until he has first exhausted his remedy against it.® After one has treated his stock as converted by the company he can- not, during the pendency of an action brought by him against it for such conversion, sue for dividends on ' such stock.* ' Blatchford n. R. R. Co. 5 Abb. Pr. 276 ; Brisbane s. D., L. & W. R. R. Co. 25 Hun, 438; Smith n. American Coal Co. 7 Lans. 317; Jermain V. R. R. Co. 91 N. Y. 483. See article, " Title to Dividends," American Law Review, July, 1885. ' Brisbane v. D., L. & W. R. R. Co, 25 Hun, 438. ' Peckham «. Van Wagenen, 83 N. Y. 40. * Hughes V. Vermont Copper M. Co. 72 N. Y. 207. § 90. STOCKHOLDERS. 137 Before a dividend has been declared it has no ex- istence, and the undivided earnings of a company are inseparable from the shares of stock ; after the divi- dend has been declared it may be itself assigned.^ The right to a dividend accrues when it is declared without regard to the time when it was earned.^ Where a company voted " to pay a dividend of four per cent, this day, and another of like amount, at option of agent, from earnings of last year," it was held that both dividends were declared at the time of the passage of the resolution, and that both belonged to the then stockholders, and that neither passed to the purchaser upon a sale of the stock.' Where a fund is deposited with certain persons for the purpose of paying a declared dividend, stockholders acquire a lien thereon for the amount of the dividend.* " A transfer of stock of a corporation carries with it to the transferee its proportionate share of the as- sets of the company, including dividends which have not been declared, and all the incidents and advan- tages which appertain to the rights of a shareholder."^ When a dividend is declared it is a debt due the stockholder, and he may upon demand maintain an ac- tion to recover the amount thereof.® » A stockholder, however, cannot compel a company 'Manning®. Quicksilver Mining Co. 34 Hun, 360; Hyatt ». Allen, 56 N. Y. 553. 'Hyatt V. Allen, 56 N. Y. 553; Goldsmith v. Smith, 25 Hun, 201. As to when the right to a stock dividend accrues, see Parks v. Automatic Punch Co. 14 State Rep. 710. = Hill «. Newichawanick Co. 8 Hun, 459 ; affl'd 71 N. Y. 593. ' Matter of LeBlanc, 14 Hun, 8. ' Boardman ». L. S. & M. S. E. E. Co. 84 N. Y. 157. ' Kane v. Bloodgood, 7 Johns. Ch. 90; Carpenter b. N. Y., &c., E. Co. 5 Abb. Pr. 377; Jones v. Terre Haute Ry. 57 N. Y. 196. 138 STOCKHOLDERS. § 91. to declare a dividend while its debts are unpaid, and the funds on hand are insufficient to pay them.^ § 91. ProTisions authorizing stockholders to demand statement. — Section 27 of Act. Whenever any person or persons owning five per cent, of the capital stock of any company not exceeding one hundred thousand dollars, or any person or persons owning three per cent, of the capital stock of any company exceeding one hundred thousand dollars, formed under the provisions of this act, shall present a written request to the treasurer thereof, that they desire a statement of the affairs of such com- pany, it shall be the duty of such treasurer to make a statement of the affairs of said company, under oath, embracing a particular account of all its assets and liabil- ities, in minute detail, and to deliver such statement to the person who presented the said written request to said treasurer, within twenty days after such presentation, and shall also, at the same time, place and keep on file in his office, for six months thereafter, a copy of such statement, which shall at all times, during business hours, be exhibited to any stockholder of said company demanding an exam- ination thereof ; such treasurer, however, shall not be re- quired to deliver such statement, in the manner aforesaid, oftener than once in any six months. If such treasurer shall neglect or refuse to comply with any of the pro- visions of this act, he shall forfeit and. pay to the per- son presenting said written request the sum of fifty dollars, and the further sum of ten dollars for every twenty-four hours thereafter until such statement shall be furnished, to be sued for and recovered in any court having cog- nizance thereof.^ ■ Karnes v. Rochester, &c. R. Co. 4 Abb. Pr. N. S. 107 ; 33 N. Y. 338 ; 35 N. T. 433. As to property dividends, see Williams a. W. U. T. Co. 93 N. T. 163-191; ante, §79. "SeeL. 1854, c.301; as amended, L. 1863, c. 473, § 1; French r. McMillan, 43 Hun, 188. § 92 STOCKHOLDERS. 139 L. 1862, c. 472, § 2. — Should not any sucli written state- ment, as is required by section one of this act,' be demand- ed during the year preceding the annual meeting of the stockholders of any company, formed under the provisions of this act, for the election of directors or trustees; it shall be the duty of the treasurer of every such company to prepare and exhibit to the stockholders then and there assembled a general statement of the assets and liabilities of such company. § 93. Stochholders' privileges. ^— The act we are con- ' That is, section 37 of The General Manufacturing Act, as amended. ° Laws of 1885, chapter 489, entitled, "An Act to protect stock- liolders of coi'porations from the wrong doings of directors in certain cases,'' provide that: § 1. Whenever the directors, named in the articles of association of any corporation organized under any general law of this State, neglect or refuse during the first year of the corporate exist- ence, to adopt the by-law required by law to enable stockholders to hold the annual election for directors, and where by such neglect the said directors hold over and continue to be directors after the expira- tion of the first year of the corporate existence, all acts and proceedings of the directors when so holding over, done for and in the name of the company, designed to charge upon the company any liability or obliga- tion for the past services of any director so holding over, or for the past services of any officer, or attorney, or counsel appointed by them, and such liability or obligation shall be considered fraudulent and void. § 3. When directors of any such association or corporation are so holding over by their wrongful neglect of duty beyond the term for which they were appointed or elected, and an action has been brought against the company by the procurement of any of them to enforce any claim or obligation declared void by the preceding section, and such action is in the interest or for the benefit of any director or directors so holding over, and the company has by their connivance made default in such action, or consented to the validity of the claim or obligation so sought to be enforced against the company, any stockholder of thfi com- pany may apply to the Supreme Court by affidavit, setting forth the facts, for a stay of the proceedings in such action, and on proof of the facts in such further manner and upon such notice as the court may direct, the Supreme Court may stay such proceedings or set aside and vacate the same or grant such other relief as to the court may seem proper, and which will not injuriously affect an innocent party, who. 140 ■ STOCKHOLDEES. § 92. sidering confers upon stockholders various privileges other than those referred to in sections 25 and 27, such without notice of such wrong doings and for a valuable consideration, has acquired rights under such proceedings. § 3. When the directors of any association or corporation shall neglect or have neglected to adopt a by-law providing for the annual election of directors for sixty days after the first year of the corporate existence, the stockholders thereof may elect directors in the place of the directors holding over in the manner following : Stockholders en- titled to vote for directors of such association or corporatioD as pre- scribed by section eight, chapter eighteen, title four, part first of the Revised Statutes, may meet after previous notice in writing given by them to all the stockholders, at least fifteen days before such meeting, of the time and place when and where such meeting will be held, for tlie purpose of electing directors ; and it shall be the duty of any officer or other person having charge of the book or books of the association or corporation containing the names of the stockholders, to allow the same to be examined by any stockholder aforesaid, or his attorney, for the pur- pose of giving such notice. The place of such meeting shall be the principal office of such company, or, in case it has no such office, at the place in this State where its principal business ias been transacted, or if access to such office or place is denied, then at some other place to be designated in such notice in the city, town or village where the princi- pal office of such company is or was last located. At such meeting such stockholders shall elect two or more inspectors of election. If at such meeting a majority of the votes cast on stock entitled to be voted on for directors, as prescribed by said section eight, chapter eighteen, title four, part one of the Revised Statutes, shall be voted upon and cast for one ticket for directors, the persons so named and voted for as directors shall thereupon be the directors of such association or corporation until the next annual election and until others are elected and qualified in their stead and without reference to the time when they became stock- holders. In the absence at such meeting of the books of the association or corporation showing who were and are stockholders of the associa- tion or corporation, each stockholder, in order to be entitled to vote at such election, shall make or present a statement in writing, to be signed and verified by him under oath before a notary public or other person authorized to administer oaths, setting forth the number of shares of the stock of such company standing in his name on its books and upon which he is entitled to vote as prescribed by the section of the Revised Statutes hereinbefore referred to, and which is then owned by him and standing on the books of the company in his name, and if known to him he shall § 92. STOCKHOLDERS. 141 as the right to inspect the corporate books, and the right to demand a statement under certain circumstances. In addition to these privileges : The stockholders annually elect the trustees who are to manage the ordinary affairs of the company, and thus the owners of a majority of the stock control the management of the corporation. They, when properly registered as stockholders, may vote upon their stock, even if it is pledged. They are entitled to an especial notice when a stock- holders' meeting is called under the act.^ A specified number (usually two-thirds) of all the stockholders must consent before the company may : Increase or decrease its capital stock. Extend its business. Increase the number of shares of its stock. Mortgage its property or franchise. also state the whole number of shares of stock issued by said association or corporation at the time when the election ought to have been held, and on filing such affidavit or verified statement with the inspectors, he shall be entitled to vote on such stock so appearing to be owned by him and standing on the books of the company in his name. The inspectors shall return and file such verified statements, together with a certificate of the results of the election, which shall be verified by them, with the clerk of the county in which such election is held, and thereupon the persons so elected shall be the directors of such association or corpora- tion as aforesaid. § 4. The stockholders aforesaid, at the meeting authorized by the preceding section, in addition to electing directors as aforesaid, may adopt a by-law providing for the future annual meetings and election of directors; such by-law shall be adopted in the same manner and by the same number of votes as is above prescribed for the election of directors, and shall have the same effect as if such by-law had been adopted by the directors of the company. § 5. This act shall take effect immediately. ' The provisions of section 21 of the act apply however only to mat- ters mentioned therein. See Freeeman's Natl. Bank of Boston v. Smith, 13 Blatch. C. Ct. 230. 142 STOCKHOLDERS. § 92. Consolidate with another company. Extend its corporate existence. Change its place of business. They are also entitled to sell and transfer their stock, to receive their proportionate share of the profits, to share proportionally in the assets of the company, after payment of its debts in case of dissolution, and, in many instances, to bring suit against the company,^ ' Averill 1). Barber, 25 St. Rep. 194; Anderton v. Wolf, 41 Hun, 571; Spencer s. Clark, 83 Week. Dig. 490; Sheridan ®. Sheridan Electric Light Co. 38 Hun, 396 ; Kelsey v. Sargent, 40 Hun, 1.50 ; Gamble »., Queens Co. Water Co. 23 St. Rep. 409; Zieglers. Hoagland,52 Hun, 385.. CHAPTER IX. INDIVIDUAL LIABILITY OP STOCKHOLDERS. § 93. General statement of individual liability of stockholders under Act. 94. Provisions as to stockholders' liability to laborers, servants and apprentices. 95. Nature of the liability. ^ 96. Who are " laborers, servants and apprentices." 97. Requisites to enforcing claims against stockholders. 98. Laborers' claims may be assigned. 99. Provisions as to individual liability of stockholders when capital is not paid in, or certificate of payment is not recorded. 100. Stockholders' individual liability under these provisions. — When it exists. 101. For what debts stockholders liable hereunder. 103. Stockholders relieved from future liability by lonaflde and prop- erly consummated sale of stock. 103. Liability as between vendor and vendee when transfer is not registered. 104. Defects in organization no defense to certain stockholders. 105. No defense to stockholder that stock was represented to him to be full paid. 106. Stockholders only liable to extent of stock held by them. 107. Stockholders severally liable to such contract creditors as are within section 24. 108. Action at law against single stockholder usually best, but may be defeated by equitable offset. 109. What claims a creditor stockholder may equitably offset. 110. Rule where such creditor stockholder is also debtor of the com- pany. 111. Questionable limitation of this privilege of equitable offset. 113. Creditor may bring equitable suit. 113. Rules governing such equitable suit. 114. Court of equity will restrain in such equitable suit separate actions at law against stockholder. 115. Section 10 imposes no liability in favor of corporation, and re- ceivers cannot sue stockholders thereunder. 144 INDIVIDUAL LIABILITY OF STOCKHOLDERS. § 93. § 116. Section 10 imposes no penalty. Action under it maybe brought in sister States. 117. Questionable whether stockholder may sue co-stockholder under section 10. 118. Who may sue. 119. What creditor must show to recover against stockholder. 130. When action to be brought against company under section 24. 131. Judgment to be recovered therein, and execution to be issued. 123. Judgment against company no evidence of debt in action against stockholder. 123. When certain requisites prescribed by section 34 are excused. 134. Stockholders holding stock issued for property freed from liabil- ity under section 10. 135. Such stock must, however, have been honestly issued by trustees. 136. Stockholders ceasing to be such, how long liable thereafter. 127. Limitations applying to actions under section 10. 128. As to right of contribution between stockholders. '129. Provisions exempting executors, pledgees, &c., from personal liability. 130. When exemption applies. 131. Liabilities of stockholders apart from act. § 93. General statement of individual liability of stockholders under act.— The Act imposes no general, unqualified liability upon stockholders of corporations organized under it. It, however, (1) makes all stockholders liable, sub- stantially as partners, without regard to the amount of the claim or the quantity of stock held, to " laborers, servants, and apprentices" for services performed for the company, and (2) it provides that all stockholders shall be liable until the capital is fully paid in and the required certificate is filed, to the amount of stock held by each, to contract creditors. Both of these liabilities it further qualifies by speci- fying that astockholder shall only be liable upon debts which are to be paid within a year from the time they are contracted, and only upon such debts after judg- ment thereon has been recovered against the company, § 95. IKDIVIDUAL LIABILITY OF STOCKHOLDERS. 145 and execution against it has been returned unsatisfied. It will be observed that in each of these two cases the liability can be enforced by a limited class of creditors only. In the first case stockholders can only be held individually upon claims of laborers, servants and apprentices, which arose in service to the company ; and which were to be paid within the year specified above, and where the holders thereof have been diligent to protect their remedy. In the second, they can only be held upon claims of contract creditors which were to be paid within a like year, and where the claimants have secured to themselves the right to enforce the liability by proper proceedings against the company. It is essential to a clear understanding of the pro- visions of the act in relation to stockholders' liabili- ties that the foregoing distinctions and limitations be constantly borne in mind. § 94. Provisions as to stockholders' liability to laborers, servants and apprentices. — Section 18 of Act. The stock- holders of any company organized under the provisions of this act, shall be jointly and severally individually liable for all debts that may be due and owing to all their laborers, servants and apprentices, for services performed for such corporation. § 95. Nature of the liability.— It is noticeable that this liability exists, even when the terms of the law are complied with ; and that it does not arise, as is usually the case with a stockholder's liability under section 10, from any violation of its provisions. All persons who are stockholders at the time the debt arises, are liable therefor,^ and without regard to its amount or the amount of stock which they hold. ' Johnson «. Underbill, 53 N. Y. 303. 10 146 INDIVIDDAL LIABILITY OP STOCKHOLDERS. § 96. The position of stockholders who are liable under this section is substantially that of partners, and if one stockholder pays a judgment recovered against him thereunder, he cannot sue individual stockholders to recover his proportionate share of the liability ; he must bring an action in equity against all the stock- holders.^ It seems, however, that a creditor may sue all the stockholders jointly, and discontinue against some, and take judgment against the others ; ^ but that all the stockholders who are liable are not joined as defendants, has been held to be good as a plea in abatement in an action under this section.* It has also been held that a creditor stockholder cannot sue another stockholder to enforce this personal liability against him.* § 96. Who are " laborers, servants and apprentices." — The meaning of the words " laborers, servants and apprentices," and the character of the service which must have been performed to bring a creditor within this section, have recently been settled by the Court of Appeals. They have held that as the first word " laborers " refers to persons of an inferior rank, the statute cannot be construed so as to embrace a superior, and that, therefore, the words following it are limited and explained by it ; and that the services referred to are "menial" or "manual" services, and that a book- keeper or general manager, is not within the terms of ' Clark v. Myers, 11 Hun, 608. = Berries ». Piatt, 81 Hun, 132; but see Dean v. Whiton, 16 Hun, 203. ' Prosser v. Matthieson, 36 Hnn, 537 ; see Strong v. Wheaton, 38 Barb. 616. ' Richardson v. Abendroth, 43 Barb. 163. § 96. INDIVIDUAL LIABILITY OP STOCKHOLDERS. 147 the section.^ This decision practically overrules upon this point a number of cases of the lower courts, in none of which was the test that the service shall be " menial " or " manual " made decisive.^ It has, however, but carried forward an early- decision of the Court of Appeals, where it was held that a secretary or other officer was not a servant within this section ; ^ and a later decision holding that a general agent was also excluded from the benefits of this liability.* The mere fact that one does some manual labor in- cidental to his position does not constitute him a laborer or servant.^ Where, however, one who held the position of foreman, took such a prominent part in the manual labor, that it was not merely incidental to his other employment, it has recently been held that he could recover under this section.* ' Wakefield v. Fargo, 90 N. Y. 213 ; Williamson «.' Wadsworth, 49 Barb. 294. See Chapman «. Chumar, 26 State Rep. 473 ; Sherman v. Herbert, 3 City Ct, 314. "Vincent v. Bamford, 13 Abb. Pr. N. S. 253; Harris «. Norvell. 1 Abb. N. 0. 137 ; Hovey v. Ten Broeek, 3 Robt. 816. ' Coffin V. Reynolds, 37 N. Y. 640 ; overruling Richardson v. Aben- droth, 43 Barb. 162. See, also, Viele ». Wells, 9 Abb. N. 0. 277. • Hill V. Spencer, 61 N. Y. 274. See, also, Dean v. DeWolf, 16 Hun, 180. ' Kraiiser ». Ruckel, 17 Hun, 4C3 ; Wakefield v. Fargo, 90 N. Y. 213. "Short u. Medbury, 29 Hun, 39. L. 1885, c. 376, entitled, "An Act to provide for the payment of wages to employees, operatives and laborers of domestic corporations, other than insurance and moneyed corporations, of which a receiver shall be appointed," provide that, ^' Where a receiver of a corporation created or organized under the laws of this State, and doing business therein, other than insurance ahd moneyed corporation's shall be appointed, the v^ages of the employees, operatives and laborers thereof shall be jireferred to every other debt or claim against such corporation, and shall be paid by the receiver from 148 INDIVIDUAL LIABILITY OP STOCKHOLDERS. § 97. § 97. Requisites of enforcing claims against stocli- holders.— The liability imposed by this section resem- bles that placed upon stockholders by section 10, in that both are governed by section 21.^ No creditor- laborer, therefore, can proceed against a stockholder, except upon a debt payable within one year, nor un- til he has obtained judgment upon his claim against the company, and execution thereon against the com- pany has been returned unsatisfied. He is also com- pelled to bring his action against the company within the year prescribed by section 24.^ The Ijurden rests upon the plaintiff to show that his claim is within section 18,^ and he must allege in his complaint that the debt was to be paid within a year,* that suit was brought within the proper time, that judgment was recovered against the company in this State ; that execution thereon has been returned unsatisfied, and that the defendants were stockholders.^ A judgment against the company is, however, no evi- dence as to the claim of the plaintiff in his action against the stockholder.* Stockholders are liable for wages of a servant which becomes due within a year previous to recovery of judgment against the com- the moneys of such corporation which shall first come to his hands." See Brown «. A. B. C. Fence Co. 23 State Rep. 415 ; People v. Reminton, 45 Hun, 339. ' Post, § 99. ' Post, § 99. ' Johnson ®. Underbill, 53 N. T. 303. * Hill V. Conkling, 7 Daly, 397. ' Dean v. Mace, 19 Hun, 391 ; Dampseye. Willett, 16 Hun, 364; post, §§ 120, 134; Strongs. Wheaton, 38 Barb. 616; Hovey v. Ten Broeck, 3 Robt. 316. • Strong V. Wheaton, 38 Barb. 616; post, § 122. § 99. IKDITIDUAL LIABILITY OF STOCKHOLDERS. 149 pany, and this, even if the engagement is for a longer period.^ § 98. Laborers' claims may be assigned.— The claim of a laborer under this section is assignable, and the assignee may enforce the debt against an individual stock- holder.^ An assignment by a laborer of a draft drawn in payment for his services and accepted by the com- pany, carries to the transferee all the rights and rem- edies incidental to the original claim, and author- izes the holder to recover against stockholders under section 18.^ § 99. ProTisions as to individual liability of stock- holders when capital is not paid in, or certificate of pay- ment is not recorded.— Section 10 of Act. All the stock- holders of every company incorporated under this act, shall be severally individually liable to the creditors of the company in which they are stockholders, to an amount equal to the amount of stock held by them respectively, for all debts and contracts made by such company, until the whole amount of capital stock fixed and limited by such company shall have been paid in, and a certificate thereof shall have been made and recorded as prescribed in the following section ; and the capital stock so fixed and limited shall all be paid in, one-half thereof within one year, and the other half thereof within two years from the incorporation of said company, or such corporation shall be dissolved. Section 11 of Act. The president and a majority of the trustees, within thirty days after the payment of the last instalment of the capital stock, so fixed and limited ' Hovey ». Ten Broeck, 3 Robt. 316; and see as to requirements of section 34, §§130, 138. 2 Krauser a. Euckel, 17 Hun, 463. ' Pilcher v. Brayton, 17 Hun, 429. 150 LNDIVTDUAL LIABILITY OF STOCKHOLDERS. § 100. by the company, shall make a certificate stating the amount of the capital so fixed and paid in ; which certificate shall be signed and sworn to by the president and a majority of the trustees ; and they shall, within the said thirty days, record the same in the office of the county clerk of the county wherein the business of the said company is carried on. Section 24 of Act. No stockholder shall be personally liable for the payment of any debt contracted by any com- pany formed under this act, which is not to be paid within one year from the time the debt is contracted, nor unless a suit for the collection of such debt shall be brought against such company within one year after the debt shall become due ; and no suit shall be brought against any stockholder who shall cease to be a stockholder in any such company, for any debt so contracted, unless the same shall be com- menced within two years from the time he shall have ceased to be a stockholder in such company, nor until an execution against the company shall have been returned unsatisfied in whole or in part. § 100. Stockholders' individual liability under these provisions.— When it exists.— It will be seen on exami- nation of these foregoing sections, that the individual liability of stockholders exists until (1.) The capital stock is paid in/ and until (2.) A proper certificate of such payment is duly made and recorded. This statu- tory liability arises whenever the whole capital stock has not been paid in. The stockholder sued may have paid in full, but that does not relieve him, if others are in default. He is still liable to an amount equal to ' The certificate of payment is not conclusive on this point. A false assertion of compliance does not make compliance with the first condi- tion. The fact must exist, and then it must be certified. Veeder v. Mudgett, 95 N. T. 395. § 100. INDIVIDUAL LIABILITY OF STOCKHOLDERS. 151 his stock, so long as the whole capital has not been fully paid in.' But, in a suit to enforce this liability, the plaintiff to recover must affirmatively show that the whole of the capital stock has not been so paid. It is presumed to have been fully paid in, and this presumption continues until the contrary is made to appear.^ The omission to make and record the certificate is as fatal as the omission to pay in the capital stock. As to this certificate, the provisions of the statute must be strictly complied with. It must not only be signed by the president and a majority of the trustees, but must be verified by their oath. An acknowledgment merely is not a compliance with the statute, and a certificate acknowledged, but not sworn to, will afford no protection to a stockholder sued under section 10.* If, however, a proper certificate is duly filed for recording, but through oversight in the county clerk's office is not recorded, this omission of the clerk to do his full duty will not prejudice the stockholders.* It is not essential that this certificate should be re- corded within the thirty days designated in section 11. That provision is directory merely, and as to subse- quently contracted debts such certificate takes effect as soon as and whenever properly delivered for recording.® If the capital stock is increased under the provisions of sections 20, 21 and 22 of the act (ant6y § 81) a new ^ Wheeler «. Millar, 90 N. Y. 353, 359. ' Bruce ®. Driggs, 25 How. Pr. 71 ; Chase ». Lord, 77 N. Y. 1. ' Brown ». Smith, 13 Hun, 408 ; affi'd, on this opinion, 80 N. Y. 650. * Sutherland «. Olcott, 39 Hun, 161 ; Dodge v. Potter, 18 Barb. 194 ; Dikeman v. Pudchafer, 1 Abb. N. S. 33 ; Craig «. Dimock, 47 111. 309 ; Fairbanks «. Davis, 50 Verm. 251; Keele v. Berryhill, 4 How. Pr. 16; Teeder«. Mudgett, 95 N. Y. 295. ' Wilson V. Leslie, 20 Ohio, 181 ; Vefeder ». Mudgett, 95 N. Y. 295. 152 INDIVIDUAL LIABILITY OF STOCKHOLDERS. § 101. certificate of payment covering this increase must be made and recorded.^ § 101. For what debts stockholders liable hereunder. — The nature of the debts against the corporation for which a stockholder is individually liable to action under this section, is defined and limited by the act. They must be contract debts, contracted to be paid within one year.'* And such debts must have been contracted or made while he was a stockholder.^ He is not liable for a debt created prior to his becoming a stockholder.* Thus, in one case where the defendant had given the company his promissory note, payable in futuro, for a specified number of shares, and had taken a re- ceipt from an officer of the company, expressing that such note when paid was to be in full of such shares, it was held that he did not become a stockholder until the note matured, and was paid, and a stock cer- tificate issued ; and that consequently he was not liable to a creditor on a company debt, contracted subsequent to the giving of the note, but prior to its maturity and payment.* Where, however, the company had entered into a contract for a year's advertising for a fixed sum pay- able quarterly, it was held, in an action under section 10, that, although the defendant was not a stockholder at the time the contract was made, he was liable for ' Veeder ». Mudgett, 95 N. Y. 295. " Cuykendall v. Coming, 88 N. Y. 129. See, also, QoSv. Whitney, 3 N. Y. City Ct. 256. ' Moss«. Oakley, 2 Hill, 268. * Phillips 0. Therasson, 11 Hun, 141. 5 Tracy®. Yates, 18 Barb. 152. § 102. INDIVIDUAL LIABILITY OP STOCKHOLDERS. 153 the instalments falling due thereunder, after he be- came and while he continued to be one.^ The court arguing that as, by the terms of the statute, the stock- holders were liable for " debts made," as well as for " contracts made," and as under this contract a debt arose at the end of each quarter,^ the action was to that extent maintainable. But, where a corporation entered into an agreement to indemnify its agent for certain payments to be made by him, it was held in the United States Circuit Court, that this liability would attach to those who were stockholders when the agreement was made, and not to those who become such subsequently, and were such when the contemplated payments were made by such agent.* § 102. Stockholders relieyed from future liability by bona lide and properly consummated sale of stock.— So, too, a honafide and properly consummated transfer of stock relieves a stockholder from all liability on debts and contracts thereafter made by the company.* As by section 25 ® a completed transfer must be entered in the transfer book of the company to protect the vendor, it follows that a sale of stock, valid be- tween the parties, will not exonerate the vendor until the transfer is duly entered on such transfer book,® and • McMaster «. Davidson, 29 Hun, 543. See, also, Mclntyre v. Strong, 63 How. Pr. 43 ; 48 Super. Ct. 127 ; Lewis «. Ryder, 13 Abb. Pr. 1. But see as to liability on a lease running for more than one year, the rent being payable monthly' GofE ». Whitney, 2 N. T. City Ct. 256. « Oviatt «. Hughes, 41 Barb. 542; Garrison ». Howe, 17 N. Y. 465. ' Cox «. Gould, 4 Blatchf. Cir. Ct. 341. * Ante, § 75 ; Freelaud «. McCuUough, 1 Denio, 414, 426 ; Veiler «. Brown. 18 Hun, 571. » Ante, § 88. ' Shellington ». Howland, 53 N. Y. 371. 154 IKDIVLDUAL LIABILITY OF STOCKHOLDERS. § 103. it is no answer to a creditor objecting that an alleged transfer was not so registered, to say that the company had no such book at the time.^ The vendor of stock in reality assigned, but not transferred in legal form, is in effect but the nominal holder. Both vendor and vendee are primarily liable to creditors of the company in accordance with the provisions of the act ; "^ and in a suit under section 10, the vendor will not be heard to allege that he had parted with the stock, and was no longer a stockholder when the debt was made or contracted, if his name then ap- peared as such upon the books. In determining wheth- er he is a stockholder, in such an action, the court will not look beyond the legal title,^ but will hold him as absolutely concluded by the entry in the transfer book. § 103. liability as between yendor and vendee when transfer is not registered.— As between the vendor and vendee in such a case, however, each is liable to the other in accordance with general legal rules. There is an implied obligation on the part of the vendee of stock, that the vendor shall have no further liabilities from it; and if, having the power to effect a legal transfer to himself on the books, the vendee omits to do so, he is liable for any consequent loss to the vendor. If, therefore, the vendor, under such circumstances, is compelled as stockholder of record to pay under section 10 creditors' claims arising" since the sale of the stock, whether he pays such claims under the compulsion of ' Shellington v. Howland, 67 Barb. 141. 2 Johnson v. Underbill, 53 N. Y. 303. ' Kichardson v. Abendroth, 43 Barb. 163; Adderley v. Storm, 6 Hill. 634 ; Worrall v. Judson, 5 Barb. 310. Bee, also, Wakefield v. Fargo, 90 N. Y. 213. § 104. IKDIVIDUAL LIABILITY OF STOCKHOLDERS. 155 a suit or before suit is brought, to a creditor whose claim is clear,^ he can recover from his vendee the amount so paid.^ A defendant may, of course, show in exoneration of himself that his name was placed on the books without his authority.® But if his name appears upon the stock book of the company this is prima facie evidence of his being a stockholder, and the burden is thrown upon him to prove that he was never a stockholder.* § 104. Defect in organization no defense to certain stockholders. — A defect in the proceedings to organize a company is no defense to a stockholder sued under section 10, who has participated in its acts of user as a corporation de facto and appeared as a shareholder upon its books when the debt for which he is sued was contracted.® So, too, a party to the certificate of incorporation cannot, in such a suit, question said certificate for irregularity, and set up that the company was not in- corporated.* Nor in the case of an attempted, but illegal, in- crease of stock can stockholders who voted for the increase, and holders who subsequently received divi- dends thereon, voted on it at stockholders' meetings, and acted and were treated in regard to it as stock- ' stover «. Flack, 30 N. T. 64. 'Johnson «. Underbill, 52 N. Y. 203. ' Matter of the Reciprocity Bank, 22 N. Y. 17. * Section 25, ante, § 88 ; Hoagland ®. Bell, 36 Barb. 57. 'Eaton «. Aspinwall, 19 N. Y. 119; Buffalo and Allegany R. R. Co. «. Carey, 26 N. Y. 75 ; Aspinwall «. Sacchi, 57 N. Y. 331 ; affi'g s. c. I Laos. 381. ' Perkins «. Hatch, 4 Hun, 137; affi'd64N.Y. 634; Hyatt ». Esmond, 37 Barb. 606. 156 INDIVIDUAL lilABILITY OF STOCKHOLDERS. § 105. holders, set up the illegality as a defeuse when so sued by creditors. As to them, they are estopped from denying the legal validity of the increase, and must be held as responsible as if it were valid.^ § 105. No defense to stockholders that stock was rep- resented to him to be full paid.— A stockholder sued by a creditor or creditors under the provisions of sections 10 and 24 cannot set up as a defense, false and fraudu- lent representations to himself by his vendor, or an officer of the corporation, that the stock was full paid capital stock, on which there was no liability of stock- holders. In such an action such representations are of no avail to him ; although they would doubtless found an action against those making them for any damages sustained by him in consequence thereof " When a person has, through fraudulent representations of the seller of the stock or of the company, become a stock- holder in a corporation where a personal liability to creditors may by statute arise, he can, in the appro- priate action, after tendering the stock to the person or company wbo fraudulently induced him to buy it, and demanding back what he gave for it, be reimbursed for any loss or damage he has sustained, and be relieved thereafter from any further liability as a stockholder ; but while he continues to be a stockholder his liability under the statute to creditors continues."^ ■ Yeeder v. Mudgett. 95 N. T. 295. '' Briggs V. Corn well, 9 Daly, 436. Opinion by Daly, C. J., citing Oakes v. Turquand, E. L. R. 3 H. of L. 325 ; Pngh & Shearman's Case, E. L. R. 13 Eq. 572; Henderson v. Royal British Bank, 7 El. & Bl. 356; Powis V. Harding, 1 Com. B. N. S. 533 ; The Empire City Bank, 6 Abb. Pr. 402 ; Reciprocity Bank, 33 N. Y. 17 ; Wright's Case, E. L. R. 12 Eq. 351; Buggies v. Brock, 6 Hun, 164; Ellis v. Schmock, 5 Bing. 521; Clarke v. Dickson, 1 El., Bl. & El. 148; Spear v. Crawford, 14 Wend. 24, 25. § 106. INDIVIDUAL LIABILITY OF STOOKHOLDEKS. 157 § 106. Stockholders only liable to extent of stock held by them.— Stockholders are individually liable to cred- itors only to an amount equal to the par value of the stock held by thena respectively.^ A stockholder is absolutely discharged from all further liability, un- der sections 10 and 24, by payment of an amount equal to his stock under legal compulsion to any cred- itor or creditors for whose debts he is liable under those sections, and would doubtless be equally dis- charged by a voluntary payment of that amount to suck creditor or creditors.^ And such payment to an amount less than his stock would be an ab- solute defense •pro tanto ; leaving him liable thereafter only to an amount equal to the difference between the sum of such payments and the par value of his stock,* Where the plaintiff's claim against the company in such an action equals or exceeds tke amount of stock held by the defendant, no greater judgment can be given than for an amount equal to the amount of stock so held by defendant, with interest thereon from the time when the suit was brought against him indi- vidually, to enforce his statutory liability;* but judg- ment may be given for the entire sum due from the company, with interest thereon from the, time it be- came due, when such principal and interest together do not exceed the amount of defendant's stock.® ' Pfohl V. HimpsoD, 74 N. T. 143; Woodruff & Beach Iron Works v. Chittenden, 4 Bos. 406 ; Chambers v. Lewis, 28 N. Y. 454. sMathez v. Neidig, 72 N. Y. 100; Tallmadge v. Fishkill Iron Co. 4 Barb. 383; Stover v. Flack, 30 N. Y. 64. ' As to effect of reduction of capital, see Randall n. Havemej-er, 49 N. Y. Super. 520; see, also, Hill v. Silvey, 39 Alb. L. J. 316, on general question. * Handy v. Draper, 89 N. Y. 334; Shellington v. Rowland, 53 N. Y. 373 ; Burr v. Wilcox, 32 N. Y. 5§7. * Wheeler v. Millar, 90 N. Y. 333. 158 INDIVIDUAL LIABILITY OF STOCKHOLDERS. § 107. Though a crediior, before suing a stockholder, must obtain judgment against the company, he cannot recover in his action against the stockbolder the costs of his prior action against the company.^ § 107. Stockholders severally liable to such contract creditors as are within section 24.— The liability of stockholders under section 10 is a several individual liability of each stockholder directly to such of the creditors as have complied with the requisite con- ditions precedent, set out in section ,24,^ and whose claims are contract debts, contracted to be paid within one year.^ The right of a creditor under section 10 is a several and distinct right, and not a joint right in the creditors generally. He can therefore sue alone to enforce this liability, although there may be other cred- itors similarly situated.* Aud he may make defendant any stockholder who was such when the company debt on which he sues was made or contracted, and the trustees of the com- pany are not necessary parties defendant.^ A creditor who has obtained judgment against a company whose capital is not fully paid in, and who has had the execution returned unsatisfied, is not com- pelled to wait for the expiration of the two years after the formation of the corporation, allowed by section 10 for the paying-in of its capital, before bringing his > Bailey ». Bancker, 3 Hill, 188 ; Miller v. White, 50 N. Y. 137. ' Farnsworth v. Wood, 91 N. Y. 308. » Cuykendall r. Corning, 88 N. Y. 129. * Weeks v. Love, 50 N. Y. 568. ° Harris ». NorveJl, 1 Abb. N. C. 137; Strong v. Wheaton, 38 Barb. 616. § 108. INDIVIDUAL LIABILITY OF STOCKHOLDEES. 159 action against such stockholder, but may sue im- mediately on the return of the execution.^ This action so brought by a single creditor, suing alone for his own claim, is one at law,^ § 108. Action at law against a single stockholder usually best, but may be defeated by legal or equitable set-off.— Its simplicity and convenience render such action at law by far the most common method of en- forcing the individual liability of stockholders, and it is in general the most speedy and effective remedy of the creditor. It is however subject to be wholly de- feated by proof, under the appropriate pleadings, that the particular defendant sued is a creditor of the com- pany to an amount equal to the amount of his stock.* This is not a direct provision of the statute, but an equitable construction put upon it by the courts, upon the assumption that it was not the design of the framers of it, that a stockholder who was a creditor of the company to the full amount of his stock should be individually liable to another creditor ; as he stands ■ upon the same ground, and is entitled to claim under the act equally with the creditor who is not a stock- holder.* The statute liability created or declared by section 10 constitutes a fund which belongs to the contract 'King V. Duncan, 38 Hun, 461. "Mathez «. Neidig, 72 N. Y. 100 ; Flash v. Conn, 109 U. S. 371 ; s. c. Supreme Ct. Reporter, vol. 8, p. 363 ; Weeks v. Love, 33 N. Y. Superior, 397; Bank, &c. v. Ibbotson, 5 Hill, 641 ; s. c. 34 Wend. 473. " Garrison v. Howe, 17 N. Y. 458 ; Mathez v. Neidig, 73 N. Y. 100 ; Agate V. Sands, 78 N. Y. 620 ; Christensen «. Colby, 43 Hun, 383. ' Briggs V. Cornwell, 9 Daly, 436 ; Briggs v. Peaniman, 8 Cow. 392 ; Matter of Empire City Bank, 18 N. Y. 199, 337 ; Bank, &c. v. Ibbotson, 34 Wend. 473. 160 INDIVIDUAL LIABILITY OF STOCKHOLDERS. § 109. creditors of the company, to secure the payment of their deVjts ; but it belongs to all such creditors, as well those who are stockholders as those who are not. This defense, so interposed by a creditor-stockholder, does not constitute an absolute bar to all claims, like a recovery by, and payment to, another creditor for the whole amount of personal liability of a stockholder,^ nor is it strictly an offset at law ; but it is a defense to this form of action, in the nature of an equitable off- set, based upon the equitable rights of the defendant to the fund sought to be taken from his possession, witb- out tbe necessary facts appearing, or being capable in that action of appearing, to enable the court to deter- mine the extent of those rights.'* Nor is it necessary to enable a defendant to inter- pose this defense that he should bring himself and his claim within the provisions of section 24:, requiring a suit on the debt to be brought against the company within one year. By section 10 the stockholders are declared liable generally ; it is the remedy or right of action to enforce this liability which is limited and prescribed by section 24,^ and the creditor-stockholder by this defense does not seek to enforce a personal liability in any sucb sense as is contemplated by that section.* § 109. What claims a creditor-stockholder may equi- tably oifset.— So long as the claim of the stockholder is a valid one, of the nature specified in sections 10 and ' Ante, § 106. " Mathez v. Neidig, 72 N. Y. 100, opinion per Church, C. J., pp. 104, 105. = Weeks v. Love, 33 N. Y. Superior, 397, per Barbour, C. J. * Mathez v. Neidig, 72 N. Y. 100, 107. §110. INDIVIDUAL LIABILITY OE STOOKHOLDBRS. 161 24, and constituting a bpna fide indebtedness from the company, it is of no importance how, or for what it arose. Payment of company notes, or payment of its laborers, or payment and discharge of judgments against it, have all been admitted under this defense. Where the stockholder introduced evidence of a loan by him to the company, to an amount equal to his stock, it was held a good defense, and the fact that security was taken by him for the loan was held im- material; and it seems that, in the absence of any evidence on the point, it would be inferred that money so loaned was properly applied by and for the com- pany.i But where the fair inference from the evidence was that a stockholder who, in his answer, claimed to be a creditor of the company, was really its debtor, it was held that an action at law by a single creditor was properly brought and maintained against him.^ § 110. Kule where creditor-stockholder is aslo a debtor of company.— So, too, where a stockholder sued in such an action set up by way of equitable offset an alleged debt due him from the company, and it appeared on the trial that the amount of this claim was less than the amount due the company on his subscription to its capital stock, it was held that he was not entitled to any offset ; that he was bound first to pay his own debt to the company, and only in case there was a balance due him after such payment could he set off that balance-; that it was immaterial that the claim had not been actually applied on his subscription, as the ' Agate V. Sands, 73 N. Y. 620 ; affi'g s. c. 8 Daly, 66. ' Herraance a. Hilmers, 8 Weekly Dig. 333. 11 162 INDIVIDUAL LIABILITY OF STOCKHOLDERS. § 111. plaintiff had a right to insist that equitably it should be so applied when defendant stood upon an equitable right.^ § 111. Questionable limitation of this privilege of equitable oflfsel. — There are certain dicta in a case in the Court of Common Pleas, to the effect that, to establish such defense, the stockholder must show that he has benefited the company to the extent of the amount claimed as a set-off; and that bonds and notes of the company acquired after its insolvency from third parties, the purchase of which is not shown to have put anything into the company's treasury, cannot be so set off.^ This view was not essential to the decision of the case, the particular bonds and notes therein set up not being satisfactorily established to be valid obligations of the company ; and it is not per- ceived why any such distinction should prevail as to obligations of the company contracted to be paid within one year, and upon which suit has been brought against the company within one year from their maturity, and the execution therein returned unsatisfied. The rea- soning establishing this defease does not necessarily depend on any benefit done to the company, or on any improvement effected in its treasury on the part of the stockholder defendant. Its position is simply that he too is a creditor of the company, and has some right to the fund which is established by the provisions raising an individual ' Wheeler t. Millar, 90 N. T. 353. ^ Briggs V. Cornwell, 9 Daly, 436. See, also, to same effect, Bulkley v. Whitcomb, 49 Hun, 290, which holds that the stockholder must have put something into the company's treasury, or have relieved the com- pany from some liability, to entitle him to claim an equitable offset. §111. INDIVIDUAL LIABILITY OF STOCKHOLDERS. 163 lial)ility ; that in an action at law by a single creditor against him personally to reach a portion of that fund, his own rights to that portion, as well as to the rest of the fund, cannot be determined ; and that it would be highly inequitable to compel him as a stockholder to pay over to a creditor a fund to which, as a fellow creditor, lie may have an equal right, and which, more- over, is already in his possession. The case in the Supreme Court of the United States ^ relied on in the Common Pleas, is in reality opposed to the doctrine there laid down. That was a suit brought by the assignee of a bankrupt corpora- tion for an unpaid subscription, where it was held that a stockholder could not set off against that trust fund devoted to the payment of all creditors, a debt due him by the company ; for that would be appropriating all the trust fund which his subscription constituted to the exclusive payment of his own claim. The effect of such a suit by an assignee of the corporation is to es- tablish a fund in which all creditors shall equitably share ; but the effect of an action at law by a single creditor, under section 10, is that that one creditor is paid in full, regardless of the claims of others, and it is for that reason that to this strictly legal and in no sense equitable action, the equitable defense in question can be interposed. It is no absolute bar to, and dis- charge of, the defendant's liability as a stockholder, but it prevents any unjust discrimination against his rights as a creditor, which in an action at law cannot be de- termined. ' Sawyer v. Hoag, 17 Wallace, 610. See, also, Scoville v. Thayer, 105 U. S. 143. 164 INDIVIDUAL LIABILITY OF STOCKHOLDERS. §113. § 113. Creditor may bring equitable suit— But a judgment-creditor of the corporation is not confined to this action at law to avail himself of the liability created and limited by sections 10, 11 and 24. He has his election to bring such an action against a stockholder, subject to the risk of being met and defeated therein by the equitable defense above set out. Such action is in general his safest, speediest and most convenient remedy, and is the one almost universally resorted to ; but he is not limited to that. He has also his election to bring a suit in equity against all stockholders liable to him, and in behalf of all creditors in the same situa- tion as his, for the establishment of the fund, for the adjustment of all liabilities to contribute thereto, and of all claims thereon.^ § 113. Eules goTerning such equitable suit.— In such a suit the court may provide for taking an account and enforcing the liability of all liable stockholders, for the benefit of all creditors entitled to share in the fund to be collected from such stockholders.^ But it is essen- tial that such suit shall be brought against all the stockholders in like category, and no other,^ and be promoted for the benefit of all creditors having a like interest. The court can only divide among all the creditors having legal claims against one or more stock- holders, the avails of the liabilities of those stock- ' Pfohl V. Simpson, 74 N. T. 137; Bank e. Ibbotson, 24 Wend. 73; Mathez v. Neidig, 72 N. Y. 100 ; Briggs v. Penniman, 8 Cow. 393 ; Griffith V. Mangam, 73 N. Y. 611. See, also, Code Civil Procedure, §§1784,1790, 1791, 1796; L. 1833, c. 378; Veeder «. Mudgett, 27 Hun, .519 ; Veeder ■/. Judson, 91 N. Y. 374; Veeder v. Mudgett, 38 Hun, 440 (mem.) ; Rodburn d. U. I. &B. Ry. Co. 28 Hun, 369. ' Weeks v. Love, 50 N. Y. 568. ' Judson V. Rossie Galena Co. 9 Paige, 598. §115. INDIVIDUAL LIABILITY OP STOCKHOLDERS, 165 holders; it cannot take from one creditor his right against a certain stockholder, and give it in whole or in part to a creditor having no legal right against that stockholder; nor can it compel such stockholder to contribute to the payment of such latter creditor's claim.^ § 114. Court of equity will restrain in such equitable suit separate actions at law against shareholder. — As this equitable suit is for a general accounting — the establishment of a common fund and adjustment of all the rights thereto — a court of equity can, on a proper application therein, restrain separate and individual ac- tions at law in the same or other courts brought to reach that common fund, and thus bring all the litiga- tion into one suit ; ^ and it is only under such circum- stances that any creditor can be enjoined from bringing his separate action at law.^ If then the creditor cannot find a responsible stock- holder, who is not at the same time a creditor to the amount of his stock, and consequently able to wholly defeat an action at law, it is still open to him to pro- ceed by a suit in equity for an accounting, and thus to avail himself of the individual liability imposed by statute.* § 115. Section 10 imposes no liability in favor of cor- poration, and receivers cannot sue stockholders thereunder. — As this liability does not exist in favor of the cor- ' Pfohl V. Simpson, 74 N. Y. 137. = Code Civ. Proc. § 448; Pfohl v. Simpson (supra) ; Erie R. R. Co. v. Ramsay, 45 N. Y. 637 ; Farnsworth ». Wood, 91 N. Y. 308. ' Farnsworth v. Wood, 91 N. Y. 308, 314. See, also. Code of Civ. Proc. § 1806 ; Mason v. N. Y. Silk Mfg. Co. 27 Hun, 307. Compare Smith ». Danzig, 3 Civ. Proc. Rep. 127. ■* Garrisons. Howe, 17 N. Y. 458. 166 INDIVIDUAL LIABILITY OF STOCKHOLDERS. §116. poration itself, or for the benefit of all its creditors — but only in favor of such creditors as are within the prescribed conditions ; and is given to be enforced by these in their own right and for their own benefit — it follows that a receiver of the corporation cannot sue a stockholder or stockholders under these sections.^ § 116. Section 10 imposes no penalty.— Action under it may be brought in sister States.— The action brought under these sections to enforce the individual liability of a stockholder, is not one for a penalty or forfeiture, but upon contract.^ But, as we have seen, an action against a trustee for omitting the annual report is penal.^ It follows, therefore, that a cause of action under section 10 cannot properly be united with one under section 12, and a complaint attempting so to do will be demurrable.* And an action against a defend- ant as trustee under section 12 is no bar to an action to recover against him as a stockholder on the same debt under section 10, and vice versa!' It follows also from the nature of the liability that, unlike the liability of trustees,^ its enforcement is not limited to this State. The better opinion being that an action to en- force it may be properly brought, and will be enter- tained, in the courts of sister States ;'' but it is essen- ' Famsworth v. Wood, 91 N. Y. 308 ; Billings v. Trask, 30 Hun, 314 ; Tucker ». Gilman, 45 Hun, 198. " Flash ». Conn, 109 U. S. 871 ; 8. c. Supreme Ct. Reporter, vol. 3, p. 263 ; Corning v. McCuUough, 1 N. Y. 47. ' Ante\ §§ 45, 49, 50, 51, 64. * Wiles V. Suydam, 64 N. Y. 178; Mappier v. Mortimer, 11 Abb. Pr. N. S. 455. Conl/ra, Sterne ». Herman, lb. 376. ' Douglass t. Ireland, 73 N. Y. 100. " Ante^ % 45. ' Pugh ». Hurtt, 53 How, Pr. 33; Cuykendall». Mills, 10 Fed. Eep. 343 ; Flash v. Conn, 16 Fla. 438 ; 109 IT. S. 371. But see, contra, Halsey § 117. INDIVIDUAL LIABILITY OF STOCKHOLDERS. 167 tial to show in such action that all the steps have been taken which were provided for in the statute under which the company was incorporated.^ § 117. Questionable whether stockholder may sue co- stockholder under section 10.— It was broadly held by the Superior Court of the city of New York, in the case of Deming v. Puleston,* that one stockholder in. a corporation created under this act cannot at law en- force the liability of another stockholder of the same corporation under any of the provisions of the act. In a prior case in the same tribunal, to which the atten- tion of the court apparently was not directed in Dem- ing V. Puleston, it was held, in a well considered opin- ion, that the mere fact that one stockholder was suing another to recover, in whole or in part, a debt due from the company, was not per se, either at law or in equity, a bar to the action ; that if the plaintiff held stock less in amount than the defendant, such defend- ant would not on any principle be entitled to any greater relief than an abatement from the liability de- clared by statute of a sum equal to the amount of the stock held by plaintiff; and that even this deduction could not be made, if the plaintiff had theretofore un- der legal compulsion paid creditors' claims to the full amount of his liability.* «. McLean, 13 Allen, 438; Ericksen v. Nesmlth, 4 Allen, 333; Mitchell «. Hotchkiss, 48 Ct. 9 ; Steam Engine Co. v. Hubbard, 101 U. S. 188 ; Savings Ins. of St. Louis v. O'Brien, 5 Ry. & Corp. L. J. 318; Sayles v. Brown, 7 Ky. & Corp. L. J. 3 U. S. Cir. Ot. Maryland, July, 1889. ' Fourth Natl. Banki). Francklyn, 130 U. S. 747. See, also, First Natl, Bank of Deadwood d. Gustin, &c., Mining Co 7Ry. & Corp. L. J. 175. ' Deming!). Puleston, 33 N. Y. Superior, 331; citing Bailey «. Banck- er, 8 Hill, 188; Andrews v. Murray, 33 Barb. 354; Richardson v. Aben- droth, 48 Barb. 163. See, also, Waite v. Purguson, 14 Abb. Pr. 379. " Woodruff & Beach Iron Works v. Chittenden, 4 Bosw. 406. 168 IHBIVIDUAL LIABILITY OF STOCKHOLDERS. § 118. It will be observed, that the cases relied on in Deming v. Puleston turned upon statute provisions imposing a general and unlimited liability upon stock- holders jointly and severally, and their reasoning is to a great degree inapplicable to sections 10 and 24 of this act.^ In a recent case in the same court it w^as held that where one became a creditor of the company, and a stockholder therein at the same time, and as a part of the same transaction, he could not maintain an action against a fellow-stockholder under section 10, but was restricted to an equitable suit for an accounting.* No reason is obvious why a stockholder who was not one when he became a creditor of the company, and who consequently was never liable for that debt, should not have a perfect cause of action under these sections against a stockholder existing when the debt was made or contracted ; and in many other supposable conditions the case is certainly not clear against the plaintiff-stockholder. Upon this point the law cannot be considered as settled. § 118. Who may sue.— With this single exception, however, it is in the power of every creditor of the corporation, whose claim is a contract debt contracted to be paid within one year, to maintain his action at law against a stockholder under section 10, by com- plying with the statutory prerequisites of section 24 ; and this right of action passes to his executors or assignees ; and the assignment of the judgment against ' See, however, Wiles v. Suydam, 64 N. Y. 173, 176: Corning v. Mc- Cullough, 1 N. T. 47; Waite v. Furguson, 14 Abb. Pr. 379. " Dodge v. Havemeyer, 4 N. T. State Rep. 501. §120. INDIVIDUAL LIABILITY OF STOCKHOLDERS. 169 the company carries with it the right to maintain such action against liable stockholders.^ These statutory requisites must, however, be strictly complied with. § 119. What creditor must show to recover against stockholder.— To disclose a right of action in favor of any given creditor against any given stockholder, it must be alleged and proved — (1), that the capital was not paid in, or that a proper certificate thereof was not recorded ; * (2), that the debt for which the stockholder is sought to be charged was a contract debt ; (3), con- tracted to be paid within one year ;* (4), that the de- fendant was a stockholder when the debt was made or contracted ; * (5), that suit was brought against the cor- poration thereon within one year from the time the debt became due ; (6), that judgment was thereupon recovered thereon against the company in a court of this State of general jurisdiction ; and (7), that an exe- cution was thereupon issued against said company, and returned unsatisfied in whole or in part; or (8), that the recovery of such judgment was rendered impossible by act of the defendant or of the law.® § 120. When action to he brought against company un- der section 24.— The first four of these essential ele- ■ Woodruff & Beach Iron Works ». Chittenden, 4 Bosw. 406. ' Ante, §§ 99, 100. Where the original capital has been fully paid in and subsequently the capital has been increased under sections 20, 21, 22 (ante, § 81), holders of such original stock are not liable to creditors by reason of a failure to pay in the increased capital ; and to disclose a cause of action against a stockholder in such a case, the creditor must show that the stock held by such stockholder is a part of the increased capital. Veeder v. Mudgett, 95 N. T. 395. ' Ante, §§ 99, 101. * Ante, § 101. ' Cuykendall «. Corning, 88 N. Y. 129; Handy «. Draper, 89 N. Y. 334. 170 INDIVIDUAL LIABILITY OF STOCKHOLDERS. §121. ments have already been discussed. As to the fifth it is important to observe, that the time within which action must be brought against the company in order to secure to the creditor his remedy against stock- holders, begins to run from the instant the original debt becomes due.^ The liability of a stockholder in such cases cannot be renewed or extended by any re- newal or extension of that indebtedness which the creditor may make with the company. Thus, in a recent case, a debt was due from the company in March, 1867, and in August, 1868, a part was paid in cash, and thecompanj^'s five months' note given for the remainder. This note was unpaid, action on it against the company begun in July, 1869, judgment obtained, and execution returned unsatisfied; but in the suit immediately brought thereon against a stockholder under section 10, the court held that the acceptance of the note did not merge or extinguish the original indebtedness, but only operated to extend the time of payment; and as the plaintiff had not brought his action against the company within one year from March 7, 1867, the defendant was not liable.^ § 121. Judgment to be recovered therein, and execution to be issued.— But the bringing of such a suit against the company within the limited time is not sufficient. A judgment must be recovered in the action brought against the company, and an execution thereupon is- sued out of a court of this State of general jurisdic- tion : and. such execution must be returned unsatis- ' Jagger Iron Co. v. Walker, 76 N. Y. 521 ; affl'g s. r. 43 N. Y. Su- perior, 375; overruling Fisher ». Marvin, 47 Barb. 161. ' Parrot ». Colby, 6 Hun, 55 ; affi'd 71 N. Y. 597, on this opinion; Parrot v. Sawyer, 87 N. Y. 623; Hard man v. Sage, 47 Huo, 330. § 122. INDIVIDUAL LIABILITY OP STOOKHOLDEES. 171 fied in whole or in part, before the creditor can main- tain an action against a stockholder on his individual liability ; and this is as essential to an action against a continuing stockholder as to an action against one who has ceased to be such.^ A proceeding affecting only specific property of the corporation, and execu- tion against that property only, is not a compliance with the condition;* and it has been held that no more can be recovered in an action against the stock- holder than was claimed and recovered in the pre- liminary action against the company, and that a suit for a part of the debt against the company, will not justify the recovery of the whole debt from the stock- holder.^ § 123. Judgment against company no evidence of debt in action against stockliolder.— After much fluctuation of opinion in the courts, it is now settled that, to es- tablish the debt in an action against a stockholder un- der section 10, proof that judgment was recovered against the company thereon is not sufficient ; it is in- cumbent on plaintiff in such action to verify by com- petent satisfactory evidence the claim against the com- pany, the same as if no action had been previously brought against it, and the judgment against the com- pany is not even prima facie evidence of the debt in the action against the stockholder. It is of no virtue ■ Handy v. Draper, 80 N. Y. 334; rev'g s. c. 23 Hun, 356; Rocky Mountain Natl. Bank v. Bliss, 89 N. Y. 338 ; Dean ®. Mace, 19 Hun, 391 ; Viele ®. Wells, 9 Abb. N. C. 377 ; Lindsley v. Simmons, 3 Abb. Pr. (N. S.) 69; Merritt v. Reid, 13 "Weekly Dig. 453; Agate v. Edgar, G. T. N. Y. Common Pleas (not reported). 2 Rocky Mountain Natl. Bank .«. Bliss {supra) ; Agate v. Edgar (aupi'O). ' Shellington v. Rowland, 67 Barb. 14. 172 IKDIVIDUAL LIABILITY OP STOCKHOLDERS. §123. or effect against him, and is only evidence as proving the performance on the part of the creditor of the con- dition precedent.^ But when introduced in evidence, as they must be, for the sole purpose of proving such performance, the validity of the judgment and execu- tion against the company cannot be disputed by the stockholder for mere irregularities therein.^ § 123. When certain requisites prescribed by section 24 are excused. — But though, as we have seen, the com- mencement of an action against the company for the debt, the recovery of judgment therein, the issue of exe- cution thereon from a New York court of competent jurisdiction, and the return of that execution wholly or partially unsatisfied, are essential statutory conditions precedent to an action to enforce the individual liabili- ty of a stockholder, yet the performance of these con- ditions will be excused when they have been rendered impossible of performance by act of the stockholder- defendant or of the law ; as where the action against the company, duly and timely begun by the creditor, was stayed by an injunction in bankruptcy proceed- ings obtained by the defendant f or where the corpo- ' Kincaid v. Dwinelle, 59 N. Y. 548, 551 ; Miller v. White, 50 N. Y. 137; Bailey v. Bancker, 3 Hill, 188; Wheeler c. Miller, 24 Hun, 541 ; Handy v. Draper, 23 Hun, 256 ; McMahon v. Macy, 51 N. Y. 155 ; Bel- mont V. Coleman, 21 N. Y. 96, 102; McHarg d. Eastman, 4 Robt. 636 ; McHarg «. Eastman, 7 Robt. 137 ; Wetherhead v. Allen, 3 Keye8, 563; Strong V. Wheaton, 38 Barb. 616 ; Morse v. McCullough, 5 Hill, 131. See, contra, Belmont zi. Coleman, 21 K. Y. 100, 101; Collins v. Suau, 7 Robt. 623 ; Lewis v. Ryder, 13 Abb. Pr. 1 ; Hoagland v. Bell, 36 Barb. 57; Slee t). Bloom, 20 Johns. 669, 684; Moss v. Oakley, 2 Hill, 265; Moss V. McCullough, 7 Barb. 279, 296 ; Doctor v. Guggenheim (City Court of New York), N. Y. Daily Register, Feb. 20, 1884 : Berridge v. Abernethy, 24 Week. Dig. 513 ; Sawyer v. Rosebrook, 48 Hun, 453. = Wheeler v. Miller, 24 Hun, 541. ' Shellington v. Howland, 53 N. Y. 371. §124. INDIVIDUAL LIABILITY OF STOCKHOLDERS. 173 ration was dissolved by judgment of a court of compe- tent jurisdiction before the year, limited by section 24 to the creditor to bring his preliminary action against the company, had expired.^ But the facts excusingsuch performance should be alleged in the complaint.^ And this excuse is only admissible where these conditions precedent are absolutely impossible to be performed. The creditor will not be heard to allege that the com- pany was insolvent, or that action against it would be fruitless. The courts have no power to dispense with the full performance of the statutory conditions, except upon the grounds already stated.* So, where a corpo- ration was thrown into involuntary bankruptcy by its creditors, it was held that one of these creditors must bring an action against the company within one year from the time the debt became due, recover judgment thereon, issue execution and have it returned unsatis- fied, if he would bind the stockholders ; that a com- plaint not alleging a compliance with the statute in those regards, was demurrable.* § 124. Stockholders holding stock issued for property freed from liability under section 10.— It is to be ob- served, however, as a pecuHar feature of this act, that it authorizes the creation of a class of stockholders who 'KincaidB. Dwinelle, 59 N. Y. 548,551; Sturges v. Vanderbilt, 73 N. y. 384; McCulloch v. Norwood, 58 k. Y. 563. See, also, Hollings- head v. Woodward, 107 N. Y. 96. ' Cuykendall v. Corning, 88 N. Y. 139 ; Lindsley v. Simmons, 3 Abb. Pr. (N.S.) 69. ' Birmingham Nat'l Bank v. Mosser, 14 Hun, 605. < Birmingham Natl. Bank v. Keck, 55 How Pr. 333; Allen v. Ward, ' 36 N. Y. Superior, 290. See, also, Pleischauer v. Dittenhoef er, 18 Weekly- Dig. 18; Knauer v. Globe Mutual Life Ins. Co. 46 N. Y. Superior, 870. But see Flash v. Conn. 109 tj. S. 371. 174 INDITIDUAL LIABILITY OF STOCKHOLDEKS. § 125. will be free from all liabilities under section 10, and to whom none of the foregoing rules apply. By the amendatory act of 1853/ the trustees may purchase mines, manufactories, and other property necessary for their business, and issue stock to the amount of the value thereof in payment therefor. Under these provisions the whole capital stock, or any portion thereof, can be paid for in property ; and when so paid for, the holder thereof, by tlie express terms of the act, is liable henceforth neither to the company itself for calls, nor to the creditors of the company for their claims against it.* If, then, any part of the stock has been so issued, there being no fraud in the valuation of the property, the holders of that stock cannot be rendered liable to creditors by a failure to pay in the remainder of the capital, nor by an omission to record the certificate of such payment." And the holder of such stock so issued for property, if sued under section 10, may, in his answer, couple with his admission that he is a stock- holder an averment that his stock was so issued, and was full paid and not liable to further calls or pay- ments ; and sucb an admission does not aid the plaint- iff. K on the trial there is no other evidence of de- fendant's ownership of stock than such admission, a motion to dismiss the complaint should be granted.* § 125. Such stock must, however, have been honestly issaed by trustees.— But to afford this protection to the ' L. 1853, c. 33, § 2. See ante, § 78. s Schenck o. Andrews, 46 N. Y. 589. 'Brown v. Smith, 13 Hun, 408: afli'd, on this opinion, in 80 N. Y. 650 ; overruling Brown «. Torrey, 10 J, & S. 1 ; Thurber v. Thompson, 21 Hun, 472. ' Lewis 8. Ryder, 18 Abb. Pr. 1. § 125. INDIVIDUAL LIABILITY OF STOCKHOLDERS. 175 holder, it is essential that tlie stock should have been honestly issued by the trustees. It will be presumed to have been honestly issued, and the burden will be on the creditor to prove the contrary.^ Where the stock of a company is issued in form for property, it is to be regarded as full-paid stock, unless there is shown to have been in said issue a fraudulent overvaluation, and an intent to evade the statute.^ To charge the holder of stock so issued individually for the debts of the company, it is not enough to prove that the property was purchased and paid for at an overvaluation through a mistake or error of judgment on the part of the trustees ; but it must be shown that the purchase at the price agreed upon was in bad faith and to evade the statute. To do this, it is sufficient to prove two facts : (1) That the stock issued exceeded in amount the value of the property in exchange for which it was issued, and (2) That the trustees de- liberately, and with a knowledge of the real value of the property, overvalued it, and paid in stock for it an amount which they knew was in excess of its actual value.* If the creditor succeeds in establishing these two positions, the holder of such stock is thereby placed in exactly the same position as if he were a holder of partially unpaid cash stock; the protection of the Act of 1853 is withdrawn from him, and he is liable under the same conditions as the ordinary stock- ' Chase v. Lord, 77 N. Y. 1 ; Dodge v. Havemeyer, 4 State Rep. 561 ; Knowles v. Duffy, 40 Hun, 485. ''Drapers. Beadle, 16 Weekly Dig. 475. 3 Lake Superior Iron Co. v. Drexel, 90 N. Y. 87 ; Douglass ». Ireland, 73 N. Y. 100; Scheack v. Andrews, 57 N. Y. 133; Brockway o. Ireland, 61 How. Pr. 369; Tliurston ». Duffy, 38 Hun, 337; National Tube Works «. Gilfillan, 46 Hun, 248. 176 INDIVIDUAL LIABILITY OF STOCKHOLDERS. §126. holder, to the same extent, and no further or other- wise.^ § 126. Stockholders ceasing to be such, how long liable thereafter. — It will be seen, on reference to section 24, that the act discriminates between continuing stock- holders and those who have ceased to be such ; by providing, as an especial statute of limitations for the benefit of the latter, that "no suit shall be brought against any stockholder who shall cease to be a stock- holder in any such company, * * * unless the same shall be commenced within two years from the time he shall have ceased to be a stockholder in such com- pany." ^ " It follows from this enactment that whenever an existing stockholder shall be divested of his interest in or control over the aflfairs of a corporation, whether by voluntarily transferring his share to another person, or compulsorily, as by forfeiture upon the declaration of the company, time begins to run, and at the end of two years the statutory limit is reached, and he is no longer liable for any debt of the corporation. The same result must follow upon the dissolution of the corporation by formal judgment, or by a surrender of its corporate rights, privileges and franchises. Organization then ceases, and the artificial entity is resolved into its inde- pendent parts. The thing itself, therefore, no longer existing, there can be no shares in the thing, and, of course, no stockholders." * Where, therefore, in an action against a stockholder under section 10, it appeared that four years prior to the ' Boynton v. Andrews, 63 N. Y. 93; Boynton v. Hatch, 47 N. Y. 225. ' L. 1848, c. 40, § 24 ; ante, § 99. =• Danforth, J., in Hollingshead v. Woodward, 107 N. Y. 100, 101. § 126. INDIVIDUAL LIABILITY OF STOCKHOLDERS. 177 commencement thereof in an action against the corpo- ration a judgment had been rendered sequestrating all its property, appointing a permanent receiver thereof, and restraining its officers and agents from all interfer- ence therewith, and that thereafter the corporation had transacted no business, and the said receiver had taken possession of its property, and had distributed the pro- ceeds thereof amongst its creditors, /pursuant to an order of the court, the same not being sufficient to pay all its debts, it was held that the defendant ceased to be a stockholder from the date of said judgment, and after the expiration of two years therefrom was dis- charged from liability.^ Where, however, on an ex parte application in an action against the company, a receiver of all its prop- erty and effects was appointed, an injunction obtained restraining the corporation from exercising any corpo- rate rights or franchises, or intermeddling with its prop- erty, security given, and the fact reported to the court, no other proceedings being had in the action, and it not appearing whether the injunction was ever served, or any notice of the receiver's appointment given to the corporation, the receivership itself being a provis- ional remedy and necessarily temporary, subject to further order and direction of the court, and to any final judgment that might be given in that action, it was held in a subsequent action against a stockholder under section 10, that this did not work a dissolution of the company, that the creditor could still proceed ' Hollingshead «. Woodward, 107 N. Y. 96. See, also, Eddy ». Co- operative Dress Ass'n, 3 Civ. Proc. R. 443. 12 178 INDTVIDUAIi LIABILITY OF STOCKHOLDEES. § 128. against it unless stayed by injunction, and its stock- holders did not cease to be such.^ A vQc&ivev pendente lite is not the proper defendant on a cause of action against the corporation arising prior to his appointment.^ § 127. Limitations applying to actions under section 10. — Apart from this special provision, the ordinary limitation of six years applies to these actions ; ^ and as the creditor cannot maintain such an action against an individual stockholder until he has obtained a judg- ment against the company upon his claim, and until an execution has been issued thereon and returned un- satisfied,^ it follows that this six years' statute of limita- tions does not begin to run in favor of the stockholder until after the return of that execution against the company.' § 138. As to right of contribution between stockholders. — A stockholder who has been compelled, under sec- tions 10 and 24, to pay the debt of his corporation, may maintain a suit in equity for contribution against the remaining stockholders who were originally liable with him for the same.® The right of contribution only applies where one ' Kincaid b. Dwinelle, 59 N. T. 548; New Englaud Iron Co. v. Gil- bert El. R. E. Co. 91 N. T. 153. Compare ante, § 59. ^ Fleischauer v. Dittenhbefer, 18 Weekly Dig. 13 ; Knauer ®. Globe Mutual Life Ins. Co. 46 N. Y. Superior, 370. ' Coming ». McCullougb, 1 N. Y. 47 ; Code of Civ. Proc. § 382 ; Wiles «. Suydam, G4 N. Y. 173; Happier v. Mortimer, 11 Abb. Pr. N. S. 455. * Ante, § 121. 'Handy b. Draper, 89 N. Y. 334; Merritt ». Reid, 18 Weekly Dig. 453. " Aspinwall v. Sacchi, 57 N. Y. 331 ; a. c. reported below under title Aepinwall t. Torrance, 1 Lans. 381. § 129. INDIVIDOAL LIABILITY OP STOCKHOLDERS. 179 of the parties liable has paid a claim for which all are liable.^ Whether such a stockholder could maintain an action at law against a fellow stockholder to recover an aliquot proportion of the corporation debt is un- certain. Where the action against the stockholder had been maintained under the provisions of .section 18 of the act,^ it was held that his only remedy against his fellow stockholders was a suit in equity against all ; ^ but that case cannot be considered as settling the law where the stockholder's claim to contribution arises from judgments recovered against him under the sec- tions ^ now under consideration. § 129. Provisions exempting executors, pledgees, etc., from personal liability.— Section 16 of Act. No person holding stock in any such company, as executor, adminis- trator, guardian or trustee, and no person holding such stock as collateral security, shall be personally subject to any liability as stockholder of such company ; but the person pledging such stock shall be considered as holding the same, and shall be liable as a stockholder accordingly, and the estates and funds in the hands of such executor, ad- ministrator, guardian or trustee, shall be liable in like manner, and to the same extent as the testator or intestate, or the ward or person interested in such trust fund would have been, if he had been living and competent to act, and held the same stock in his own name.^ ' Bailey v. Bancker, 3 Hill, 188. » Ante, § 94. = Clark V. Myers, 11 Hun, 608. ' Ante,.^ 99. ' ' 0«ie holding stock as an executor in trust cannot transfer it without authority so as to divest ownership of cestui que trust. White v. Price 39 Hud, 394. 180 INDIVIDUAL LIABILITY OP STOCKHOLDERS. § 131. § 130. When exemption applies.— B3' the foregoing very clear provisions persons holding stock in these corporations as collateral security, and persons holding such stock in either of the fiduciary capacities above specified, are free from any personal liabilities under this act. Where, however, by agreement between S. and F. $1,000 of stock were bought by S. to be held in his name for the joint account, it was held that S. was not a trustee for $500 thereof under these provisions of the statute ; but was liable to the full extent of the stock ; and that having paid $1,000 to a creditor, whose claim, under sections 10 and 24 of the act was clear, he could recover $500 from the joint owner F., although he did not wait to be sued before paying the creditor.^ § 131. Liabilities of stockholders apart from act.— The provisions of sections 10, 18 and 24 cover and in- clude all the individual liabilities of stockholders, and rights of the company's creditors against them, given or imposed by the act. We have seen, however, that on the general princi- ples of law, a creditor of a corporation, who has ex- hausted his remedy at law against it, can bring suit .against a stockholder who has not paid in his subscrip- tion, to reach and apply to the satisfaction of such -creditor's claim the amount so unpaid upon the de- fendant's stock.^ So, too, the assets of a corporation — whether in- corporated under the act or not — are a trust fund for the payment of its debts, and its creditors have a lien ' stover B. Flack, 30 N. T. 64. * ' Ante, % 86. See Thompson's Liability of Stockholders, § 1. See, Burgess b. Seligman, 107 U. S. 20. § 131. INDIVIDUAIi LIABILITY OP STOCKHOLDERS. 181 thereon, and a right to priority of payment therefrom over its stockholders, and may follow it into the hands of such stockholders. When, therefore, the property of a company has been divided amongst its stock- holders, a judgment-creditor, after return of execution against the company unsatisfied,^ may maintain alone an action in the nature of a creditor's bill against a single stockholder, to reach whatever was so received by him.^ And in such an action, unlike the statutory action under section 10,^ the judgment against the company is at least p?'ima facie evidence against the stockholder, that the claim against the company is a valid one.* ' Sturges V. Vanderbilt, 73 N. Y. 384. " Bartlett v. Drew, 57 N. Y. 587; 4 Lans. 444; 00 Barb. 648; Graham V. Hoy, 38 N. Y. Superior, 506. = Ante, § 133. ' Hastings ». Drew, 76 N. Y. 9 ; Stephens ». Fox, 83 N. Y. 313; Doctor V. Guggenheim (City Court of New York), N. Y. Daily Register, Feb. 30, 1884. CHAPTER X. POWERS AND PRIVILEGES OF CORPORATIONS FORMED UNDER ACT. § 132. Provisions as to general powers. 133. Other general powers. 134. Company may mortgage. 135. Nature of provisions allowing mortgages. 135a. Stockholders' consent. 1356. For what debts mortgages may be given. 186. Privileges of purchasers at mortgage sale of franchise and prop- erty of corporations. 137. Two or more companies may consolidate. 137a. Consolidation of manufacturing corporations. 138. Company may change corporate name. 139. May hold stock of certain other corporations. 140. May extend duration of corporate existence. 141. May change its place of business. 142. May carry on business out of State. 143. Other special privileges. § 132. ProTisions as to general powers.— Section 26' of Act. Every corporation created under this act shall pos- sess the general powers and privileges, and be subject to the liabilities and restrictions contained in title third, chapter eighteen of the first part of the Eevised Statutes.' ' As amended, L. 1861, c. 170, § 1. ' The provisions of title third, of chapter eighteen, of the first part of the Revised Statutes, referred to in the above section, are as follows : Section 1. Every corporation, as such, has power: 1. To have succession, by its corporate name, for the period limited in its charter; and when no period is limited, perpetually. 2. To sue and be sued, to complain and defend, in any codff of law or equity. 3. To make and use a common seal, and alter the same at pleasure (see, as to use and necessity of seal, Lienkauf v. Colman, 110 N. Y. 50; Whitford v. Laidler, 94 N. Y. 145). 4. To hold, purchase and convey such real and personal estate, as the § 132. POWERS AND PEIVILBGBS UNDER ACT. 183 And the provisions of section six, article first, title two, chapter thirteen of the first part of the Eevised Statutes purposes of the corporation shall require, not exceeding the amount limited in its charter. 5. To appoint such subordinate officers and agents as the business of the corporation shall require, and to allow them a suitable compensa- tion. 6. To make by-laws not inconsistent with any existing law, for the management of its property, the regulation of its afiairs, and for the transfer of its stock. S 2. The powers enumerated in the preceding section shall vest in every corporation that shall hereafter be created, although they may not be specified in its charter, or in the act under which it shall be in- corporated. § 3. In addition to the powers enumerated in the first section of this title, and to those expressly given in its charter, or in the act under which it is or shall be incorporated, no corporation shall possess or exer- cise any corporate powers, except such as shall be necessary to the exer- cise of the powers so enumerated and given, § i. No corporation created, or to be created, and not expressly in- corporated for banking purposes, shall, by any implication or construc- tion, be deemed to possess the power of discounting bills, notes, or other evidences of debt, of receiving deposits, of buying gold and silver, bul- lion or foreign coins, of buying and selling bills of exchange, or of issu- ing bills, notes, or other evidences of debt, upon loan, or for circulation as money. § 5. Where the whole capital of a corporation shall not have been paid in, and the capital paid shall be insufficient to satisfy the claims of its creditors, each stockholder shall be bound to pay on each share held by him, the sum necessary to complete the amount of such share, as fixed by the charter of the company, or such proportion of that sum as shall be required to satisfy the debts of the company. § 6. When the corporate powers of any corporation are directed by its charter to be exercised by anj particular body or number of persons, a majority of such body or persons, if it be not otherwise provided in the charter, shall be a sufficient number to form a board for the trans- action of business; and every decision of the majority of the persons duly assembled as a board, shall be valid as a corporate act. § 7. If any corporation hereafter created by the Legislature shall not organize and commence the transaction of its business within one jear from the date of its incorporation, its corporate powers shall cease. § 8. The charter of every corporation that shall hereafter be granted 184 POWERS AND PRIVILEGES UNDER ACT. § 133. shall apply to every such corporation. [Consult post, § 144.J § 133. Other general powers.— Section 2^ provides tLat corporators who form a company under this act, " shall by their corporate name be capable in law of purchasing, holding and conveying any real and personal estate whatever which may be nec- essary to enable the said company to carry on their operations named" in the certificate of incor- poration.^ Real estate companies are limited by the act and amendments as to the amount of real estate they may hold.^ Eeal estate may be acquired in other States and countries.* by the Legislature, shall be subject to alteration, suspension, and repeal, in the discretion of the Legislature. § 9. Upon the dissolution of* any corporation, created or to be created, and unless other persons shall be appointed by the Legislature, or by some court of competent authority, the directors or managers of the affair^ of such corporation at the time of its dissolution, by whatever name they may be known in law, shall be the trustees of the creditors and stockholders of the corporation dissolved, and shall have full power to settle the affairs of the corporation, collect and pay the outstanding debts, and divide among the steckholders the moneys and other prop- erty that shall remain, after the payment of debts and necessaiy expenses. § 10. The persons so constituted trustees shall have authority to sue for and recover the debts and property of the dissolved corporation, by the name of the trustees of such corporation, describing it by its corpo- rate name, and shall be jointly and severally responsible to the creditors and stockholders of such corporation to the extent of its property and effects that shall come into their hands. Note. — Real estate held by a corporation upon its dissolution does not revert to the grantors, but passes to the trustees under these pro- visions. Heath v. Barmore, 60 N. Y. 303. ' AnU, § 6. ' Greenpoint Sugar Co. v. Whitin, 69 N. T. 328. = Ante, § 6 and § 5 Table, " Real Estate." * Post, § 142. § 133. POWEKS ASD PEITILEGBS DNDEE ACT. 185 The operations of every company must be confined to the business which by its certificate of incorporation it is authorized to carry on/ unless such business has been extended under other provisions of the act. The business carried on may of course be prosecuted in all its details.^ A company upon its organization may also classify its stock, and thus create preferred stockholders,* In- asmuch, however, as the Act gives no specific power to issue such stock to companies formed under it,* it is probable that at no time subsequent to the formation of the corapany could such stock be issued, unless perhaps upon the unanimous consent of all the common stockholders.^ Where preferred stock has been issued, such stock may be exchanged for common stock in accordance with the Statute given in the note.** ' CoUes V. Trow City Directory, 11 Hun, 397. A company retaining the benefit of an ultra vires contract cannot escape liability on this ground. Diamond Watch Co. v. Eoeber, 106 N. Y. 473 ; Live Stock Asso. Lim. v. Levy, 3 N. T. St. Kep. 514; see, also, Leslie v. Lorillard, 110 N. Y. 519; Woodruff n. Erie Ry. Co. 93 N. Y. 609. = De GrofE «. American Linen Thread Co. 21 N. Y. 136; see, also, vf orks on general corporation law. ' Kent t). Quicksilver Mining Co. 78 N. Y. 178, 179; Morawetz on Corporations, § 464. * See provision of New Jersey Corporation Act, Corbin's Ed. 1889, §25. ' Kent ». Quicksilver Mining Co. 78 N. Y. 159 ; Green's Brice's Ultra Vires, 2d Ed. 164, and cases; Cook on Stock, Stockholders, etc. § 368; Field on Corporations, § 121; see American Law Review, Vol. 18, p. 43. " Every corporation organized nnderthe laws of this State which has heretofore Issued, or may hereafter issue, both preferred and common stock, forming part of the capital stock of such corporation, is hereby authorized, whenever the directors of such corporation shall by vote of two-thirds of their number declare it for the interest of the corporation so to do, and the holder of any succh preferred stock may request in 186 POWERS ANU PRIVILEGES UNDER ACT. § 134. § 134. Company may mortgage.— L. 1864, c 517, § 2.^— Any corporation formed under the said act passed Febru- ary seventeenth, eighteen hundred and forty-eight, or of the acts amending or extending the said act, may secure the payment of any debt heretofore contracted, or which may be contracted by it in the business for which it was incorporated, by mortgaging all or any part of the real or personal estate of such corporation ; and every mort- gage so made shall be as valid, to all intents and pur- poses, as if executed by an individual owning such real or personal estate ; Provided, that the written assent of the stockholders owning at least two-thirds of the capital stock of such corporation shall first be filed in the office of the clerk of the county where the mortgaged property is situated. L. 1869, c. 706, § 1. — In all cases where a corporation shall have heretofore made or shall hereafter make a mort- gage of any of its real estate situated beyond the limits of this State, and the recording officer of the county in which such real estate is situated shall have refused or shall refuse to file or record the assent as now required by law, it is hereby declared to be and to have been a suffi- cient filing of the assent of the stockholders if such assent shall have been or shall hereafter be filed in the office of the clerk of the county where the company has its prin- cipal place of business within this State. L. 1875, c. 88, § 1. — ^In all cases where a corporation has heretofore executed a mortgage upon any of its real estate, and the written consent of persons owning two- thirds or more of the capital stock of such corporation shall have been given to the mortgaging of such real writing the exchange of the same for the common stoclr, to exchange the preferred stock of such holder for common stock, and to issue cer- tificates of common stock tlierefor share for share, or upon such other valuation as may have been agreed upon in the scheme for organization of such company or the issue of such preferred stock ; provided, how- ever, that the total amount of the capital stock of such company shall not be increased thereby. L. 1880, c. 225. ' As amended, L. 1871, c. 481, § 2. f 134. POWERS AKD PRIVILEGES UNDER ACT, 187 estate, at or before the time of the giving of such mort- gage, but from accident or mistake the said consent has not been filed in the office of the clerk of the county in which such real estate is situated, as required by law, it shall be lawful for the clerk of such county to receive and file in his office the written consent so given, accompanied by the affidavit of any officer or stookholdeT of such cor- poration showing that such consent was in fact made and signed, at the time the same purports to have been made and signed, and that the signatures thereto are genuine ; and in such case, on filing such consent and affidavit, the said mortgage shall have the like validity and effect from and as of the time of the filing of such consent and affidavit as if the same had been given at that time and had been accompanied or preceded by the filing of such consent ; ■ provided that nothing herein contained shall affect any action or legal proceeding now pending, or impair any intermediate right acquired by lien or otherwise in or to the property of the corporation affected by such mortgage. L. 1878, c. 163, § 1. — Any company formed under the act entitled " An act to authorize the formation of cor- porations for manufacturing, mining, mechanical or chem- ical purposes," passed February seventeen, eighteen hun- dred and forty-eight, or of the acts amending or extending said act, may secure the payment of any debt heretofore contracted or which may be contracted by it, in the busi- ness for which it was incorporated, by mortgaging all or any part of the goods and chattels of such corporation, and also the franchises, privileges, rights and liberties thereof, provided that the written assent of a majority of the stockholders, owning at least two-thirds of the capital stock of such corporation, shall first be filed in the office of the clerk of the county where the corporation has its principal place of business, and also in the office of the clerk of the county where such goods and chattels are situated.^ ' The "franchises, privileges, rights and liberties" above mentioned are " the corporate franchises and rights which became vested in the 188 POWERS AND PRIVILEGES UNDBB ACT. § 135. § 135. Nature of foregoing proTisions.— By section two of the Act^ the power to mortgage, which at common law belongs to a corporation capable of holding and conveying property,'^ was taken away from corporations formed under the manufacturing act. The statutes above given are, therefore, enabling acts,* and now by complying with their provisions a company may mortgage its real and personal property and its fran- chises. In order to do this, however, the statutes must be closely followed, and the required consent of the stockholders must be obtained and filed. A consent given by stockholders to the mortgaging of the real and personal estate will not warrant the mortgaging of the franchises of the company.* If the franchises are to be mortgaged, the consent, signed by the stock- holders, should be so drawn as to authorize sueh action. In the case last cited," the Court say : " "We do not think that the Act of 1878" operates as a repeal of the act of 1864, or the act of 1871, which authorizes the mortgaging of the real and personal property of the corporation, with the assent of the stockholders own- ing at least two-thirds of the stock. The Act of 1878 requires the assent of a majority of the stockholders owning at least two-thirds of the capital stock." The court leaves it undecided whether it was intended company by virtne of its organization as a corporation under the general law." They do not include "patent rights, licenses, easements or priv- ileges acquired by the company since its incorporation either from indi- viduals or corporations; " these are in the nature of property of which the company has the power to dispose. Lord v. Yonkers Fuel Gas Co. 101 N. T. 614. ' Ante, § 16. ' See Rochester Savings Bank v. Averell, 96 N. Y. 472. = Greenpoiut Sugar Co. o. Whitin, 69 N. Y. 328. * Lord V. Yonkers Fuel Gas Co. 99 N. Y. 547. ' 99 N. Y. 547. ' See preceding paragraph (§ 134). §135a. POWEKS AND PBIVILEGES UKDER ACT. 189 by the Legislature that a majority of the stockholders in number as well as a two-thirds majority of the stock, must consent to a mortgage of franchise ; but it is ad- visable in making such a mortgage to cover this double requirement. § I36a. Stockholders' consent— The written consent of two-thirds of the stockholders in interest should be obtained and filed in the clerk's office of the county where the mortgaged premises are situated.' The stockholders may, however, ratify a mortgage which has been given without their consent.^ The consent will be liberally construed and parol evidence will be admitted to explain it ; and if owners of two-thirds of the outstanding stock sign the consent this is sufficient.* The company, however, cannot properly consent upon stock owned by it or directly under its control ; al- though one who has taken stock from the company in pledge and who has a certificate therefor may do so.* It is probable that section 17, which authorizes a pledgor to vote upon stock at all meetings of the com- pany, would not empower him to consent upon such stock to a mortgage to be given by the company.^ A company cannot authoi'ize an agent to give a mortgage in his own name, and agree to indemnify him thereupon, without the requisite consent of stockhold- ers, as this would be a mere evasion of the law.* It ' Greenpoint Sugar Co. v. Whitin, 69 N. Y. 328. ' Rochester Savings Bank j>. Averell, 96 N. Y. 467 ; Cf. Astor v. Westchester Gas Light Co. 33 Hun, 333. 3 Vail V. Hamilton, 20 Hun, 355. * Vail®. Hamilton, 85 N. Y. 453. ' Vail V. Hamilton, 20 Hun, 355. ' Cox V. Gould, 4 Blatch. 341. 190 POWERS AND PRIVILEGES UNDER ACT. § 335&. would seem, however, that a lien upon corporate prop- erty might arise by operation of law.^ A stockholder who is also a creditor, and has knowledge of a mortgage executed by his company, cannot take advantage of the defective filing of the necessary consent.^ After judgment of foreclosure has been regularly obtained upon a mortgage by a compa- ny, it will be presumed, in the absence of all proof, that the necessary assent was obtained and filed.^ The receiver of a company may bring an action to set aside a mortgage executed without the necessary consent of stockholders.* The consent, however, is required for the benefit and protection of stockholders ; and it is doubtful if any one but a stockholder or his representative can take advantage of its not being filed.^ Where property is bought by a company and a mortgage is given to secure a part of the purchase money, the vendors will have an equitable right to hold the property until the consideration is paid, notwithstanding the failure to file the required assent.* A form of consent of stock- holders to a mortgage will be found in Appendix B. § 135b. For what debts mortgages may be given.— There is some uncertainty as to what debts may be - Dubois B. Hall, 43 Barb. 36; Coman v. Lakey, 80 N. Y. 345. ' Rochester Savings Bank v. Averell, 26 Hun, 643 ; 96 N. Y. 467 ; Conkling «. Secor Sewing Machine Co. 53 How. Pr. 269. = Denike v. N. Y. & R. L., &c. Co. 80 N. Y. 599. * Vail V. Hamilton, 20 Hun, 355 ; 85 N. Y. 453. ' See Paulding t>. The Chrome Steel Co. 94 N. Y. 334 ; Rochester Savings Bank o. Averell, 26 Hun, 643 ; Conkling v. Secor Sewing Ma- chine Co. 55 How. 269. ' Coman v. Lakey, 80 N. Y. 845 ; Thomas on Mortgages, § 121. § 135&. POWERS AND PRIVILEGES UNDER ACT. 191 secured by mortgage under the provisions quoted above.^ In the case of Carpenter v. Black Hawk Mining Company,* Earl, C, expressed the opinion that a mort- gage could not be made by a company for the purpose of raising money to carry on its operations ; and this holding is referred to by Rapallo, J., in a recent case in the Court of Appeals.' In this latter case it was held that a mortgage given under these provisions t<\ secure bonds, some of which were issued and negotiated at a date subsequent to the making of the mortgage but which were used to satisfy debts of the corporation as they accrued, was a valid security as to such bonds.* In the opinion of the court, however, Rapallo, J., says : "As to a mortgage given to secure future advances, different questions might arise, but, where a bond se- cured by mortgage is given to the lender for money ad- vanced at the time, the borrower becomes immediately indebted, and it would seem to be immaterial whether the money is applied by the borrower to the payment of some antecedent debt, or to other purposes for which he was legitimately entitled to borrow the money." It may be doubted whether the legislature intended to place any special restriction whatsoever upon the making of mortgages by these corporations, except that they should obtain the assent of stockholders as stated in the enabling acts. It seems probable that the intention ' § 134. ' 65 N. Y. 43. ' Lord V. Yonkers Fuel Gas Co. 99 N. Y. 555. < Lord V. Yonkers Fuel Gas Co. 99 N. Y. 547, 554. See, also, Central Gold Mining Co. v. Piatt, 3 Daly, 263 ; Graham v. Atlanta Hill, &c., Co. Daily Register, Oct. 14, 1884; Martin v. Niagara Falls P. Co. 44 Hun, 130. 192 POWEES AND PEIVILEGES UNDER ACT. § 1 36. was to allow every company with the consent of the specified number of stockholders, to make any mortgage for any business venture which it was within the power of the company to undertake. The debt may be antecedent to the mortgage, or may arise upon its execution, or may accrue gradually thereafter as in the case of Lord v. Yon- kers Fuel Gas Company.^ If the obligation incurred in any case is one within the power of the company to contract it is a legitimate debt. So it would seem that if money were borrowed by a company for a proper but future use, such as the extension of its business, the debt to repay it would be contracted within the statute, and a mortgage given to secure the debt would be valid.^ It is to be observed, however, that the Court of Appeals has not as yet given this broad construction to the statute.^ A single mortgage may be given to secure any number of creditors, and any transfer in substance a mortgage will be construed as such.* § 136. Privileges of purchasers at mortgage sale of franchise and property of corporations.— L. 1873, c. 469,' § 1. — Whenever the franchises, privileges, easements, rights and liberties of any corporation created by any act of the legislature of this State, or formed and incorporated under or by virtue of any general act thereof, and empowered by said act to mortgage its property or franchises, and the property, estate and effects of any such corporation have been heretofore or may be hereafter sold by virtue of any mortgage executed by such corporation ; and whenever the ■ 99 N. y. 547. ' See Jones «. Guaranty & Indemnity Co. 101 N. S. 622; Central Gold Mining Co. v. Piatt, 3 Daly, 270. See provisions, ante, § 134. = Lord s. Yonkers Fuel Gas Co. 99 N. Y. 547 ; Carpenter v. Black Hawk Mining Co. 65 N. Y. 4B. « Vail V. Hamilton, 20 Hun, 355. • As amended, L. 1880, c. 113. § 136. POWERS AND PRIVILEGES UNDER ACT. 193 purchaser or purchasers thereof shall have acquired title to the same in the manner prescribed by law, such pur- chaser or purchasers may associate with him or them any number of persons ; and upon making and filing articles of association as prescribed by this act, such purchaser or purchasers and his or their associates and their successors and assigns, .being residents of this State, shall thereupon become and be a body politic and corporate, and may take and receive a conveyance of, and shall thereupon succeed to, possess and exercise and enjoy all the rights, powers, franchises, privileges, easements, liberties, property, estate and effects of which the title shall have been acquired and conveyed as aforesaid. § 2. In case the said corporation whose franchises, privileges, easements, rights, powers, liberties, property, estate and effects shall have been so sold as aforesaid, shall have been incorporated under or by virtue of the provisions of any general statute or statutes of this State for the formation of corporations, the certificate so to be made and filed shall be in the form of and shall state and set forth the particulars which in and by such statute or statutes were required to be stated and set forth in the original certificate of incorporation or articles of associa- tion of the said corporation. § 3. In case the corporation whose franchises, privi- leges, easements, rights, powers, liberties, property, estate and effects shall have been so sold as aforesaid, shall have been created by any special act of incorporation, then and in that case said certificates so to be made and filed shall state and set forth the following particulars, namely : — 1. The name of the body politic and corporate so to be formed as aforesaid. 2. The amount of the capital stock thereof, which shall not exceed the amount of the capital stock of the said former or pre-existing corporation authorized by law at the time of such sale as aforesaid, and the number of shares of which the said stock shall consist. 13 194 POWERS XKD PRIVILEGES UNDER ACT. § 136. 3. The title and time of the passage of the said original act creating the said former corporation, and any other act or acts relating thereto. 4. The number of the directors who shall manage the concerns of the said body politic and corporate, and the names of the first board of directors thereof, and who shall hold their office for one year and until others are chosen in their places. § 4. The said certificate shall be executed in duplicate and acknowledged before some officer competent to take acknowledgment of deeds. One of the said duplicates shall be filed in the office of the secretary of State, and the other thereof shall be filed in the office of the clerk of the county in which the said corporation first mentioned in this act had its principal place of business : — And there- upon the said body politic and corporate so formed as. aforesaid shall exist for the time, and may and shall pos- sess, exercise and enjoy all the powers, privileges, rights, liberties, easements and franchises possessed by the said former corporation ; and in the same manner and to the same extent, and with the same force and effect as the same could have been exercised by the said former corporation had not such sale as aforesaid been made : And whenever, by the decree of the court having jurisdiction of the fore- closure proceedings, it has been adjudged, determined and found by the court what powers, privileges, rights, liber- ties, easements and franchises were possessed and enjoyed by the former corporation at the time of entering such decree, and were therein ordered to be sold, the same shall be possessed and enjoyed by the new corporation to which they shall have been conveyed under and by virtue of the decree of foreclosure and sale, as provided for in the act hereby amended. But no omission in such decree to set forth or define any of the rights, privileges or franchises, of such former corporation shall in any way impair the rights of such purchasers and of such new corporation to § 137. POWERS AND PRIVILEGES UNDER ACT. 195 possess and enjoy all that was possessed by the former corporation at the time of such sale. § 5. A copy of any articles of association filed in pur- suance of this act, and certified by the secretary of State and county clerk with whom the same shall have been filed, or their deputies, to be a true copy of such articles and of the whole thereof, shall be received in all courts and places as legal evidence of the incorporation of the said body politic or corporate so to be formed as afore- said. § 137. Two or more companies may consolidate.— L. 1867, c. 960.* — § 1. Any two or more corporations, or- ganized under the act entitled " An act to authorize the formation of corporations for manufacturing, mining, me- chanical or chemical purposes," passed February seven- ' teenth, eighteen hundred and forty-eight, or any of the acts amending or extending the same, whenever the ob- jects for which such companies had been respectively or- ganised were the same or of a similar nature, are hereby authorized to consolidate such companies into a single cor- poration in manner following : The trustees of any two or more of such corporations may enter into and make an agreement, under their respective corporate seals, for the consolidation of the said corporations, prescribing the terms and conditions thereof, the mode of carrying the same into effect, the name of the new corporation, the number of trustees thereof (not less than three nor more than thirteen), the names of the trustees who shall manage the concerns of the new company for the first year and until others shall be elected in their places, the name of the town or towns, county or counties in which the opera- tions of the new company are to be carried on ; and if such companies proposed to be consolidated, or either of them, shall have been organized for the purpose of carrying on any part of their or its business in any place out of this ' As amended, L. 1877, c. 374. 196 POWEES AND PRlVrLEGES CKDER ACT. § 137., State, and the said new company shall propose to carry on any part of its business out of this State, the said agree- ment shall so state, and it shall also state the name of the town or city and county in which the principal part of the business of said new company within this State is to be transacted ; the amount of capital and number of shares of the stock into which the same is to be divided (which capital shall not be larger in amount than the aggregate amount of capital of the several companies thus to be consolidated, and shall not be increased except in accord- ance with the provisions of the said first mentioned act, passed February seventeenth, eighteen hundred and forty- eight) ; the manner of converting the shares of capital stock in each of said corporations into the shares of such new corporation, with such other particulars as they may deem necessary, not inconsistent with the provisions of the said act entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight, and the acts amending or ex- tending the same. § 2. Such agreement of the directors shall not be deemed to be the agreement of the said corporations so proposing to consolidate until after it has been submitted to the stockholders of each of said corporations respectively, separately, at a meeting thereof to be called upon a notice of at least thirty days, specifying the time and place of such meeting and the object thereof, to be addressed to each of such stockholders, when their place of residence is known to the secretary, and deposited in the post office, and published for at least three successive weeks in the State paper, and in one of the newspapers published in each of the counties in which either of the said corpora- tions shall have its place of business, and has been sanc- tioned and approved by such stockholders, by the vote of at least two-thirds in amount of the stockholders present at such meetings respectively, voting by ballot in regard to § 137. POWERS AND PRIVILEGES UNDER ACT. 197 such agreement, either in person or by proxy, each share of such capital stock being entitled to one vote ; and when such agreement of the directors has been sanctioned and approved by each of the meetings of the respective stock- holders separately, after being submitted to such meetings ■in the manner above mentioned, then such agreement of the directors shall be deemed to be the agreement of the said several corporations ; and a sworn copy of the proceedings of such meetings, made by the secretaries thereof respec- tively, and attached to the said agreement, shall be evi- dence of the holding and of the action of such meetings in the premises. If any stockholder shall, at said meeting of stockholders or within twenty days thereafter, object to the said consolidation and demand payment for his stock, such stockholder or said new company may, if said con- solidation take effect at any time thereafter, apply to the supreme court, at any special term thereof, held in any county in which the said new corporation may have its place of business, for the appointment of three persons to appraise the value of said stock, and shall designate the time and place of meeting of such appraisers, and give such directions in regard to the proceedings on said ap- praisement as shall be deemed proper, and shall also direct the manner in which payment for such stock shall be made to such stockholder. The oourt may fill any vacancy in the board of appraisers occurring by refusal or neglect to serve or otherwise. The appraisers shall meet at the time and place designated, and they or any two of them, after being duly sworn honestly and faithfully to discharge their duties, shall estimate and certify the value of such stock at the time of such dissent as aforesaidj and deliver one copy of their appraisal to the said company, and another to the said stockholder, if demanded ; the charges and ex- penses of the appraisers shall be paid by the new company. When the corporation shall have paid the amount of the appraisal, as directed by the court, such stockholder shall cease to have any interest in the said stock, and in the cor- 198 POWERS AKD PRIVILEGES UNDER ACT. § 137. porate property of the said corporation, and tlie said stock may be held or disposed of by the said corporation.* § 3. Upon the making, sanctioning and approving of the said agreement, in the preceding sections mentioned, in the manner therein required, and the filing of the duplicates or counterparts thereof, and of the verified written assent of stockholders mentioned in the preceding section, in the office of the clerk of the county where the operations of said new corporation are to be carried on, and in the office of the secretary of State, then and immediately thereafter the said corporations agreed to be consolidated shall be merged in the new corporation provided for in the said agreement, to be known by the corporate name therein mentioned, and the details of such agreement shall be car- ried into effect as provided therein, only such new corpo- ration shall not have any larger powers than are granted by the said act mentioned in the first section hereof, and the acts amending and extending the same, nor be exempt from the performance of any duty which the said several corporations may be liable to perform. § 4. Such new company shall possess the general powers and be subject to the general liabilities and restric- tions expressed in the third title of the eighteenth chapter of the first part of the Revised Statutes, and to all the lia- bilities and restrictions to which either of the companies from which it has been formed was subject. It shall also have the general powers and privileges, and be subject to the general liabilities, restrictions, duties and provisions expressed and contained in the said act entitled " An act to authorize the formation of corporations for manufactur- ing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight, and the acts amending or extending the same, so far as the same may be applicable to a corporation organized for the Consult Frask v. Peekskill Plough Works, 6 Hun, 336. § 137. POWERS AND PRIVILBaBS UNDER ACT. 199 purposes expressed in the said agreement for consolidation, and for which said new company shall have been organized. § 5. Upon the consolidation of said corporations and the organization of said new company, as hereinbefore pre- scribed, all and singular the rights, franchises and interests of the said several corporations so consolidated in and to «very species of property, real, personal and mixed, and things in action thereunto belonging, shall be deemed to be transferred to and invested in such new corporation, without any other deed or transfer ; and such new corpo- ration shall hold and enjoy the same, and all rights of property, franchises and interests, in the same manner and to the same extent as if the said several corporations so consolidated should have continued to retain the title and transact the business of such corporations, and the title and real estate acquired by either of the said corporations shall not be deemed to revert or be impaired by means of such act of consolidation or anything relating thereto. § 6, The rights of creditors of any corporations that shall be so consolidated shall not in any manner be im- paired by any act of consolidation, nor shall any liability or obligation for the payment of any money now due or hereafter to become due to any person or persons, or any claim or demand, in any manner or for any cause, existing against any such corporation or against any stockholder thereof, be in any manner released or impaired, but such new corporation is declared to succeed to such obligations and liabilites, and to be held liable to pay and discharge all such debts and liabilities of each of the corporations that shall be so consolidated, in the same manner as if such new corporation had itself incurred the liability or obligation to pay such debt or damages ; and the stock- holders of the respective corporations so entering into such consolidation shall continue subject to all the liabil- ities, claims and demands existing against them as such at or before such consolidation ; and no suit, action or other 200 POWERS AND PEITILEGES UNBER ACT. § 137a. proceeding then pending before any court or tribunal in which any corporation that may be so consolidated is a party, of in which any such stockholder is a party, shall be deemed to have abated or discontined by reason of any such consolidation, but the same may be prosecuted to final judgment in the same manner as if the said corpora- tions had not entered into the said agreement of consolida- tion, or the said new corporation may be substituted as a party in the place of any corporation so consolidated as aforesaid with any other corporation or corporations and forming such new corporation, by order of the court in which such action, suit or proceeding may be pending. § 7. No companies consolidated under this act shall be permitted to prosecute or carry on more than one kind of business authorized by the said act passed February seven- teenth, eighteen hundred and forty-eight. § 137a. Consolidation of manufacturing corporations.— L. 1884, c. 367.' — § 1. Any two or more corporations here- tofore or hereafter organized under any general or special law of this State for the purpose of carrying on any kind of manufacturing business of the same or of a similar nature, are hereby authorized to consolidate such companies into a single corporation in the manner following: The respec- tive boards of directors, or of the trustees, of any two or more of such corporations may enter into and make an agree- ment, under their respective corporate seals, for the con- solidation of the said corporations, prescribing the terms and conditions thereof, the mode of carrying the same into effect, the name of the new corporation, the number of the trustees thereof (not less than three nor more than thir- teen), the names of the trustees who shall manage the con- cerns of the new company for the first year, and until others shall be elected in their places, the term of exist- ence of such new company, not exceeding fifty years, the ' Consult Edison Electric Light Co. v. New Haven Electric Co. 21 Abb. N. C. 119. § 137a. POWERS AND PRIVILEGES UNDER ACT. 201 name of the town or towns, county or counties in which the operations of the new company are to be carried on ; and if such companies proposed to be consolidated, or either of them, shall have been organized for the purpose _ of carrying on any part of their or its business in any place out of this State, and the said new company shall propose to carry on any part of its business out of this State, the said agreement shall so state, and it shall also state the name of the town or city and county in which the principal part of the business of said new company within this State is to be transacted ; the amount of capital, the number of shares of the stock into which the same is- to be divided (which capital shall not be larger in amount than the fair aggregate value of the property, franchises and rights of the several companies thus to be consoli- dated, but which may be increased in accordance with the provisions of the act entitled " An act to authorize the formation of corporations for manufacturing, mining, me- chanical or chemical purposes," passed February seven- teenth, eighteen hundred and forty-eight, and any acts amending the same), and the manner of distributing such capital among such consolidated corporations or the holders of the stock of the same, with such other partic- ulars as they may deem necessary. § 2. Such agreement of the directors shall not be deemed to be the agreement of the said corporations so proposing to consolidate until after it has been submitted to the stockholders of each of such corporations respectively, separately, at a meeting thereof to be called upon a notice of at least thirty days, specifying the time and place of such meeting and the object thereof, to be addressed to each of the said stockholders when their place of resi- dence is known to the secretary, and deposited in the post office, and published for at least three successive weeks in one of the newspapers published in each of the counties of this State in which either of the said corpora- tions shall have its place of business, and has been sane- 202 POWERS AND PRIVILEGES UNDER ACT. § 137a. tioned and approved by such stocl^holders by the vote of at least two-thirds in amount of the stockholders present a,t such meetings respectively, voting by ballot in regard to such agreement, either in person or by proxy, each, share of such capital stock being entitled to one vote ; and when such agreement of the directors has been sanc- tioned and approved by each of the meetings of the respec- tive stockholders separately, after being submitted to such meetings in the manner above mentioned, then such agree- ment of the directors shall be deemed to be the agreement of the said several corporations ; and a sworn copy of the proceedings of such meetings made by the secretaries thereof, respectively, and attached to the said agreement, shall be evidence of the holding and of the action of such meetings in the premises. If any stockholder shall, at said meeting of the stockholders, or within twenty days thereafter, object to the said consolidation and demand payment for his stock, such stockholder or said new com- pany, if consolidation take effect at any time thereafter, may apply at any time within sixty days after such meet- ing of the stockholders to the supreme court, at any special term thereof held in any county in which the said new corporation may have its place of business, upon at least eight days' notice to the new company, for the ap- pointment of three persons to appraise the value of said stock, and said court shall appoint three such appraisers and shall designate the time and place of the first meeting of such appraisers, and give such directions in regard. to the proceedings on said appraisement as shall be deemed proper, and shall also direct the manner in which pay- ment for such stock shall be made to such stockholder. The court may fill any vacancy in the board of appraisers occurring by refusal or neglect to serve or otherwise. The appraisers shall meet at the time and place designated, and they or any two of them, after being duly sworn honestly and faithfully to discharge their duties, shall estimate and certify the value of such stock at the time of such dissent as aforesaid, and deliver one copy of their § 137«. POWERS AND PRIVILEGES UNDER ACT. 203 appraisal to the said new company, and another to the said stockholder, if denianded ; the charges and expenses of the appraisers shall be paid by the new company. When the new corporation shall have paid the amount of the appraisal, as directed by the court, such stockholder shall cease to have any interest in the said stock and in the corporate property of the said corporation, and the said stock may be held or disposed of by the said new cor- poration. § 3. Upon the making, sanctioning and approving of the said agreement in the preceding sections mentioned in the manner therein required, and the filing of the dupli- cates or counterparts thereof, and of the verified copy of the proceedings of the meeting of the stockholders men- tioned in the preceding section in the office of the clerk of the county in this State where the operations of such new corporation are to be carried on, and in the office of the secretary of State, then, and immediately thereafter, the said corporations agreed to be consolidated shall be merged into the new corporation provided for in the said agree- ment, to be known by the corporate name therein menr tioned, and the details of such-agreement shall be carried into effect as provided therein. § 4. Such new company shall possess the general powers and be subject to the general liabilities and restrictions expressed in the third title of the eighteenth chapter of the first part of the Revised Statutes, and shall be entitled to enjoy the rights, franchises and privileges possessed by each of the companies from which it has been formed, subject, however, to the liabilities, restrictions, duties and provisions expressed and contained in the act entitled "An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty- eight, and the acts amending or extending the same, so far as the same may be applicable to a corporation organized for the purposes expressed in the said agreement for con- 204 POWERS AND PRIVILEGES DNDER ACT. § 137a. solidation, and for which said new company shall have been organized. § 5. Upon the consolidation of the said corporations, and the organization of such new company, as hereinbefore prescribed, all and singular the rights, privileges, fran- chises and interests of every kind belonging to or enjoyed by the said several corporations so consolidated, and every species of property, real, personal and mixed, and things in action thereunto belonging, mentioned in said agree- ment of consolidation, shall be deemed to be transferred to and vested in and may be enjoyed by such new cor- poration, without any other deed or transfer ; and such new corporation shall hold and enjoy the same, and all rights of property, privileges, franchises and interests in the same manner, and to the same extent, as if the said several companies so consolidated had continued to retain the title and transact the business of such corporations, and the title to real and personal estate, and rights and privileges acquired and enjoyed by either of the said cor- porations shall not be deemed to revert or be impaired by such act of consolidation, or anything relating thereto. § 6. The rights of creditors of any corporations that shall be so consolidated, shall not in any manner be impaired by any act of consolidation, nor shall any liability or ob- ligation for the payment of any money now due or here- after to become due to any person or persons, or any claim or demand in any manner, or for any cause existing against any such corporation, or against any stockholder thereof, be in any manner released or impaired ; but such new cor- poration is declared to succeed to such obligations and liabilities and to be held liable to pay and discharge all such debts and liabilities of each of the corporations that shall be so consolidated, in the manner as if such new cor- poration had itself incurred the obligation or liability to pay such debt or damages ; and the stockholders of the respective corporations so entering into such consolida- tion shall continue subject to all the liabilities, claims and § 138. POWERS AND PEIVILEGBS UNDER ACT. 205 demands existing against them as sucli at or before sucli consolidation ; and no suit, action or other proceeding then pending before any court or tribunal in which any corporation that may be so consolidated is a party, or in which any such stockholder is a party, shall be deemed to have abated or been discontinued by reason of any such consolidation ; but the same may. be prosecuted to final judgment in the same manner as if the said corporations had not entered into the said agreement of consolidation ; or the said new corporation may be substituted as a party in the place of any corporation so consolidated as afore- said with any other corporation or corporations and form- ing such new corporation, by order of the court in which such action, suit or proceeding may be pending. § 7. Any new company organized under this act shall be permitted to prosecute or carry on any kind of business authorized by the charter of either of the companies which have been consolidated.' § 138. Company may change corporate name.— L. 1870, c. 322.^ — § 1. Any incorporation, incorporated company, society or association organized under the laws of this State, excepting banks, banking associations, trust com- panies, life, health, accident, marine and fire insurance companies, may apply, at any special term of the supreme court sitting in the county in which shall be situated its chief business office, for an order to authorize it to assume another corporate name. § 2. Such application shall be by petition, which shall set forth the grounds of the application, and shall be veri- fied by the chief officer of the corporation. Notice of such application shall be published for six weeks in the State 'See^os*, §197a. 2 As amended, L. 1874, c. 76, and L. 1876, c. 280. Consult Matter of Manhattan Dispensary, 7 N. Y. St. Rep. 871 ; Matter U. S. Mercantile Reporting Co. 24 N. Y. St. Rep. 548. 206 POWERS AND PRIVILEGES UNDEK ACT. §138. paper and in a newspaper of every county in whicli such corporation shall have a business office, or, if it have no business office, of the county in which its principal cor- porate property is situated, such newspaper to be one of those designated to publish the session laws ; and it must appear to the satisfaction of the court that such notice has been so published, and that the application is made in pur- suance of a resolution of the directors, trustees or other managers of the corporation applying. § 3. If the court to which such application is made shall be satisfied, by such petition, so verified, or by other evidence, that there is no reasonable objection to such corporation changing its name, it may make an order authorizing it to assume the proposed new corporate name. A copy of said order shall be filed in the office of the secretary of State and with the county clerk of every county in which said corporation has a business office, or, if it have no business office, of the county in which its- principal corporate property is situated, and be published at least once in each week for four weeks in some news- paper in every county where such corporatibn has a busi- ness office, or if it have no business office, in the county in which its principal corporate property is situated, such newspaper to be designated by the court. § 4. "When the requirements of this act shall have been complied with, the corporation applying for a change of name may, from and after the day specified in the order of the court, be known by and use the new corporate name designated in the order of the court. § 5. No suit or legal proceeding, commenced by or in behalf of, or against any corporation, shall abate by reason of a change of its corporate name, made as herein au- thorized. Such change of the corporate name of the said corporation or company shall in no way affect the rights or liabilities of said corporation or company. All obliga- tions of said company or corporation may be enforced §139. POWERS AND PKIVILEGBS UNDBK ACT, 207 against said corporation or company in the changed name,, and all actions and proceedings commenced and pending against said corporation or company at the time said cor- porate name is changed shall be continued in the name in which said action or proceedings were commenced, or the court may, on the application of either party, allow the action or proceeding to be continued in the corporate name to which said corporation or company has been changed. § 139. May hold stock of certain other corporations.' — L. 1866, c. 838.^ — § 3. It shall be lawful for any company, heretofore or hereafter organized under the provisions of this act, or the act hereby amended, to hold stock in the capital of any corporation engaged in the-business of min- ing, manufacturing, or transporting such materials as are required in the prosecution of the business of such com- ^ pany, so long as they shall furnish or transport such ma- terials for the use of such company, and for two years thereafter, and no longer ; and also to hold stock in the capital of any corporation which shall use or manufacture materials, mined or produced by such company ; and the trustees of such company shall have the same power with ' § 1. It shall be lawful for any corporation organized under the laws of this State, and transacting business in it and other States, or foreign countries, except savings banks, to acquire, hold and convey in such States or foreign countries, with the consent thereof, such real estate as 8hall be requisite for such corporation in the convenient transaction of its business, and to invest its funds in the stocks, bonds, or securities of other corporations owning lands situated in this State or such States, provided that loans shall not be made on any stocks upon which divi- dends shall not have been declared continuously for three years, im- mediately before such loans arc made ; and provided further, that such Stocks shall be continuously of a market value twenty per cent, greater than the amount loaned or continued thereon. § 3. All acts and parts of acts inconsistent with the provisions of this net are hereby repealed. L. 1872, c. 146 ; as amended, L. 1875, c. 119; as amended, L. 1883, c. 361. See ante, § 73; Holmes & Griggs Mfg. Co. J!. Holmes & Wessel Metal Co. 23 N. Y. St. Kep. 538. " As amended, L. 1876, c. 358. 208 POWERS AXD PRIVILEGES UNDER ACT. § 140. respect to tlie purchase of such stock and issuing stock therefor as are now given by the law with respect to the purchase of mines, manufactories, and other property nec- essary to the business of manufacturing, mining and other companies. But the capital stock of such company shall not be increased without the consent of the owners of two- thirds of the stock, to be obtained as provided by sections twenty- one and twenty-two of the act hereby amended. § 4. When any such manufacturing company shall be a stockholder in any other corporation, its president or other officers shall be eligible to the office of trustee of such corporation, the same as if they were individually stockholders therein. § 140. May extend duration of corporate existence. — L. 1857, c. 29, § 2.* — Whenever any company, formed under said act, shall have fixed the duration of its corporate ex- istence for a less period than it was privileged to do by the first section of said act, it may, by a vote of the stock- holders representing a majority of the stock, and upon ex- ecuting and acknowledging a new or amended certificate under its corporate seal, signed by the president and two- thirds of its directors or trustees, and filing the same in the county where its business shall be carried on, and in the office of the secretary of State, extend the term of its corporate existence from time to time, to a period not longer in the aggregate than it could have originally fixed the same, and shall thereupon possess all the powers and privileges, and be subject to all the liabilities men- tioned in said act, during such extension of its existence. L. 1867, c. 937, § 1. — Any company or corporation here- tofore formed under any general law of this State, at any time within three years of the expiration of its term of ex- istence, may extend the term of existence of such company ' As amended, L. 1867, c. 13, § 1. Consult aa to the eflfect of not ex- tending existence, Dyeing and Printing Est. v. De Westenberg, N. Y'. Daily Reg. Feb. 19, 1886. § 141. POWEKS AND PEIVlLEaBS UNDER ACT. 209 or corporation beyond tlie time mentioned in tlie original articles of association or certificate of incorporation, by the consent of the stockholders owning two-thirds in amount of the capital stock of such company or corpora- tion, in and by a certificate to be signed by such stock-! holders, and acknowledged or proved, so as to enable them to be recorded, which certificate shall be filed in the ofiSce of the secretary of State, and in the ofiice of the clerk of the county in which its original certificate or articles of association, if any, are filed or recorded ; and the said sec- retary of State and the clerk of such county shall, upon such filing, record the same in the books kept in their re- spective offices for the record of articles of association, and make a memorandum of such record in the margin of the original articles of association, in such book, and there- upon the time of existence of such company shall be ex- tended, as designated in such certificate, for a term not ex- ceeding the term for which said company or corporation was organized in the first instance.^ § 141. May change its place of business. — L. 1864, c. 517. — Any company formed under L. 1848, c. 40, may change its place or places of business by a vote of the stockholders representing two-thirds of the stock, at any meeting of the stockholders regularly called, and execut- ing and acknowledging an amended certificate specifying the names of the towns or cities from and to which the business location of the company is to be changed, and in other respects conforming to the original certificate ; which amended certificate shall be signed by the president and two-thirds of the directors of the company, and shall be filed in the office of the secretary of State, and in the office of the clerk of the county where the business opera- tions of the company are to be carried on, and published weekly, in two papers in the towns or cities from and to which the business operations have been removed, and are ' It is to be noticed that under this provision the stockholders are re- quired to make the certificate. 14 210 POWERS AKD PRIVILEGES UNDER ACT. § 142. to be carried on, for the term of three months. But the property of said company shall be liable to taxation in any county where such property may be, or in which its busi- ness may be done, to the extent of its property in any such county.^ § 142. May carry on bnsiness out of State.— Although a corporation organized in New York cannot migrate from the State and carry on business exclusively else- where, it may, both by the terms of this act * and by the law of comity which exists between the States, carry on its operations without this State.* When it does so, however, it is subject to the laws of the sov- ereignty where it is engaged in business.* This is a rule of great importance to corporations, for the policy of some of the States has been to exclude foreign corporations from their borders, and to impose severe restrictions upon their ability to carry on busi- ness within them, and such legislation is within the power of the States. Thus it has been held proper for a State to enact that no foreign corporation can acquire title as against the State to any of the real estate in its domains.^ The intention, however, to exclude a foreign com- pany from a State, so as to prevent it from acquiring or holding real estate, must be expressed in some posi- ' Pott, § 144. A company may, by complying with L. 1861, c. 170, designate a principal place of business other than that in which its operations are carried on. ' Ante, § 6 ; L. 1857, c. 29, § 8. ' Bank of Augusta ®. Earle, 13 Peters, 519 ; Merrick v. Brainard, 34 N. Y. 208. * Runyan v. Lessee of Coster et al. 14 Peters, 122. * Bunyan e. Lessee of Coster et al. 14 Peters, 122. But the title in such cases will be good except as against the State. Hickory Farm Oil Co. ». BuflEalo, N. Y. & P. R. R. Co. 2 Ry. & Corp. D. J. 470 ; Cir. Ct. U. S. West. Dis. Pa. 1887. § 142. POWERS A:5rD PEIVILEGES UNDER ACT. 211 tive manner.^ As was said in a recent case in the United States Supreme Court ; '■ If the policy of the State or Territory does not permit the business of the foreign company within its limits, or allow the corporation to acquire or hold real property, it must be expressed in some affirmative way ; it cannot be inferred from the fact that its legislation has made no provision for the formation of similar cor- porations, or allows corporations to be formed only by general laws," ^ In a State where there is no such policy deducible " from the general course of legislation, or from the settled adjudications of its highest court"® there is no reason why a New York company should not carry on its business, make contracts, and acquire and hold real estate required for the purposes of its business.* In such a State, however, it will be subject to the local law, or will be held to have consented thereto, and will be amenable to suit by such service of pro- cess as the laws of the State where it transacts busi- ness provide.® By statute, companies organized under New York laws are empowered to acquire and hold real estate in other States or foreign countries.* " Stevens v. Pratt, 101 El. 20C ; Farmers' Loan & Trust Co. of N. T. «. McE[inney, 6 McLean, 7. " Cowell «. Springs Co. 100 U. S. 55. ' Christian Union v. Yonut, 101 U. S. 353. * Bank of Austria v. Earl, 13 Peters. 519; Christian Union v. Yount (mpra) ; Newburgh Petroleum Co. v. Weare, 27 Ohio St. 343 ; Smith «. Alvord, 63 Barb. 415; Angell & Ames on Corp. §§ 104, 109. ' Merchants' Mfg. Co. v. Grand Trunk R'way Co. 63 How. 459 ; Plimp- ton «. Bigelow, 93 N. Y. 592. " L. 1872, c. 146 ; as amended, L. 1875, c. 119; as amended, L. 1883, c. 361 ; anU, § 133. 212 POWERS AND PEIVILEGES UNDER ACT. § 143. § 143. Other special privileges.— Every company may increase or diminish its capital stock, or increase the number of shares of its capital, as we have seen.^ It may also extend its business to any other manu- facturing,, mining, mechanical or chemical business, by complying vpith the terms of the law.^ Any individual, company, association, or private corporation may build (except in cities or villages) a railroad for the use of his or its business.^ Car companies may lay down and maintain rail- road tracks for special purposes in counties other than New York and Kings.* Companies formed under this act for the manufac- ture of gas, have the privileges conferred on gas light companies formed under L. 1848, c. 37.'' Steam heating companies may manufacture, furnish ' Ante, § 81. ' Ante, § 81 ; People ex rel. v. Beach, 19 Hun, 359. See, also, People V. Moore, 60 Hun, 356. ' It shall be lawful for any individual, company, association, or pri- vate corporation to build and operate, solely for the purpose of conduct- ing the business of such individual, company, association, or corpora- tion, a railroad on or across any highway ; provided that consent in writing, and under seal, of the owners of all lands on which any such railway may be built, abutting a highway, be first obtained ; and pro- vided further, that the consent in writing of the supervisor of the town in which any railroad, proposed to be built under this act, is located, be also first obtained ; and provided further, that this act shall not apply to any city or village ; and provided further, that no such railroad shall be so located, graded, built or operated as to interfere with or obstruct the traveled part of any highway, or interfere with or obstruct the pub- lic use of any highway, or any highway intersecting the same. L. 1883, c. 140. * See L. 1880, c. 367. ' L. 1883, c. 497. And gas manufacturing companies may make cer- tain bonds and give mortgages to secure the same by complying with L. 1885, c. 141. See, as to such companies in New York City, L. 1886, c. 321. § 143. POWEES AND PRIVTIiEaSS UNDER ACT. 213 and sell hot water, hot air or steam, and lay pipes for conducting the same in the streets of any city, village, or town of this State, by complying with L. 1879, c. 317, and are required to supply steam for heating under certain circumstances.^ A corporation which has sold any of its realty, may purchase other lands adjacent to its own, notwith- standing any restriction in its charter, by complying with L. 1882, c. 290.^ ' SeeL. 1885, c. 549. " Any corporation which shall have sold and conveyed any part of its real estate, may, notwithstanding any restriction in its charter, pur- chase, take and hold, from time to time, any lands adjacent to those already held by it, provided the supreme court shall authorize such purchase, taking and holding upon the application of such corporation, and on being satisfied that the value of all lands proposed to be so pur- chased shall not exceed that of lands sold and conveyed by the said corporation within the three years next preceding such application. L. 1883, c. 290. Note. — Corporations are prohibited from interposing the defense of usury. L. 1830, c. 173. Laws as to the employment of minors have been adopted as follows: L. 1886, c. 409; L. 1887, c. 463; L. 1887, c. 533. Any person who on behalf of a corporation coerces an employee not to join a labor organization is guilty of a misdemeanor. L. 1887, c. 688. Companies must pay employees in cash. L. 1889, c. 381. CHAPTER XI. TAXATION AND DISSOLUTION. I. Taxation. § 144. Where corporations are taxable. 145. State Tax Law of 1880, as amended. 145o. Object and effect of act. 146. Construction of act. 147. General method of corporate taxation. 147a. Tax upon organization of companies. II. Dissolution. § 148. Provisions as to alteration or repeal of charter. 149. Where charter is annulled the corporation is extinct. 150. Corporation extinct upon expiration of its term of existence. 151. Stockholders cestuis que trust, and not partners after expiration of charter. 153. Dissolution of companies, how effected. § 144. Where corporations are taxable.— Companies formed under this act must state in their certificates of incorporation the town and county where the opera- tions of the company are to be carried on.^ The place so stated in the certificate is the locality where the company will be taxed, for it is assumed that the prin- cipal office of the company is there.^ If incorporators ' Ante, § 6. ' Oswego Starch Factory v. Dolloway, 21 N. Y. 449 ; Western Trans- portation Co. v. Scheu, 19 N. Y. 408; Union Steamboat Co. v. City of Buffalo, 82 N. Y. 351 ; Gutta Percha & Rubber Mfg. Co. v. McMahon, Daily Reg. Apl. 1, 1884; Chesebrough Mfg. Co. v. Coleman, 44 Hun § 144 TAXATION. 215 specify several places where the business is to be car- ried on as the statute authorizes/ the company will be taxed where the principal office is located.^ The statute of 1857 provides that where the business is to be in part conducted out of the State, the place where the operations are to be carried on in the State must be specified, and this shall be taken to be its principal place of business.^ If a company desires to change its place of business, it m'ay do so by complying with the statute, heretofore given,* but " the property of said company shall be liable to taxation in any county where such property may be, or in which its business may be done, to the extent of its property in any such county." ^ 545. In the first case above noted the court said : " The general statute authorizing the formation of corporations of the character of the plaintiS in this action, did not contemplate the creation of companies having no ■specified location in some town or city. The statement which was re- ■quired to be contained in the certificate, and which was actually inserted in the certificate under which this corporation was organized, was in- tended to serve the same purpose as the declaration usually contaiiied in special acts of incorporation, in which it was stated that the business was to be carried on in a particular town or city. The location estab- lished by the certificate could not be changed at the pleasure of the direc- tors or trustees any more than the corporate name, the period of exist- ence, or the object for which the company was formed, or the amount of its stock. * * * It is not intended to state that every corporate act must necessarily be transacted in the particular locality. On the con- -trary, such business as the exigency of its affairs requires to be trans- acted in other parts of the State, or out of the State, may be so trans- acted ; but under this general power it could not change its residence by establishing its principal office in another place." • L. 1853, c. 333 ; ante, § 6. ' Peter Cooper's Glue Factory ». McMahon, 15 Abb. N. C. 314 ; People «. The Assessors of Glean, 15 State Kep. 461. See, also, People «. McLean, 80 N. Y. 354. = L. 1857, c. 29 ; ante, § 6. • Ante, § 141. 'L. 1864, c. 517; anfe, §141. 216 TAXATION. § 144. Where a company has established a principal office apart from the place where its operations are carried on, it may, under certain circumstances, make the locality of the principal office the place of taxation. The following act must, however, be complied with : L. 1861, c. 170, § 2. — No company organized under the provisions of said act to authorize the formation of cor- porations for manufacturing, mining, mechanical or chem- ical purposes, shall be deemed or taken to have a principal office or place for transacting its financial concerns other than that at which the operations of said company are carried on, unless within the month of May in each year the president and treasurer, or a majority of the trustees, shall make duplicate certificates, stating the amount of the then capital of said company, and the portion of such capital not invested in real estate, and stating that such company then has a principal office for transacting its fi- nancial concerns in a county other than that in which the operations of said company are carried on, stating the town or city and county in which such financial office is located, and that the president and treasurer, and a ma- jority of the trustees of said company are then actually residents of the town or city in which such financial office is then located, which duplicate certificates shall be signed and sworn to by the persons making the same, and filed, the one in the clerk's office of the county where the opera- tions of said company are carried on, and the other in the clerk's office of the county in which such financial office shall be. And in case in any year such duplicate certifi- cates shall be made and filed as aforesaid, then during the year succeeding the first day of June next after the filing of such certificates, the personal estate of such company shall be assessed only in the town or ward named in said certificates as that in which such financial office is located. The Eevised Statutes of the State also contain the following provisions regarding the place of taxation : § 145. TAXATION. 217 " The real estate of all incorporated companies liable to taxation shall be assessed in the town or ward in which the same shall lie, in the same manner as the real estate of individuals. " All the personal estate of every incorporated company- liable to taxation on its capital, shall be assessed in the town or ward where the principal office or place for trans- acting the financial concerns of the company shall be ; or if such company have no principal office or place for transacting its financial concerns, then in the town or ward where the operations of such company shall be carried on."^ § 145. State tax law of 1880, as amended.— The pro- visions of the State tax law of 1880, as amended, in so far as they affect corporations under this act, are as follows : * § 1. Hereafter it shall be the^duty of the president or treasurer of every association, corporation or joint-stock company liable to be taxed on its corporate franchise or business, as provided in section three of this act, to make report in writing to the comptroller, annually, on or before the. fifteenth day of November, stating specifically the amount of capital paid in, the date, amount and rate per centum of each and every dividend declared by their re- spective corporations, joint-stock companies or associa- tions during the year ending with the first day of said month. In all cases where any such corporation, joint- stock company or association shall fail to make or declare any dividend upon either its common or preferred stock during the year ending as aforesaid, or in case the divi- dend or dividends made or declared upon either its com- mon or preferred stock during the year ending as afore- said shall amount to less than six per centum upon the par value of the said common or preferred stock, the ' 2 R. S. 990, Art. 1. See Hudson River Bridge Co. ®. Patterson, 74, N. T. 365. See post, §§ 147, 147a. ' L. 1880, c. 542 ; as amended, L. 1881, c. 361 ; L. 1882, c. 151 ; L. 1885, c. 359 and 501 ; L. 1889, c. 198, 353 and 463. Information and blanks for the return under this law may be obtained from the comptroller. 218 TAXATION. § 145. treasurer and secretary thereof, after being duly sworn or affirmed to do and perform the same with fidelity accord- ing to the best of their knowledge and belief, shall, be- tween the first and fifteenth days of November, in each year, in which no dividend has been made or declared as aforesaid, or in which the dividend or dividends made or declared upon either its common or preferred stock amounted to less than six per centum upon the par value of said common or preferred stock, estimate and appraise the capital stock of such company upon which no dividend has been made or declared, or upon the par value of which the dividend or dividends made or declared amounted to less than six per centum, at its actual value in cash, not less, however, than the average price which said stock sold for during said year ; and when the same shall have been so truly estimated and appraised, they shall forthwith forward to the comptroller a certificate thereof, accompanied by a copy of their said oath or affirmation, by them signed, and attested by the magistrate or other person qualified to administer the same ; provided that if the comptroller is not satisfied with the valuation so made and returned, he is hereby authorized and empowered to make a valuation thereof and to settle an account upon the valuation so made by him for the taxes, penalties and interest due the State thereon ; and any association, cor- poration or joint-stock company dissatisfied with the ac- count so settled, may within ten days appeal therefrom to a board consisting of the secretary of State, attorney-gen- eral and State treasurer, which board, on such appeal, shall affirm or correct the account so settled by the comp- troller, and the decision of said board shall be final ; but such appeal shall not stay proceedings unless the full amount of the taxes, penalties and interest as due on said account, as settled by the comptroller, be deposited with the State treasurer. § 2. If the said officers of any such corporation, joint- stock company or association shall neglect or refuse to furnish the comptroller, on or before the fifteenth day of ^ 145. TAXATION. 219 Ifovember, of each and every year, with the report ^ afore- said, or the certificate of appraisement and oath or affirm- ation, as the case may be, as required by the first section of this act, or to pay the tax imposed on such corporation, company or association within fifteen days after the first of January, as provided in the fourth section of this act, it shall be the duty of the comptroller of the State to add ten per centum to the tax of said corporation, company or association, for each and every year for which such report or certificate of appraisement and oath or affirmation were not so furnished, or for which such tax shall not have been paid, which percentage shall be assessed and collected with the said tax in the usual manner of assessing and collect- ing such taxes ; provided, that if said officers of any such corporation, joint-stock company or association shall in- tentionally fail to comply with the provisions of the first or fourth section of this act for one year, the comptroller shall report the fact to the governor, who, if he shall be made satisfied that such failure was intentional, shall thereupon direct the attorney-general to take proceedings, in the name of the people of this State, to declare the charter or privileges of said corporation, joint-stock com- pany or association forfeited, and at an end ; and for such intentional failure duly found, the charter and privileges of every such corporation, company or association shall cease, end, and be determined. § 3. Every corporation, joint-stock company, or associ- ation whatever, now or hereafter incorporated, organized, or formed under, by, or pursuant to law in this State or in any other State or country, and doing business in this State, except only savings banks and institutions for savings, life insurance companies, banks, foreign insurance companies, manufacturing or mining corpora- tions, or companies wholly engaged in carrying on manu- facture, or mining ores within this State, and agricul- tural and horticultural societies or associations, which ' Cerbat Mining Co. v. State, 29 Hun, 81. 220 TAXATION. § 145. exceptions, however, shall not include gas companies, trust companies, electric or steam-heating, lighting and power companies shall be liable to and shall pay a tax, as a tax upon its franchise or business, into the State treasury annually, to be computed as follows : If the dividend or dividends made or declared by such cor- poration, joint-stock company or association, during any year ending with the first day of November, amount to six or more than six per centum upon the par value of its capital stock, then the tax to be at the rate of oncrquarter mill upon the capital stock for each one per centum of dividends so made or declared ; or if no dividend be made or declared, or if the dividend or dividends made or de- clared do not amount to six per centum upon the par value of said capital stock, then the tax to be at the rate of one and one-half mills upon each dollar of the valuation of the said capital stock made in accordance with the pro- visions of the first section of this act ; and in case any such corporation, joint-stock company or association shall have more than one kind of capital stock, as, for instance, common and preferred stock, and upon one of said stocks a dividend or dividends amounting to six or more than six per centum upon the par value thereof has been made or declared, and upon the other no dividend has been made or declared, or the dividend or dividends made or declared thereon amount to less than six per centum upon the par value thereof, then the tax shall be at the rate of one- quarter mill for each one per centum of dividend made or declared upon the capital stock, upon the par value of which the dividend or dividends made or declared amount to six or more than six per centum, and in addition there- to, tax shall be charged at the rate of one and one-half mills upon each dollar of a valuation, made also in accord- ance with the provisions of this act, of the capital stock upon which no dividend was made or declared, or upon the par value of which the dividend or dividends made or declared did not amount to six per centum. § 4. It shall be the duty of the treasurer or other officer § 145. TAXATION. 221 having charge of any corporation, joint-stock company or association upon which a tax is imposed by either of the preceding sections of this act, to transmit the amount of said tax to the treasury of the State within fifteen days after the first day of January in each and every year.^ ***** § 8. The corporations, joint-stock companies and associ- ations mentioned in this act as taxable shall hereafter be exempt from assessment and taxation for State purposes, except upon their real estate, and as herein provided ; but they shall in all other respects be liable to assessment and taxation as heretofore. § 9. The taxes imposed by this act, and the revenue de- rived therefrom, shall be applicable to the payment of the ordinary and current expenses of the State, and if any corporation, joint-stock company, person, partnership or association shall neglect or refuse to pay any tax by this act required to be paid, the same may be sued for in the name of the people of the State, and recovered in any court of competent jurisdiction, in an action to be brought by the attorney-general at the instance of the comp- troller. § 10. All obligations, liabilities and taxes heretofore incurred or imposed under said act, chapter five hundred and forty-two of Laws of eighteen hundred and eighty, are saved, and shall be enforced as if the said act had not been hereby amended. § 11. The amount of capital stock which shall be the basis for tax under the provisions of section three of this act, in the case of every corporation, joint-stock company and association liable to taxation thereunder, shall be the amount of capital stock employed within this State. In making to the comptroller the report in writing or cer- tificate of estimate and appraisal of the capital stock of ■ § 5 applies only to insurance companies, §§ 6 and 7 provide for the payment of an additional tax by corporations organized for transporta- tion, telegraph, telephone or express purposes. 222 TAXATION. § 145. such corporation, joint-stock company or association pro- vided for by the first section of this act, it shall be the duty of the president or treasurer thereof, as the case may be, to state specifically the amount of capital stock em- ployed within this State, of such corporation, joint-stock company or association. Whenever the comptroller is dissatisfied with such report or certificate of estimate and appraisal, as the case may be, of any corporation, joint- stock company or association whose capital is only par- tially employed within this State, he is authorized and empowered to ascertain, fix and determine the amount of capital employed within this State, and to settle an ac- count for the taxes and penalties due the State thereon. § 12. Whenever any corporation, joint-stock company or association, liable to make reports or certificates of estimate and appraisal to the comptroller, under any of the provisions of this act, shall neglect or refuse to make such report or reports within the time prescribed in this act, or shall make such report or certificate as shall be un- satisfactory to the comptroller, the comptroller is author- ized to examine, or cause to be examined, the books and records of any such corporation, joint-stock company or association, and to fix and determine the amount of tax and penalty due in pursuance of the provisions of this act, either from the said books and records, or from any other data in his possession which shall be satisfactory to him, and to settle an account for said tax and penalty, together with the expenses of such examination, against said cor- poration, joint-stock company or association. § 13. Whenever the comptroller shall deem it necessary or important to examine any person as a witness upon any subject or matter relating to the amount of capital stock of such corporation, or to use, examine or inspect any book, account, voucher or document in possession of any officer of such corporation, or other person, or under his control, relating to such capital stock and tax, he shall have the power to issue a subpoena in proper form, com- § 145. TAXATION. 223 manding such person or officer to appear before him or some person designated as commissioner by him by an appointment in writing, filed in the office of such comp- troller, at a time and at the place where the principal office of such corporation is situated within this State in such subpoena specified, to be examined as a witness, and such subpoena may contain a clause requiring such person or officer to produce on such examination all books, papers and documents in his possession or under his control, re- lating to the capital stock of such corporation and the amount thereof employed within this State. Such sub- poena shall be served upon the person named by showing him the original subpoena and delivering to and leaving with him at the same time a copy thereof. The comp- troller or the commissioner so designated by him as afore- said may administer oaths to such persons as he may de- sire to examine, so brought before him by subpoena or otherwise, and examine them on oath in relation to any matter which may in any wise be material in determining the amount of the tax to be paid by any such corporation, joint-stock company or association as aforesaid. When- ever any person duly subpoenaed to appear and give evi- dence as aforesaid, or to produce any books and papers as hereinbefore provided, shall neglect or refuse to appear or to produce such books and papers according to the exi- gency of such subpoena, or shall refuse to testify before said comptroller or the commissioner so designated by him, or to answer any proper and pertinent question, he shall be deemed in contempt, and thereupon any justice of the Supreme Court of the judicial district within which the principal office of such corporation within this State is situated shall, upon the motion of the comptroller, based upon affidavit showing the commission of the offense, either, first, make an order requiring the accused to show cause before him, at a time and place specified therein, why the accused should not be punished for the alleged offense ; or, second, issue a warrant of attachment directed to the sheriff of a particular county, or generally directed to the 224 TAXATION. § 145. sheriff of any county wliere the man may be found, com- manding him to bring him before said justice either forth- with or at a time and place therein specified, to answer for the alleged offense. On the return of said attachment and the production of the body of the defendant therein the said justice shall have jurisdiction in the matter, and the person charged may purge himself of the contempt in the same way, and the same proceedings shall be had, and the same penalties may be imposed and the same punishments inflicted as in the case of a witness subpoenaed to appear and give evidence as is prescribed in title three, chapter seventeen of the Code of Civil Procedure, in proceedings to punish a contempt of court other than a criminal con- tempt. § 14. The comptroller is hereby authorized and directed, upon application to him made by any corporation, joint- stock company or association, to make, settle and adjust all accounts against such corporation, joint-stock company or association, for all taxes and penalties arising under the third section of this act since the twelfth day of May, a. d. eighteen hundred and eighty-two, by taking as a basis for taxation the capital employed within the State by such corporation, joint-stock company or association. Pro- vided, however, that such corporation, joint-stock com- pany or association shall not be entitled to the benefit of a settlement upon such basis unless it shall have secured such adjustment and paid into the treasury the full amount of the taxes so settled, before the first day of August, eighteen hundred and eighty-five, nor shall this section apply to the case of any tax for which suit shall have been heretofore brought by the attorney-general, in which suit the trial has been commenced, or in which judgment shall have been entered heretofore for the people for the amount of said tax. Any corporation, joint-stock company or association whose capital has heretofore been only par- tially employed within this State, and which is now liable for taxes arising under the third section of this act since §145. TAXATION. ^25 the twelfth day of May, a.d. eighteen hundred and eighty- two, and which are still due and unpaid^ may, at any time prior to the first day of August, eighteen hundred and eighty-five, pay to the State treasurer, for the use of the State, in full discharge of the same, such sum of money as shall be fixed by the comptroller as the tax due for the said period by the said corporation, joint-stock company^ or association, upon the basis of the capital employed within the State^. Provided, that this section shall not apply to the case of any tax for which suit may have here- tofore been brought by the attorney-general, and for which judgment shall have been entered therein, or if in such suit trial has been commenced. § 15. All accounts hereafter settled by the comptroller agreeably to the provisions of this act shall bear interest' from a date thirty days after the sending of notice of settle- ment, hereinafter provided for, until full payment thereof shall be made, § 16. It shall be the duty of the comptroller after making with any partnership, corporation, joint-stock company or association, liable to taxation under any of the provisions of this act, the settlement of such taxes, to forthwith send notice hereof, in writing, to such person, partnership, cor^ 'poration, joint-stock company or association, which notice may be sent by mail to the post office address of such cor- poration, joint-stock company or association. § 17. No writ of certiorari to review the determination and settlement of the comptroller as to the amount of capital used within the State by any corporation, joint- stock company or association, and as to the tax and penalty to be paid thereon, shall be granted, except application therefor be made within thirty days after service upon such corporation, joint-stock company or association by the comptroller of notice of such settlement. Nor shall any such writ be granted except the papers upon which motion therefor is to be made, including notice of motion, shall have been served upon the comptroller at least eight daya 15 226 TAXATION. § 145. before such motion, nor unless the corporation, joint stock company or association applying for such writ shall, before making such motion, have deposited with the State treas- urer the full amount of taxes, penalties and charges so settled and adjusted by the comptroller, and filed with him an undertaking in such amount, and with such suf&cient sureties as shall be approved by one of the justices of the Supreme Court of this State, to the effect that if said writ be vacated and the determination of the comptroller sus- tained, the applicant for the writ will make payment of all costs and charges which may accrue against such ap- plicant in the prosecution of such writ, including costs on all appeals. § 18. After the expiration of thirty days from the service by the comptroller of notice of the settlement aforesaid, if no proceedings shall have been taken to review the same, as provided by this act, or if the deposit with the State treasurer of the amount of the said settlement, together with the undertaking, as provided for by this act, shall not then have been made, it shall be lawful for the comptroller to issue his warrant or warrants under his hand and seal of office directed to the sheriff of any county in this State, commanding him to levy upon and sell the goods and chattels, lands and tenements of the said corporation, joint- stock company or association found within the said county, for the payment of the amount of said settlement, together with interest thereon and costs of executing such warrant, and to return the said warrant to the comptroller, and pay to the State treasurer the money which shall be collected by virtue thereof, by a certain time therein to be specified, not less than sixty days from the date of such warrant. Such warrant shall be a lien upon and shall bind the per- sonal estate of the person, partnership, corporation, joint- stock company or association against whom it shall be issued, from the time an actual levy shall be made by vir- tue thereof, and the sheriff to whom such warrant shall be directed shall proceed upon the same in all respects with the like effect and in the same manner as prescribed by § 145. TAXATION. 227 law in respect to executions issued against property upon judgments rendered by a court of record, and shall be en- titled to the same fees and costs for his services in execut- ing the same, to be collected in the same manner. § 19. The comptroller may at any time revise and read- just any account theretofore settled against any person, association, corporation or joint-stock company, by himself or any preceding comptroller, for taxes arising under this act or the act to which it is an amendment, whenever it shall be made to appear by evidence submitted to him that the same has been illegally paid or so made as to include taxes which could not have been lawfully demanded, and shall resettle the same according to law and the facts, and charge or credit as the case may require the di£ference, if any, resulting from such revision and resettlement upon the current accounts of such person, association, corpora- tion or joint-stock company. § 20. The action of the comptroller upon any applica- tion made to him by any person or corporation for a re- vision and resettlement of accounts as provided in this act, may be reviewed, both upon the law and the facts, upon certiorari by the Supreme Court, at the instance either of the party making such application or of the attorney- general, in the name and in behalf of the people of this State, and for that purpose the comptroller shall return to such certiorari the accounts and all the evidence sub- mitted to him on such application, and, if the original or resettled accounts shall be found erroneous or illegal by that court, either in point of law or of fact, the said ac- counts shall be there corrected and restated by the said Supreme Court, and from any such determination of the Supreme Court an appeal may be taken by either party to the Court of Appeals as in other cases.^ ' §§ 19 and 20 were added by L. 1889, c. 463. L. 1886, c. 366, pro- vide as follows: § 1. For the better enforcement of chapter five hundred and forty-two, of the laws of eighteen hundred and eighty, and the acts amendatory thereof, it shall be lawful for any person 228 TAXATION. § 145a. § 145a. Object and effect of act.— The object and effect of the foregoing act is to impose upon all corporations doing business in the State of New York an annual franchise tax for general State purposes. The amount of this tax is determined by the comptroller of the State upon reports required to be sent him by the companies. In case the dividends paid by a company during each year to the first day of November amount to six per centum or more upon the par value of its capital stock, then the tax is at the rate of one-quarter mill upon the capital stock for each one per cent, of dividend made or declared ; but in case no dividend or dividends of less than six per centum have been made or declared, then the tax is at the rate of one and one-half mills upon each dollar of the valuation of the capital stock of the company.^ The act provides fully for as- certaining the value of the stock, and for enforcing the having knowledge of the evasion of taxation under said acts by any association, corporation or joint stock company liable to taxation thereunder, to report such fact to the comptroller, together with such information as may be in his possession as may lead to the recovery of such taxes from said association, corporation or joint-stock company, and whenever in the opinion of the attorney-general or comptroller the interests of the State require it, either of them is hereby authorized to employ such person so reporting such evasion to assist in the collection and preparation of evidence and in the prosecution and trial of suits for such taxes ; and so much of the sum collected from such delinquent association, corporation or joint-stock company, by reason of such report or such services, as shall have been agreed upon by such person and the attorney-general or comptroller as a compensation therefor, shall be paid to such person, provided that the sum so paid shall not exceed ten per centum of the amount so collected ; and provided further, that nothing whatever shall be paid to such person for such purpose unless there shall be a recovery of taxes from such delinquent association, corporation or joint-stock company by reason of such report or such services. ' See ante, § 145, subd. 3 ; and as to rate of taxation where a company has preferred stock, see Id. § 146. TAXATION. 229 payment of tlie tax. Companies employing only a part of their capital in this State will only be taxed on the amount employed here.^ § 146. Construction of act.— The tax imposed by this act is constitutional.^ It is a tax upon "franchise," and is not a property tax. " It is levied on corpora- tions alone, and one of the penalties provided for its non-payment is the forfeiture of their charter. The amount of the tax is dependent upon their business prosperity, as evidenced by their capacity to declare dividends, instead of upon the value of the corporate property, and it is made payable by the corporations affected directly to the State authorities. The income of these corporations is referred to only as a means of arriving at the measure of t'heir liability," * There is no force in the objection to the law " that various corporations subjected to its provisions are thereby subjected to unequal or double taxation." The object under the law to which the tax is to be applied is so stated as to be a compliance with art. 3, § 20, of the State constitution.* The Court of Appeals has recently held that a division among stockholders of a surplus fund, earned and accumulated prior to January, 1880, was not a dividend within the meaning of this ' See amendments 1881, 1885, ante, pp. 234, 235. See, also. People ». Horn Silver Mining Co. 105 N. Y. 76. " People ». Horn Silver Mining Co. 105 N. Y. 76 ; People v. Gold & Stock Tel. Co. 98 N. Y. 67; People v. Home Ins. Co. 93 N. Y. 338. The first report was to be made in November, 1880, and the first tax to be paid in January, 1881. People v. Spring Valley H. G. Co. 92 N. Y. 383. ' People, &c. ». Home Insurance Co. 93 N. Y. 328. ' Id. See, also, Gordon v. Comes, 47 N. Y. 611 ; People ®. N. Y. Floating and D. D. Co. 92 N. Y. 487. 230 TAXATION. § 146. law, and that even if it were '• a dividend within the letter of the act, to construe it as such would be con- trary to its spirit and intent." ^ Corporations taxable under these laws are still sub- ject to the payment of local taxes ^ under general stat- utes,^ and to the payment of all taxes upon their real estate,* but they have no taxation for State purposes, except that imposed hereunder.* The Legisleture in excepting from these taxes manufacturing companies carrying on manufacture in this State did not intend to refer to manufacturing cor- porations organized under the General Manufacturing Act alone ; those organized under the Business Act, and all corporations whose chief business is the manufacture and sale of artificial products, are within the terms of the exception.* A corporation organized " for the purpose of con- structing, using and providing one or more dry docks or wet docks, or other conveniences and structures for building, raising, repairing and coppering vessels and steamers of every description," is not a manufacturing company within this exception,'' and a corporation en- ■ People V. The Albany Ins. Co. 92 N. Y. 458. ^ People T. Davenport et al., Trustees, 91 N. Y. 574; People «. Fire Association, 93 N. Y. 311 ; People v. Commissioners, 26 Hun, 446. » Poit, % 147. * L. 1881, c. 361, § 8; ante, § 145. See People ■). Gold and Stock Tel. Co. 98 N. Y. 67. s See further, as to Act : Central Trust Co. v. N. Y. C. & N. R. R. Co. 110 N. Y. 250; People ■b. Assessors, 106 N. Y. 671; People ». Commia- sioners, 101 N. Y, 651 ; People v. Warren, 109 N. Y. 576; People ». Parker, 26 State Rep. 098; People v. Commissioners, 104 N. Y. 240; People c. Commissioners, 99 N. Y. 254. = Nassau Gas Light Co. t. City of Brooklyn, 89 N. Y. 409. ' People V. N. Y. Floating and Dry Dock Co. 92 N. Y. 487, and 1 1 Abb. N. C. 40. § 146. TAXATION. 231 gaged in the business of collecting, storing, preserving ice and preparing it for sale is not.^ It has also been recently held that the process of refining bullion at the assay office was not a manufacture, and that a com- pany sending bullion there to be refined, and paying therefor was not a manufacturing company.^ ' People V. Knickerbocker Ice COi 99 N. Y. 181. A new company formed from an old one but with increased capital must pay tax. ■People V. Martins, 10 State Rep. 650. ' People v. Horn Silver Mining Co. 105 N. Y. 76. In this case Earl, J., said: "According to common comprehension and the ordinary use of language, the process of refining this bullion at the assay office was not a manufacture, and the assay office was not a manufacturing establishment. But, whether it was or not, the de- fendant which employed the assay office for a compensation to refine the bullion wa's not itself engaged in the manufacture. It was no more a manufacturer than the farmer who takes his grain to the grist- mill to be ground into flour, for a part of the grain or a money compensa- tion, or who takes his wool to a cloth manufacturer to be made into cloth for a compensation, and then to be returned to him. A railroad company may manufacture all its cars and engines, and yet it cannot be properly classified as a manufacturing company. The definition of the terms ' manufacturing corporations ' and ' manufacture,' as derived from some decisions and statutes to which our attention has been called, is of little service in th6 construction of the language of this act. These terms must be construed in view of the general purposes of the acta in which they are used, and the general phraseology found in connection with them. "To give effect to the legislative intention, their ordinary meaning may be enlarged or restricted. Under this section, it is not sufficient to exempt a corporation from taxation that it is a manufacturing corpora- tion, but it must also carry on manufacture within this State. " In exempting such corporations from taxation under the act, the legislature may be supposed to have been influenced by two things: — a desire to encourage manufacture within the State, and the fact that a corporation carrying on any manufacturing business within the State would necessarily have visible, tangible property liable under the general laws of the State to taxation. We are, therefore, constrained to hold that the defendant cannot be allowed the exemption claimed.'' See further as to what is a manufacturing company ; Evening Jour- nal Association v. State Board of Assessors, 18 Vroom (N. J.), 36 ; Print- ing Co. V. Assessors, 33 Vroom (N. J.), 75. 232 TAXATION. § 147. § 147. General method of corporate taxation.— In ad- dition to the State tax law of 1880, which imposes a franchise tax for state purposes, all companies formed under the act are subject to the general tax laws of the State. Corporations are not taxed upon their personal estate in the same manner as individuals. The scheme of corporate taxation does not look to the valu- ation of specific chattels, but the capital stock and sur- plus of the company is taxed as a whole.^ From the ' L. 1857, c. 456, provide that : " The capital stock of every company liable to taxation, except audi part of it as shall have been excepted in the assessment-roll, or as shall have been exempted by law, together with its surplus profits or reserved funds, exceeding ten per cent, of its capital, after deducting the assessed value of its i^al estate, and all shares of stock in other corporations actu- ally owned by such company, which are taxable upon their capital stock under the laws of this State, shall be assessed at its actual value, and taxed in the same manner as the other personal and real estate of the county.'' And the Revised Statutes further provide as follows: See 1 R. S. c. 13, title 4: " Section 1. All moneyed or stock corporations deriving an income or profit from their capital, or otherwise, shall be liable to taxation on their capital in the manner hereinafter prescribed. " § 2. The president, cashier, secretary, treasurer, or other proper of- ficer, of every such incorporated company, shall, on or before the first day of July in each year, make and deliver to the assessors, or one of them, of the town or ward in which such company is liable to be taxed, according to the provisions of the sixth section of the second title of this chapter, a written statement specifying : " 1. The real estate, if any, owned by such company, the towns or wards in which the same is situated, and the sums actually paid therefor. " 2. The capital stock actually paid in and secured to be paid in, ex- cepting therefrom the sums paid for real estate, and the amount x>f such capital stock held by the State, and by any incorporated, literary or charitable institution ; and, " 3. The town or ward in which the principal oflice or place of trans- acting the financial business of such company is situated ; or, if there be no such principal ofiBce, the town or ward in which its operations are carried on, or in which it is liable to be taxed under the provisions of this chapter. § 147. TAXATION. 233 ^valuation put upon the capital stock certain deductions are allpwed by statute, some of which have been ex- plained in recent decisions.^ Prominent among these is the " assessed value of the real estate" of the com- pany.'' This deduction is allowed because the real . , « § 3. The president or other proper officerof every such company shall also deliver to the comptroller, on or before the first day of July in each year, a written statement, containing the same matters required by the foregoing section, to be specified in the statement to be delivered to the ^assessors. The statements required by this and the preceding section of this title, shall be certified under the oath of the said president or other proper ofiScer to be in all respects just and true. " § 4. If the statements above required, or either of them, shall not be furnished by any company to the assessors and to the comptroller, within thirty days after the time above provided, the company neglecting to furnish such statements, or either of them, shall forfeit to the people of this State for each statement omitted to be furnished the sum of two hundred and fifty dollars ; and it shall be the duty of the comptroller to furnish the attorney-general with an account of all companies that shall neglect to render such lists, that he may prosecute for the penalties here- by imposed. "§ 5. If any company that shall be prosecuted for any such penalty ishall pay the costs of prosecution and furnish the statement required, the comptroller, if he shall be satisfied that the omission was not willful, may, in his discretion, discontinue such suit." The sixth section specifies how the assessors shall enter the property of the company in their assessment rolls. See, also, L. 1863, c. 654; L. 1860, c. 825; Davies' System of Taxa- tion in N. T. p. 88, et seq; Saxton's Tax Laws, chapter IIL ' People V. Coleman, 113 N. Y. 565; People v. Commissioners, 104 N. T. 340 ; People «. Commissioners, 95 N. Y. 554 ; People ». McLean, 80 N. Y. 354; Oswego Starch Factory v. Dolloway, 31 N. Y. 419. See Davies' System of Taxation, p. 8. " See People ». Asten, 100 N. Y. 597, and cases, note 1, above. , In People ex rel. The Fairfield Chemical Company ». Coleman, 115 N- Y. 178, Peckham, J., says: " There is no evidence in this case that the assessed value is not the actual value of the Connecticut property. The afiSdavit upon which to procure the writ of certiorari does state that the whole capital stock of $150,000 is invested in real and personal property necessary for its business in the State of Connecticut, and in the statement filed by the relator with the commissipner of taxes it is stated 234 TAXATION. § 147. estate of a corporation is taxed in the same manner as the real estate of an individual, in the locality where it is situated.^ Where the statutory deductions are made from the valuation of the capital and surplus the company is taxed on the valuation remaining. No deduction for debts is allowed.* But in determining the value of the that the whole capital stock was issued in payment of its real estate situated in the town of Black Rock in the State of Connecticut. Neither allegation is equivalent to a statement that the actual value of the real estate is $130,000. " Yet it has been assumed that the actual value was that sum because the whole capital stock, amounting to such sum, was issued in payment therefor. It may have been thus issued and the assessed value may still have been the actual value of the property. We think it should be so assumed. To take the assessed value of real property in another State (where it is practicable and convenient to obtain such fact), as the actual value in the absence of some controlling circumstance which shows the contrary, is more apt to work substantial justice than any other mode. " The general purpose of statutes relating to assessments and taxation is to bring within their grasp all property at its actual value. When the real estate is within our own jurisdiction the assessed is regarded as the actual value thereof. Generally the same theory holds good in regard to real property which is situate without the State. If the real property of the relator were situate here the assessed value of the real property, $43,400, would, of course, be the sum to be deducted from the value of the capital stock, even though $150,000 had been paid for such property. By the relator's contention it is to have the benefit of a deduction of $150,000 from the value of its capital stock, simply because its real property, which is the cause of deduction, is situated in Connecticut, although it is only taxed there at a valuation upon such real estate of $43,400. We think that sum may properly be assumed to be its value." ' Ante, § 144. If there is no evidence that the actual value of real estate out of this State is diflferent from its assessed value the deduction will be made in accordance with the assessed value. People c. Cole- man, 115 N. Y. 178. The price paid for real estate out of this State is, in the absence of other evidence, a -proper test of its actual value, and may be deducted from the valuation of its capital stock. People r>. Com- missioners, 104 N. Y. 340. The franchise of a company is not real estate. Id. ■' People V. Asten, 100 N. Y. 597. § 147a. TAXATION. 235 capital stock of the company the commissioners should consider its market value, its value as an interest- bearing investment, and its value as representative of the assets and debts of the company.^ Wide range is allowed the commissioners in determining the value of the stock. Their valuation may be reviewed, but not in the Court of Appeals.^ If a company is omitted from the tax list by mistake, it may be taxed the next year.* The time of assessment, in New York City, is the second Monday in January, but in the State generally, the first day of July.* The owner or holder of stock in any incorporated com- pany liable to taxation on its capital, shall not be taxed as an individual for such stock.' § 147a. Tax upon organization of companies.— As we have seen * every company upon its organization must pay to the State a tax of one-eighth of one per cent, on its capital for the privilege of organization. The certificates by which the companies get their life will not be received for record until the tax is paid, A similar tax must be paid on every increase of capital. The Court of Appeals has held that where a railroad company is reorganized by purchasers at a mortgage sale, under the power given them by the statutes of the State, this new company must pay the tax for or- ganization.' The State authorities are reported to ' People V. Coleman, 107 N. T. 541 ; People v. Asten, 100 N. Y. 597. See cases, note 1, p. 334. ' People V. Warren, 109 N. Y. 57i6. ' See L. 1865, c. 453; People ». Bd. Assessors, 92 N. Y. 430. ' Davles' System of Taxation, pp. 6, 7. ' 2 R. S. (7th Ed.) p. 983. • AnU, §§ 6, 8. ' People V. Schurtz, 110 N. Y. 443; compare § 136, ante. 236 DISSOLUTION. §§ 148-150. hold that a company formed by the consolidation of two or more companies under the Consolidation Act of 1884,^ must also pay this tax.* However this ques- tion may be finally settled, there is much ground for claiming that the case is quite different from that decided by the Court of Appeals in People v. Schurtz.* DISSOLUTION. § 148. FrOTlsions as to alteration or repeal of charter. — Section 19 of Act. The Legislature may at any time alter, amend, or repeal this act, or may annul or repeal any incorporation formed or created under this act ; but such amendment or repeal shall not, nor shall the dissolu- tion of any such company, take away or impair any rem- edy given against any such corporation, its stockholders or officers, for any liability which shall have been pre- viously incurred. § 149. Where charter is annulled the corporation is extinct. — By the foregoing provisions the Legislature retains in its own hands the power to dissolve, and by legislative action put an end to, any corporation incor- porated under this act. Where the charter of a corporation is annulled by act of the Legislature, the corporation is extinct.* § 150. Corporation extinct upon expiration of its term of existence.— So, too, upon the expiration of the term ■ AnU, § 137o. ' Consult People v. Schurtz, 110 N. Y. 443; People v. Cook, 47 Hun, 467 ; People v. Martins, 10 State Rep. 650. ' 110 N. Y. 443. *Sturges D. Vanderbilt, 73 N. Y. 384; Merrill v. Suffolk Bank, 31 Me. 57 ; Mumma v. Potomac Co. 8 Pet. 286. § 151. DISSOLUTION. 237 of existence of a corporation as limited in its certificate of incorporation, it becomes extinct ; no formal de- cree of dissolution is necessary, and a judgment there- after rendered against it in an action then pending is void. This does not conflict with the cases already cited,* to the effect that until a corporation is declared dis- solved by the judgment of a court of competent juris- diction, creditors may proceed against it by its corpo- rate name, and that it remains in esse until so declared dissolved. Those will be found to relate to a dissolu- tion in consequence of insolvency, or non-user, or mis- user of the corporate franchises, or some other cause of forfeiture ; but dissolution by the expiration of its char- ter is one declared by the act of the Legislature itself. The limited time of existence bias expired, and no ju- dicial determination of that fact is requisite. The cor- poration is de facto dead.^ § 151. Stockholders cestnis que trust, and not partners after expiration of charter. — After the charter of a manufacturing corporation had thus expired by statu- tory limitation, its general agent, appointed during the existence of the corporation, continued to carry on the business and to contract debts, and for one of these debts he gave a promissory note in the name of the corporation. This note was unpaid, and an action brought thereon against the stockholders of the de- funct corporation, seeking to charge them as makers of the note, on the ground that, their charter having ex- pired, they were partners. It appeared in this action ' Ante, § 136. = Sturges «. Vanderbilt, 73 N. Y. 384, 390 ; People ». Walker, 17 N. Y. 503; Greeley®. Smith, 3 Story's 0. C. R. 658. 238 DISSOLUTION. § 152, that the defendants, six months after the expiration of the charter, received dividends as from the earnings of the corporation ; but that they were then and there- after ignorant of the- fact that the corporation had ceased to exist. It also appeared, that the credit wa» given to the supposed corporation, and not to the de- fendants as individuals or partners ; and the court held, that, as upon the expiration of the charter, the title to the corporate property vested in the trustees then in oflSce, in trust for the creditors and stockhold- ers,^ therefore the defendants, being merely cestuis que trust, were not, on the facts appearing, chargeable as partners.^ § 153. Dissolution of companies, how effected. — A for- feiture of the franchises of a corporation, unless there be specific provisions by statute, can only be enforced by the sovereign power to which the corporation owes its life, in some proceeding instituted on behalf of the sovereignty.^ The special statute provisions under and by virtue of which the corporations now under consideration, among others, can be dissolved,* either by voluntary ' 1 R. S. 600, § 1. ' The Central City Savings Bank v. Walker, 66 N. T. 424. See, also, Fuller V. Rowe, 57 N. Y. 23. ' Denike ». N. Y. & R. Lime, &c. Co. 80 N. Y. 599 : Byrne v. N. Y. Brick & Cement Co. 16 Weekly Dig. 139; Moran b. Lydecker, 11 Abb. N. C. 298; 37 Hun, 583 ; ante, § 126. ' Assignment by companies were prohibited by sec. 4, title 4, c. 18, part 1 R. S. (R. S. 8th Ed. p. 1534). This statute was repealed by L. 1882, c. 402, § 39, but by L. 1884, c. 434, the repealing act was amended so as to leave the prohibition in effect. See Paulding «. Chrome Steel Co. 94 N. Y. 334; Sibell t. Remsen, 33 N. Y. 95; and as, to what is not a violation of the Statute, Vamum v. Hart, N. Y. Ct. Appeals, Jan. 14, 1890; 41 Alb. L. J. 191; 38 State Rep. 362. § 152. DISSOLUTION. 239 or involuntary dissolution, are collected and set out at great length in the Code of Civil Procedure.^ These must be carefully studied and closely fol- lowed in every case where a dissolution is desired ; as the courts demand a strict compliance with their re- quirements.* Their general nature, applying as they do, with specified exceptions, to all New York corporations,, and the fact that they constitute a portion of the present Code, join to render any more particular state- ment or examination of them unnecessary in this work.^ ' See, as to Voluntaby Dissolution, Code of Civ. Proc. §§ 2419 to 2431, inclusive. See Bliss' Edition, Vol. II, pp. 543-552, and cases there cited ; Matter of the Mart, 22 Abb. N. C. 227 ; In re Dramatic Fund AsBo. 5 Ry. & Corp. L. J. 295 ; Importers' and Grocers' Ex. 4 Ry. & Corp. L. J. 393. See, as to Involttntabt Dissolution, Code of Civ. Proc. |§ 1784 to 1813, inclusive. See Bliss' Edition, Vol. II, pp. 185-206, and cases there cited; also Veeder v. Mudgett, 27 Hun, 519; Veeder o. Jud- son, 91 N. Y. 374 ; People ». Hydrostatic Paper Co. 88 N. Y. 623 ; Kelsey «. Pfauldler Process, &c. Co. 45 Hun, 10 ; People v. Seneca Lake, &c. Co. 23 State Rep. 346. Consult Wait on Insolvent Corporations; L. 1888, c. 378 ; L. 1886, c. 310. » Bliven «. Peru Steel and Iron Co. 60 How. Pr. 680 ; Matter of Pyro- lusite Manganese Co. 29 Hun, 249 ; Denike ». N. Y. & R. Lime, &c. Co- 80 N. Y. 599 ; People «. Hektograph Co; 10 Abb. N. C. 457 ; Matter Wo- ven Tape Skirt Co. 85 N. Y. 506 ; affi'g 8 Hun, 508 ; Prentiss ». Nichols, 16 Weekly Dig. 73 ; Prothingham v. Barney, 6 Hun, 366. ' Though chapter 442 of the Laws of 1876, permitting a dissolution of these corporations in certain cases of disagreement of their trustees, was repealed by the repealing act of 1880, it will be noticed that its pro- visions are substantially embodied in § 2420 of the Code of Civil Pro-.- cedure, which is applicable to corporations in general. PART II. THE ACT TO PROVIDE FOR THE ORGANIZATION AND REGULATION OF CERTAIN BUSINESS CORPORATIONS. PASSED JUNE 21, 1875. AS AMENDED AND MODIFIED TO APRIL, 1890. 16 CIIAPTEE XII. PROVISIONS OP THE BUSINESS CORPORATION ACT. 153. "What corporations may organize hereunder. 154. General powers of companies. 155. Application for license. 156. Secretary of State to issue license to commissioners. 157. Commissioners to open subscription books. — Subscribers, when tO' meet. 158. What the by-laws must provide. , 159. Commissioners' report. — Certificate of incorporation. 160. License deemed revoked, when. 161. Table of companies to be published annually in session laws. 163. Directors. — Officers. — Number of directors, how changed. 163. Capital stock. — Subscriptions, how payable. 164. Stock certificates and their transfer. 165. Corporation may issue bonds. 166. Stock or bonds, for what issued. 167. Capital stock, how increased or reduced. 168. Corporate account books to be kept. 169. Stock book to be kept; its contents, &c. 170. Annual report to be filed. — Penalty upon neglect. 171. Certain dividends prohibited. 173. Loans to stockholders prohibited. 173. False certificate or report. — Liability therefor. 174. Liability when indebtedness exceeds capital stock. 175. Executors, &c„ not personally liable as stockholders. 176. Executors, &c., may vote at elections. 177. Qualifications of stockholders' liability. 178. Annual election of directors. — ^Voting thereat. 179. On failure to elect, directors hold over. 180. Oath of inspectors of election. 181. Extending duration of corporate existence. 183. Corporations, where taxable. 183. Change of principal place of business. 184. What companies may reorganize hereunder. 185. Corporations under act, of two classes. 186. Full liability companies. 244 PROVISIONS OF THE §§ 153, 154. § 187. Limited liability companies. 188. Word " Limited " to be used. — Penalty for its omission. 189. Individual liability of stockholders in " limited'" companies. 190. Effect of dissolution. 190a. Amended certificate to extend business. 1906. Increase of number of shares of stock. 190c. Full liability companies may reorganize as limited liability companies. IQOd. Natural gas companies. § 153. What corporations may organize hereunder. — Section 1. Corporations may be organized under the provisions of this act for the carrying on of any lawful business except banking, insurance, the construction and operation of railroads, or aiding in the construction there- of, and the business of savings banks, trust companies or corporations intended to derive profit from the loan or use of money, or safe deposit companies, including the renting of safes in burglar and fireproof vaults.'' § 154. General powers of companies.— Section 2. When so organized, every such corporation shall possess the following general powers : 1. To have succession by its corporate name for the period limited in its certificate of incorporation. 2. To sue and be sued ; to complain and defend in any court. 3. To make and use a common seal and alter the same at pleasure. 4. To appoint such subordinate officers and agents as the business of the corporation shall require, and its by- laws shall provide for. 5. To make by-laws for the management of its property, the regulation of its affairs, for the transfer of its stock and defining the duties of its officers, and from time to time to amend the same. 6. To purchase, hold and possess so much real and per- sonal estate as shall be necessary for the transaction of its L. 1875, c. 611, § 1. See^ost, § 192. §§ 155, 156. BUSINESS CORPORATIOK ACT. 245 "business, and sell and convey the same when not required for the uses of the corporation ; provided, however, that all real estate acquired in satisfaction of any liability or indebtedness, unless the same be necessary and suitable for the uses and business of the corporation, shall be sold within three years q,fter becoming the property of such corporation, but such time may be extended to a period not exceeding five years in all, by an order of the supreme court made in the district in which the principal business office of such corporation is located, on the verified peti- tion of such corporation stating the reasons for such ex- tension.' § 155. Application for license.— Section 3. Whenever "three or more persons, a majority of whom shall be citi- zens and residents of this State, shall propose to form a corporation under the provisions of this act, they shall make a certificate to that effect, which certificate shall be signed by each of such persons and duly acknowledged by them before some officer authorized to take acknowledg- ments under the laws of this State. Such certificate shall set forth : 1. The name of the proposed corporation. 2. The object for which it is to be formed, including the nature and locality of its business. 3. The amount and description of the capital stock. 4. The number of shares of which such capital stock shall consist. i 5. The location of the principal business office. 6. The duration of the corporation, which, however, shall not exceed fifty years.^ § 156. Secretary of State to issue license to commis- sioners. — Section 4. Such certificate shall be filed in the office of the secretary of State ; and the secretary of State ' See poet, §198. ' As amended, L. 1890, c. 33. See as to method of forming com- panies, post, 1 193. 246 PROVISIONS OP THE §§ 157, 158. shall thereupon issue a license to the persons making such certificate, empowering them as commissioners to open books for subscriptions to the capital stock of such cor- poration at such times and places as they may determine ; but no license shall be issued in the case of a proposed corporation having the same name as an existing corpora- iiion in this State, or a name so nearly resembling that of an existing corporation as to be calculated to deceive. § 157. Commissioners to open subscription books. — Subscribers, when to meet. — Section 5. Said commis- sioners shall proceed to open books for subscriptions to the capital stock of such corporation, and no such sub- scription shall be received unless at the time of making it the person so subscribing shall pay to said commissioners ten per cent, of the par value of the stock subscribed for in cash. When one-half of the capital stock has been sub- scribed, said commissioners shall call a meeting of the subscribers for the purpose of adopting by-laws for such corporation and electing directors thereof. Notice of such meeting shall be given to every subscriber by depositing in the post-office, properly addressed to his last known place of residence, and postage prepaid, at least five days before the time fixed, a written or printed notice, stating the time, place and object of such meeting. §158. Whattheby-Iawsmnstprovide.— Section 6. The by-laws of every corporation created under the provisions of this act, shall be deemed and taken to be its law, and shall provide : 1. The number of directors of the corporation. 2. The term of office of such directors, which shall not exceed one year. 3. The manner of filling vacancies among directors and officers. 4. The time and place of the annual meeting. 5. The manner of calling and holding special meetings of the stockholders. 6. The number of stockholders who shall attend, either § 159. BUSINESS CORPORATION ACT. 247 in person or by proxy, at every meeting, in order to con- stitute a quorum. 7. The officers of the corporation, the manner of their election by and among the directors, and their powers and duties. But such officers shall always include a president, a secretary, and a treasurer. 8. The manner of electing or appointing inspectors of election. 9. The manner of amending the by-laws.' § 159. Commissioners' report.— Certificate of incorpo- ration.— Section 7. Within ten days after the said sub- scribers' meeting, said commissioners shall file, in the office of the secretary of State, a verified record of the pro- ceedings thereof, containing a copy of the subscription list, a copy of the by-laws adopted, and the names of the direc- tors chosen. Thereupon the secretary of State shall issue to said directors a certificate, setting forth that said cor- poration is fully organized in accordance with this act. Such certificate shall include a copy of the original cer- tificate provided for in section three of this act, the date and place of the subscribers' meeting, the names of the directors elected, and a statement that all the provision^ of this act have been duly observed in the organization of such corporation. A copy of such certificate shall, within ten days after the issuing thereof by the secretary of State, be filed in the office of the clerk of the county in • L. 1878, c. 334, are as follows: § 1. It shall be lawful for any corpoTation formed under chapter six hundred and eleven, laws of eighteen hundred and seventy-five, by either Patrons of Husbandry, or Sovereigns of Industry, or jointly by both, to fix in their by-laws or constitution the following provisions, namely : First. The amount of each share, which shall not be less than five dollars. Second. The number of shares that shall be held by each director, which shall not be less than one full share. Third. The basis of voting at all meetings of associations, or directors thereof, giving at least one vote to each member having paid for one full share. See post, § 195. ' 248 PROVISIONS OF THE §§ 160. 161. whicli the principal business office of such corporation is situated. Such certificate shall be recorded at length in a book to be kept in the office of the secretary of State to be known as the record of incorporations, and, also in a similar book in the office of the county clerk aforesaid. Such certificate, or a copy thereof duly certified by the secretary of State or his deputy, shall be presumptive evidence of the incorporation of the corporation named therein, in all courts and proceedings in this State. The secretary of State shall receive for the filing and issuing of all the necessary documents in and about the organization of a corporation under this act, the sum of ten dollars ; and for each certified copy of certificate of incorporation, the sum of three dollars, which sum shall be paid into the treasury of the State ; and county clerks shall receive the fees now allowed by law. Upon every amendment of the "by-laws of any such corporation, a copy of the amended by-law shall be filed in the office of the secretary of Stafe and of such county clerk, and shall not take effect until so filed ; and a; copy thereof, certified by the secretary of State or his deputy, shall be received as presumptive evidence of such amended by-law in all courts and pro- ceedings. § 160. License deemed revoked, when. — Section 8. IJn- less such corporation shall be fully organized as provided in the last preceding section, within, one year after the issuing of the license to commissioners to open books, such license shall be deemed to be revoked, and all proceedings thereunder shall be void. § 161. Table of companies to be published annually in session laws. — Section 9. The secretary of State shall pub- lish, as an appendix to the session laws of each year, a statement of all the corporations organized under this act during the preceding year, containing in each case the name of the corporation, its principal business, the location of its principal business office, the amount of capital stock, the date of the filing of the preliminary certificate and of § 162. BUSINESS CORPORATIOSr ACT. 249 the granting of the final certificate of incorporation by the secretary of State ; and any change of location or capital of any such corporation made during the preceding year. § 162. Directors.— Officers.— Number of directors, how changed. — Section 10.* The business of every corpora- tion created hereunder shall be managed by a board of directors (the members of which at their election and throughout their term of oiEce shall be stockholders in such corporation to at least the extent of five shares, and shall hold their office until their successors are chosen), and by such officers, to be elected by and from among said direc- tors, as the by-laws shall prescribe. The number of direc- tors shall not be less than three or more than thirteen, and the existing number thereof- may be changed to not less than three or more than thirteen, by a vote of a ma- jority in interest of the owners of stock issued by said corporation, present in person, or by attorney duly author- ized, at a meeting df the stockholders of such corporation called pursuant to such a notice, specifying the purpose of such meeting and given to each stockholder, as is pre- scribed in section five of this act ; and a statement of the change of the number of directors so made, sighed and verified by the president or a vice-president of the corpora- tion and by the secretary of the meeting at which the change was made, shall be filed in the office of the secre- tary of State, and a copy thereof in the office of the clerk of the county in which the principal business office of the company is situated, within ten days after such meeting. A majority of the whole number of directors shall be ne- cessary to constitute a quorum. The secretary shall re- cord all the votes of the corporation and the minutes of its transactions in a book to be kept for that purpose. The treasurer shall give bonds in such sums and with such sureties as are required by the by-laws for the faithful dis- charge of his duties. ' As amended; L. 1881, c. 423, and L. 1890, c. 33. Consult post, §§ 194, 195, 199. 250 PROVISIONS OF THE § 163. § 163. Capital stock.— Suliscriptions, how payable.— Section 11.^ The capital stock of every corporation formed under this act shall be divided into shares of not less than ten dollars nor more than one hundred dollars each ; and shall in no case exceed five million dollars. All subscriptions therefor shall be made payable to the cor- poration in such installments and at such time or times as shall be fixed by the by-laws or by the directors acting under the by-laws, and if default be made in any payment an action may be maintained in the name of the corpora- tion to recover any installment which shall remain due and unpaid for the period of thirty days after the time so fixed for the payment thereof ; and no stockholder shall be en- titled to vote at any election or at any meeting of the stockholders on whose share or shares any installments or arrearages may have been due and unpaid for the period of thirty days immediately preceding such election or meeting. The corporation may by by-laws prescribe other penalties for a failure to pay the installments that from time to time become due, not exceeding forfeiture of the stock and ^he amount paid thereon, but no such forfeiture shall be declared against any stockholder before demand shall have been made for the amount due thereon, either in person or by a written or printed notice duly mailed to such stockholder at his last known place of residence, at least thirty days prior to the time when such forfeiture is to take effect ; and provided further, that upon such for- feiture the shares of stock held by such delinquent stock- holder or subscriber shall be sold at public auction at the office of said corporation after ten days' notice thereof shall be conspicuously posted up in said office, and the proceeds of such sale, over and above the amount due on said shares, and after deducting the expenses of such sale, if any, shall be paid to the delinquent stockholder or sub- scriber.' ' As amended, L. 1881, c. 395 ; and L. 1883, c. 103. ' See post, § 196. §§ 164, 165. BTJSINBSS CORPORATION ACT. 251 § 164. Stock certificates and their transfer.— Section 12. The directors of such corporation shall prepare certifi- cates of stock, and shall deliver them, signed by the pres- ident and treasurer, and sealed with the seal of the cor- poration, to each person entitled to receive the same, ac- 'cording to the number of shares held, which certificates of stock shall be transferable at the pleasure of the holder, in person or by attorney duly authorized, subject, how- ever, to all payments due or to become due thereon ; and ihe assignee to whom the same has been so transferred, shall be a member of said corporation, and have and en- joy all the immunities, privileges and franchises, and be subject to all the liabilities, conditions and penalties in- cident thereto, in the same manner as the original holder ■would have been ; but no certificate shall be transferred so long, as the holder thereof is indebted to such corpora- tion, unless the board of directors shall consent thereto. § 166. Corporation may issue bonds.— Section 13.^ It shall be lawful for all such corporations to borrow money for the legitimate purposes of such corporation, and for such purpose to issue bonds with or without coupons at- tached thereto, or to mortgage any real estate which it may have or possess, and bearing interest not exceeding six per centum per annum ; but the amount of such bonds and such mortgages outstanding at any one time shall not exceed one-half of the value of the corporate property of such corporation. Any issue of such bonds and such mortgages beyond the amount herein specified, shall ren- der every director voting the same, personally liable to any holder of such bonds or such mortgages, for any damage caused by such over-issue to such holder. No such mort- gage or mortgages shall be issued, however, without first having obtained the written assent of its stockholders owning more than two-thirds of the stock of said corpora- tion. ' As amended, L. 1888, c. 394. 252 PEO VI SIGNS OP THE §§ 16&-168. §166. stock or bonds, for what issued.— Section 14. No corporation organized under this act shall issue either stock or bonds except for money, labor done, or property actually received for the use and legitimate purposes of such corporation at its fair value, and all fictitious in- crease of stock or indebtedness in any form shall be void.* § 167. Capital stock, how increased or reduced.— Section 15. The capital stock of any corporation organ- ized under this act may be increased to an amount not to exceed in the aggregate two million dollars or reduced by a vote of a majority of the stockholders in number and rep- resenting a majority of the stock of such corporation, at any meeting thereof convened for that purpose, pursuant to notice thereof specifying the object of such meeting, and served pursuant to the provisions of section five. A state- ment of such increase or reduction shall be filed in the office of the secretary of State, and of the clerk of the county in which the principal business office of such cor- poration is situated, within ten days after such action. But before any corporation shall be entitled to diminish the amount of its capital stock, if the amount of its debts and liabilities shall exceed the amount of capital to which it is proposed to be reduced, such amount of debts and liabilities shall be first satisfied and reduced so as not to exceed such diminished amount of capital.^ § 168. Corporate account books to be kept.— Section 16. It shall be the duty of the directors of every such corpora- tion to cause to be kept at its principal office or place of business, correct books of account of all its business and transactions, and every stockholder in such corporation shall have the right, at all reasonable times, by himself or his attorney, to examine the records and books of account of such corporation.' ' See post, §§ 190, 198. ' See ^««, §197. ' See post, § 194. §169. BUSINESS CORPORATION ACT. 253 § 169. Stock book to be kept ; its contents.— Section, 17. It shall be the duty of the directors of every such corporation to cause a book to be kept by the treasurer or clerk thereof, containing the names of all persons, alpha- betically arranged, who are or shall within six years have been stockholders of such corporation, and showing their places of residence, the number of shares of stock held by them, respectively, and the time when they, respectively,, became the owners of such shares, and the amount actually paid thereon ; which book shall, during the usual business hours of the day, on every day, except Sundays and leg^jl holidays, be open for the inspection of stockholders and creditors of the corporation, and their personal represen- tatives, at the principal business office of such corpora- tion ; and any and every such stockholder, creditor or rep- resentative shall have a right to make extracts from such book ; and no transfer of stock shall be valid for any pur- pose whatever, except to render the person to whom it shall be transferred liable for the debts of the corporation, according to the provisions of this act, until it shall have been entered therein as required by this section, by an entry showing from and to whom transferred. Such book shall be presumptive evidence of the facts therein stated, in favor of the plaintiff, in any suit or proceeding against such corporation, or against any one or more stockholders. Every officer, or agent of any such corporation, who shall neglect to make any proper entry in such book, or shall refuse or neglect to exhibit the same, or allow the same to be inspected, and extracts to be taken therefrom, as provided by this section, shall be deemed guilty of a misdemeanor ; and the corporation shall forfeit and pay to the party in- jured a penalty of fifty dollars for every such neglect or refusal and all the damages resulting therefrom. And every corporation that shall neglect to keep such book open for inspection as aforesaid, shall forfeit to the People the sum of fifty dollars for every day it shall so neglect, to be sued for and recovered in the name of the People of the State, by the district attorney of the county in which the princi- 254 PROVISIONS OF THE § 170. i pal business office of such corporation is located, and the amount so recovered shall be paid to the proper authori- ties for the support of the poor of such county. § 1 70. Annual report to be filed.— Penalty upon neglect. — Section 18.^ Every such corporation shall annually, with- in twenty days after the first day of January, or in case of such corporation doing business without the United States,! then within twenty days after the first day of April, make, a report as of the said first day, of January, which shall state the amount of capital, and the proportion actually paid in, the amount and, in general terms, the nature of its existing assets and debts, and the names of its then stock- holders, and the dividends, if any, declared since the last report, which report shall be signed by the president and a majority of the directors, and shall be verified by oath of the president or secretary of such corporation, and filed in the office of the secretary of State ; and if any such corporation shall fail so to do, all the directors thereof shall be jointly and severally liable for all the debts of the corporation then existing and for all that shall be contracted before such report shall be made. Provided, however, that any such corporation doing business with-, out the United States, shall still be required to make such report, within twenty days after the first day of January, in each year as aforesaid, unless such corporation shall make and file in the office of the secretary of State, within twenty days after the first day of January in each year, a certificate verified by the oath of the president, secretary or treasurer of such corporation, stating that said corpora- tion is at the date of such certificate doing business without the United States, and such certificate shall be conclusive evidence for the purpose of this section that such corpora- tion is actually doing business without the United States, and provided that if any director shall file with the sec- retary of State, at any time within thirty days after such first of January, or first day of April, as the case may be, ' As amended, L. 1884, c. 208. §§171,172. BUSINESS CORPORATION ACT. 255 a certificate, verified bj the oath of such director, stating that he has endeavored to have such report made and, signed as aforesaid, but that the officers or a majority of the directors have refused or neglected to make and file such report ; and shall append to suoh/certificate a report containing the items aforesaid, so far as they are within his knowledge or are obtainable from sources of informa- tion open to him, which report shall be verified by him as being true to the best of his knowledge, information and belief, in that case such director shall not be liable on ac- count of such failure to make and file such report upon making proof of such facts in any action which may be commenced against him, upon the trial thereof. When- ever, under this section, a judgment shall be recovered against a director, severally, all the directors of the cor- poration shall contribute a ratable share of the amount paid by such director on such judgment, and such director shall have a right of action against his co-directors, jointly or severally, to recover from them the proportion of the amount so paid on such judgment.* § 171. Certain dlTidends prohibited.— Section 19. If the directors of any such corporation shall declare and pay any dividend when the corporation is insolvent, or any dividend the payment of which would render it insolvent, or which would diminish the amount of its capital stock, the directors voting in favor of declaring such dividend shall be jointly and severally liable for all the debts of the corporation then existing, and for all that shall be thereafter contracted while they shall respectively con- tinue in office.^ § 172. LoaDS to stockholders prohibited.— Section 20. No loan of money shall be made by any such corporation to any stockholder therein, and if any such loan shall be made to a stockholder, the officers who shall make it, or who shall assent thereto, shall be jointly and severally See po»t, § 199. » See poBt, § 199. 256 PROVISIONS OF THE §§ 173-176. liable to the extent of such loan and interest for all the debts of the corporation contracted before the repayment of the sum so loaned.* § 173. False certificate or report. — Liability tiierefor. — Section 21. If any certificate or report made, or public notice given, by the officers of any such corporation, shall be false in any material representation, all the officers who shall have signed the same shall be jointly and severally liable for all the debts of the corporation contracted while they are officers thereof. § m. Liability when indebtedness exceeds capital stock. — Section 22. If the indebtedness of any such cor- poration shall at any time exceed the amount of its capital stock, the directors of such corporation creating such in- debtedness shall be personally and individually liable for such excess to the creditors of such corporation.* § 175. Executors, &c., not personally liable as stock- holders. — Section 23. No person holding stock in any such corporation, as executor, administrator, guardian or trustee, and no person holding such stock as collateral se- curity, shall be personally subject to any liability as stock- holder of such corporation ; but the person pledging such stock shall be considered as holding the same, and shall be liable as a stockholder accordingly ; and the estates and funds in the hands of such executor, administrator, guard- ian or trustee shall be liable in like manner, and to the same extent, as the testator or intestate, or the ward or person interested in such trust fund would have been, if he had been living and competent to act, and held the same stock in his own name.' § 176. Executors, &c., may vote at elections. — Section 24. Every such executor, administrator, guardian or trus- tee shall represent the share or shares of stock in his hands at all meetings of the corporation, and may vote accordingly as a stockholder, and every person who shall ' See post, § 199. ' Post, § 199. = Poet, § 208. §§ 177, 178. BUSINESS CORPOEATION ACT. 257 pledge his stock as aforesaid, may, nevertheless, represent the same at all such meetings, and may vote accordingly as a stockholder. § 177. Qualification of stockholders' liability.— Section 25. No stockholder shall be personally liable for the pay- ment of any debt contracted by any corporation formed under this act, which is not to be paid within two years from the time the debt is contracted, nor unless an action for the collection of such debt shall be brought against such cor- poration within two years after the debt shall become due ; and no action shall be brought against any stockholder who shall cease to be a stockholder in any such corpora- tion for any debt so contracted, unless the same shall be commenced within two years from the time he shall have ceased to be a stockholder in such corporation.^ § 178. Annual election of directors.— Toting thereat.— Section 26. The annual election of directors shall be held at such time and place as shall be designated by the by- laws of the corporation, and public notice of such time and place shall be published, not less than ten days previous thereto, in a newspaper published in a city or town in which the principal business office of the corporation is situated, if a newspaper be published therein, and other- wise in the newspaper published nearest to said office ; and the election shall be made by such of the stockholders as shall attend for that purpose, either in person or by proxy. No person shall be permitted to vote upon the proxy of a stockholder in any such corporation after the lapse of eleven months from the date thereof, unless the stockholder shall have specified therein that it is to con- tinue in force for some longer and limited time. All elec- tions shall be by ballot, and each stockholder shall be en- titled to as many votes as shall equal the number of his shares multiplied by the number of directors to be elected, and he may distribute his votes among those to be voted for as he sees fit ; and the persons receiving the greatest ' Post, § 303. 17 258 PROVISIONS OF THE §§ 179-181. number of votes shall be directors, and when any vacancy shall occur among the directors, by death, resignation, or otherwise, it shall be filled for the remainder of the year in such manner as may be provided for by the by-laws of the said corporation.^ § 179. On failure to elect, directors hold over.— Section 27. In case it shall happen at any time that an election of directors shall not be made on the day designated by the by-laws of said corporation, when it ought to have been made, the corporation, for that reason, shall not be dis- solved, but it shall be lawful, on any other day within three months thereafter, to hold an election for directors, upon service of notice upon the stockholders thereof respectively in the manner provided in section five of this act ; and all acts of directors shall be valid and binding as against such corporation until their successors shall be elected. § 180. Oath of inspectors of election.— Section 28. Every person acting as an inspector of election in any such corporation shall, before entering upon the duties of his office, take and subscribe an oath or affirmation before some officer authorized to administer the same, that he will discharge the duties of his office with fidelity, and that he will not receive any vote but such as he believes to be legal, nor reject any which he believes to be legal ; and if any such inspector shall violate this oath or affirmation, he shall be subject to all the penalties imposed by law upon inspectors of general State elections in this State violating their duty, and shall be proceeded against in like manner and with like effect. § 181. Extending duration of corporate existence.— Section 29. Whenever any corporation organized under this act has fixed the duration of its corporate existence for a less period than fifty years, it may, at any time, ex- tend the term of its existence beyond the time mentioned ■ Poa, § 194. §§182, 183. BUSINESS CORPORATION ACT. 259 in the original certificate of incorporation by the consent of the stockholders owning two-thirds in amount of the capital stock of such corporation, in and by a certificate to be signed by such stockholders, in person or by attorney duly authorized, and acknowledged or proved, so as to en- able it to be recorded, which certificate shall be filed in the office of the secretary of State, and of the clerk of the county in which the principal business office of such cor- poration is situated ; and the said secretary of State and the county clerk, respectively, upon such filing, shall re- cord the same in the record of corporations kept in his office, and make a memorandum of such record in the margin of the original certificate in such record book ; and thereupon the time of existence of such corporation shall be extended, as designated in such certificate, for a term which, with the term originally fixed, will not exceed fifty years. §182. Corporations, where taxable.— Section 30. Every corporation organized under this act shall be taxed on all of its property, except its real estate, in the town, city or village where its principal business office is situated ; and on its real estate, in the town, city or village where such real estate is situated, shall be taxed therein.' § 183. Change of principal place of business.— Section 31. Such corporation may change its principal place of business, by the consent of the stockholders owning two- thirds in amount of the capital stock of such corporation, in and by a certificate to be signed by such stockholders in person or by attorney duly authorized and acknowl- edged or proved, which certificate shall be filed in the office of the secretary of State and of the clerk of the county in which the principal business Office of such cor- poration is situated ; and the secretary of State and county clerk respectively shall, upon such filing, record the same in the record of corporations kept in his office, and make ' Post, § 204. 260 PEOVISIONS OF THE § 184. a memorandum of such record in the margin of the record of the original certificate recorded in such office, and thereupon the principal business office of such corpora- tion shall be deemed to be changed as stated in said cer- tificate.' § 184. What companies may reorganize hereunder.'— Section 32. Any corporation heretofore or hereafter or- ganized under the general laws of this State, except such corporations as are particularly excepted by the first sec- tion of this act from organizing thereunder, may come under and avail itself of the privileges and provisions of this act by complying with the following provisions : The directors of such corporation shall publish a notice, signed by at least a majority of them, in a newspaper published in the county in which the principal business office thereof is situated, for at least three successive weeks, and to de- posit a written or printed copy thereof in the post office, postage prepaid, addressed to each stockholder, at his last known place of residence, at least three weeks previous to the day fixed upon for holding such meeting, specifying the object of the meeting, and the time and place when and where such meeting shall be held. At the time and place specified in the notice, the stockholders shall organize by choosing one of the directors chairman of the meeting) and, also, a suitable person for secretary, and proceed to a vote of those present, in person or by proxy ; and if votes representing a majority of all the stock of the company shall be given in favor of availing itself of the provisions of this act, the said officers shall make a certificate of the proceedings, showing a compliance therewith, duly ac- knowledged, and stating : 1. The name of the corporation. 2. The object for which it is formed, including the na- ture and locality of its business. 3. The amount and description of the capital stock. ' Post, § 198. * As amended, L. 1880, c. 187, § 1 ; and L. 1885, c. 540, § 1. § 184. BUSINESS CORPORATION ACT. 261" 4. The number of shares of which such capital stock consists. 5. The location of the principal business office. 6. The duration of the corporatioUj which, however, shall not exceed fifty years. 7. The names of the directors for the ensuing year ; which certificate, with a copy of the by-laws of ^uch cor- poration, shall be filed in the office of the secretary of State, whereupon the secretary of State shall issue to said directors a certificate setting forth that such corpora- tion is fully reorganized in accordance with this act. Such certificate of the secretary of State shall include a copy of the certificate of the proceedings (not including the by- laws), held, as hereinbefore set forth, the date and place of the stockholders' meeting, the names of the directors elected, and a statement that all the provisions of this act have been duly observed in the reorganization of such cor- poration. A copy of such certificate shall, within ten days from the issuing thereof by the secretary of State, be filed' in the office of the clerk of the county in which the princi- pal business office of such corporation is situated. Such certificate shall be recorded at length in a book to be kept in the office of the secretary of State. For the issuing of this certificate of reorganization the secretary of State shall receive the same fee as is provided in section seven of chapter six hundred and eleven of the laws of eighteen hundred and seventy-five. From the time of such filing, such corporation shall be deemed to be a corporation or- ganized under this act, and if originally organized or in- corporated under any general law of this State, shall have and exercise all such rights and franchises as it has here- tofore had and exercised, under the laws pursuant to which it was originally incorporated. But such change or pro- ceedings shall not in any way affect, change or diminish the existing liabilities of the corporation so availing itself of the provisions of this act.' ' L. 1880, c. 187, § 3, as amended, L. 1881, c. 551, provide as follows: 262 PROVISIONS OF THE §§ 185, 186. § 185. Corporations under act, of two classes. — Section 33. The corporations formed under this act shall be of two classes, to be known, respectively, as : 1. Full liability companies. 2. Limited liability companies. § 186. "Full liability companies."— Section 34. In "full liability companies " all the stockholders shall be severally individually liable to the creditors of the company in which they are stockholders, for all debts and liabilities of such company, and may be joi^ed as defendants in any action against the company. No execution shall issue against any stockholder individually, until execution has been issued against the company and been returned unsatisfied ; and whenever a judgment shall be recovered against a stock- holder individually, all the stockholders shall contribute a proportionate share of the amount paid by such stock- holder on such judgment, proportionate to the number of shares of stock owned by each of such stockholders, and such stockholders shall have a right of action against the other stockholders in such corporation, jointly or severally to recover from them, and each of them, the proper portion due by them, and each of them, of the amount so paid on such judgment.^ The provisions of this act shall apply to and include any corporation which might, under the terms of this act, come under and avail itself of the said act hereby amended, and which shall have heretofore taken proceedings and filed papers as required by said last-mentioned act, for the purpose of coming under the same and availing itself of the provisions thereof; and when any corporation, such as is described in the first section of this act, has heretofore, and during the term of its original corporate existence, taken the proceedings and filed the papers specified therein, as required by said act (chapter six hundred and eleven of the Laws of eighteen hundred and seventy-five), for the purpose of coming under the same and extending its corporate existence thereunder, such proceedings shall be held valid and efiectual for snch purposes ; and, in such case, the same rights, fran- chises and liabilities shall belong and attach to any such corporation as if such proceedings had been taken after the passage of this act. See post, § 192. ' Post, § 201. §§ 187, 188. BUSINESS OOEPORATXOBT ACT. 263 § 187. " Limited liability companies." — Section 35. In " limited liability companies," the name of the company shall in every case have as its last word the word " lim- ited," and every such corporation shall paint or affix, and shall keep painted or affixed, its name on the outside of every office or place in which the business of the company is carried on, in a conspicuous position, in letters easily legible, and shall have its full name stated in legible characters in all notices, advertisements, and other official publications of such company, and in all its bills of ex- change, promissory notes, checks, orders for money, bills of lading, invoices, receipts, letters, and other writings used in the transaction of the business of the corpora- tion.^ §188. Word "limited" to be used. -Penalty for its omission from corporate name.— Section 36. Every omis- sion of the word " limited " in the use of the name of such company shall render each and every officer or director in such company personally liable for any indebtedness, damage or liability incurred during such omission. If any limited liability company under this act does not paint or affix, and keep painted or affixed its name, in the manner above set forth, it shall be liable to a penalty of not ex- ceeding twenty-five dollars for such omission, for every day during which such name is not so kept painted or affixed ; and every director or officer of such company who shall authorize or permit such omission shall be liable to a like penalty ; and if any director (Jr officer of such com- pany, or any person on its behalf, shall use or authorize the use of any seal purporting to be a seal of the company on which its name is not so engraved as aforesaid, or shall use or authorize the issue of any notice, advertisement, ot other official publication of such company, or shall sign or authorize to be signed on behalf of such company any bill of exchange, promissory note, indorsement, check, order for money or goods, invoice, bill, receipt, letter of credit ' Foit, % 302. 264 PROVISIONS OF THE § 189. or other writing of the company wherein its name is not mentioned as aforesaid, he shall be liable to a penalty of one hundred dollars. The penalties in this section provided shall be sued for in the name of the People of the State of New York by the district-attorney of the county in which the principal office of such corporation is located, and the amounts recovered shall be paid over to the proper authorities for the support of the poor of such county.^ § 189. IndiTidnal liability of stockholders in " limited " companies. — Section 37. In limited liability companies, all the stockholders shall be severally individually liable to the creditors of the company in which they are stock- holders, to an amount equal to the amount of stock held by them, respectively, for all debts and contracts made by such company, until the whole amount of capital stock fixed and limited by such company has been paid in, and a certificate thereof has been made and recorded as herein- after prescribed. The term stockholder, as used herein, shall apply not only to such persons as appear by the books of the corporation or association to be such, but also to every equitable owner of stock, although the same may appear on such books in the name of another person ; and also to every person who shall have advanced the in- stallments or purchase-money of any stock in the name of any person under twenty-one years of age, and while such person remains a minor to the extent of such advance ; and also to every guardian or other trustee who shall voluntarily invest any trust funds in such stock ; and no trust funds in the hands of such guardian or trustee shall be in any way liable under the provisions of this act by reason of any such investment, nor shall the person for whose benefit any such investment may be made be re- sponsible in respect to such stock until thirty days after the time when such persons respectively become compe- tent and able to control and dispose of the same ; but the guardian or other trustee making such investment as afore- ' Post, § 202. § 189. BUSINESS CORPORATION ACT. 265 aaid shall continue responsible as a stockholder until such responsibility deTolves upon the person beneficially in- terested therein ; and in respect to stock held by a guardian or other trustee under a transfer of the same by a third person, or under positive directions by a third per- son for such investment, the person making such transfer or giving such directions, and his executors and adminis- trators, shall, for the purposes of this act, be deemed a stockholder ; and the estate of such person, if he be de- ceased, shall be responsible for the debts and liabilities chargeable on such stock, according to the provisions of this act. No execution shall issue against any stockholder individually, until execution has been issued against the corporation and returned unsatisfied ; and whenever a judgment shall be recovered against a stockholder individ- ually, all the stockholders shall contribute a proportion- ate share of the amount paid by such stockholder on such judgment proportioned to the number of shares of stock owned by each of such stockholders, and such stockholder shall have a right of action against the other stockholders in such corporation, jointly or severally, to recover from them, and each of them, the proportion due by them and each of them of the amount so paid on such judgment. The capital stock of every such limited liability company shall be paid in, one-half thereof within one year, and the other half thereof within two years from the incorporation of said company, or such corporation shall be dissolved.^ The directors of every such company, within thirty days after the payment of the last installment of the capital stock, shall make a certificate stating the amount of the capital so paid in, which certificate shall be signed and sworn to by the president and a majority of the directors ; and they shall, within the said thirty days, record the same in the office of the secretary of State, and of the county in > See L. 1886, c. 579; L. 1887, c. 561: L. 1888, c. 447, and L. 1889 c. 519, by which the time for the payment of the capital stock of certain limited liability companies has been extended. 266 PROVISIONS OF THE §g 190-1906. which the principal business office of such corporation is situated.^ § 190. Effect of dissolution. -Section 38. The dissolu- tion, for any cause whatever, of any corporation created as aforesaid, shall not take away or impair any remedy given against such corporation, its stockholders or officers, for any liabilities incurred previous to its dissolution.' § 190a. Amended certificate to extend business— Sec- tion 39. The directors of any manufacturing corporation organized under this act, who may desire within one year from the date of the original certificate of such manufac- turing corporation to extend the business of such corpora- tion beyond that mentioned in said original certificate, providing that the proposed extension of said business shall be of the same general character of that stated in, and which might have been properly included in, said orig- inal certificate, are hereby authorized to make and file an amended certificate of incorporation to conform to this act ; and upon the making and filing of such amended cer- tificate, the said corporation shall be deemed and taken to be a manufacturing corporation for all purposes stated in said amended certificate from the time of filing said orig- inal certificate.' Supplementary Amendments. Laws 1884, Chapter 397. §1901*. Increase ofnumber of shares of stock.— § 1. Any company formed under the act entitled, " An act to provide for the organization and regulation of certain business cor- porations," passed June twenty-first, eighteen hundred and seventy-five, may increase the amount of shares of which its capital stock consists, provided the capital stock of ' Po»t, % 203. " Post, § 204. » Added to the act by L. 1888. c. 513 § 190c, BUSINESS COBPOKATIOK ACT. ' 267 such company shall not thereby be increased or diminished, and provided the shares shall not bo less nor more than the amounts fixed by said act. § 2. Such increase shall be made by a vote of the stock- holders in favor thereof, representing two-thirds of the capital stock, at any meeting of the stockholders called in the manner prescribed in the act hereby amended, and by executing and acknowledging an amended certificate speci- fying the number of shares of which the said capital stock of said company shall thereafter consist and the par value of each share, and in other respects conforming to the original certificate, which amended certificate shall be signed by the president and two-thirds of the directors of the company, and shall be filed in the office of the sec- retary of State, and in the clerk's office of the county where the original certificate was filed. § 3. Each stockholder shall be entitled to a certificate for such a number of shares of said capital stock, after the whole number has been increased as aforesaid, as shall at their par value be equal to the par value of the shares therefor held by him in such company, on surrendering the certificates for said shares so held by him to be can- celled ; provided that such increase shall not so divide the shares as to give the fractional part of a share to any stockholder. Laws 1885, Chapteb 535. § 190c. "Full liability" companies may reorganize as "limited liability" companies.—! 1. Any corporation now or heretofore or hereafter to be organized as a corporation doing business as and belonging to a class known as a " Full liability company," under an act entitled " An act to pro- vide for the organization and regulation of certain business corporations," passed June twenty-one, eighteen hundred and seventy-five, may become a corporation belonging to a class known as " Limited liability companies," with all 268 • PROVISIONS OF THE § 190c. the rights, privileges and duties, and subject to all the regulations and liabilities pertaining to the same, together with the privilege and right of retaining and continuing the corporate name, with the word " limited " as its last word, in such cases, and in manner and form as stated in this act. § 2. Any such full liability company, which, at the time of availing itself of the privileges of this act, whose debts, liabilities or other obligations at such time, shall not be greater than the amount of the capital stock of such com- pany actually paid and unimpaired, may become a limited liability company, as stated in section one of this act, by complying with the following provisions : The directors of such corporations shall publish a notice, .signed by at least a majority of them, in a newspaper published in the county in which the principal business office thereof is situated, for at least three successive weeks, once each week, and to deposit a written or printed copy thereof in the post office, postage prepaid, addressed to each stock- holder at his last known place of residence, at least two weeks previous to the day fixed upon for holding such meeting, specifying the object of the meeting, and the time and place where such meeting shall be held. At the time and place specified in the notice, the stockholders shall organize by choosing one of the directors chairman of the meeting, and also a suitable person for secretary, and proceed to a vote of those present, in person or by proxy ; and if votes representing a majority of all the stock of the company, shall be given in favor of availing itself of the provisions of this act, the said chairman and sec- retary, with two other directors, shall make a certificate of the proceeding, showing a compliance with this act, duly acknowledged, and stating : 1. The name of the corporation. 2. The original object for which it was formed. 3. The amount and description of the capital stock, and in how many shares the same is divided. § 190d. BUSINESS CORPORATION ACT. 269 4. The location of the principal business office. 5. The duration of the corporation, which, however, shall not exceed fifty years. 6. The names of the directors for the ensuing year, which certificate, with a copy of the by-laws of such cor- poration shall be filed in the office of the secretary of State, and in the office of the clerk of the county in which the principal business office of such corporation is situated. From the time of such filing such corporation shall be deemed to be a limited liability corporation, as if originally organized as such, and shall have and exercise all such rights and franchises as it has heretofore had and exercised, and any stockholder or officer thereof shall not be subject to any greater liability than if such corporation had been originally organized as a limited liability company. § 3. It is further provided, that in case the capital stock of any such corporation availing itself of the privileges of this act shall not be paid up in full at such time, that in that case the time for the payment of such capital stock shall begin to run from the time of such new reorganiza- tion, and the time and manner in which the same shall be paid, shall be the same as if such corporation had been originally organized at such time as a limited liability company. Laws 1889, Chapter 422. § 190d. Natural gas companies.— § 1. It shall be lawful for any corporation organized under chapter six hundred and eleven of the Laws of one thousand eight hundred and seventy-five, and acts amendatory thereto, for the purpose of boring, drilling, digging or mining for natural gas, and conveying and distributing the same in pipes, and vending said gas to the consumers thereof ; to purchase, lease, se- cure and convey such real estate, and such only, as may be necessary for the convenient transaction of their business ; and to effectually carry on the operations of such corpora- tion § 2. Such corporation is authorized to dig and trench 270 PROVISIONS OP THE § 190d. for, and lay their pipes along or under any of the public roads or highways, or through or under any of the waters within the limits of this State, .provided the same shall not be so done as to incommode the public use of said highways, or interrupt the navigation of said waters. Provided, however, that no pipe-line for the purpose aforesaid shall be constructed .across, along, or upon any public highway, without the consent of the commissioners of highways of the town in which such highway is located, upon such terms as may be agreed upon with such com- missioners ; or upon the order of the general term of the supreme court of the department in which such highways are situated, made upon petition, and notice to the com- missioners of highways of such town, according to the practice, or order of the court, or an order to show cause ; and in such manner, and upon such terms as shall be ordered by the court. § 3. No pipe-line shall be constructed into or through any incorporated city or village in this State, unless the same be sanctioned by a majority of the common council of such city, or trustees of such village, by resolution adopted at a regular meeting of such common council, or board of trustees, which resolution shall prescribe the terms upon which consent is granted. Nothing in this or the preceding section shall be construed or held to confer any other right than the relinquishment of the public rights, and the consent of the people to the construction of such pipe-line, and shall not aflfect any private right. § 4. When any corporation formed as aforesaid has. fully completed its organization, the said corporation, its agents or employees shall be authorized to enter upon any lands for the purpose of making surveys, and to agree with the owner of the property as to the amount of compensa- tion to be paid such owner for the right of laying and maintaining pipes for conveying natural gas on or beneath the surface of said lands. § 5. Before entering upon or using any lands, for the § 190 Ante, % 189. " Ante, §§ 93-99. ' See Alb. L. J. vol. 39, p. 349, where the liability of stockholders in the two Acts is compared. ' AnU, §§ 99-101. « Ante, § 189. Where a lease for five years was executed by the com- pany, it was held that a stockholder was individually liable for the rent, payable within two years from the time of executing the lease and de- livering the premises, but for none beyond that time. Mclntyre Strong, 63 How. Pr. 43. ' Ante, §§ 99-121 § 203. COKPOEATIONS UNDER THE BUSINESS ACT. 289 issue against any stockholder individually liable until execution, has been issued against the corporation and returned unsatisfied."^ This provision does not make the return of the unsatisfied execution a prerequisite to bringing an action to enforce the stockholders' lia- bility." A judgment against the company is not con- clusive against the stockholder.* A creditor stock- holder may offset his claim.* A single stockholder may bring an equitable action as is the case under the Manufacturing Act.' The provisions of the two acts relative to the manner and time of paying in the capital and filing a certificate of its full payment are much alike,' and the same exemption from personal liability exists under each in reference to executors, guardians, trustees, and pledgees.'' There appears to be but one instance in which the liability of a stockholder of a limited liability company is less than that of a stockholder of a corporation organized under the Act of 1848, viz. : stockholders of companies under the liatter act are always liable to " laborers, servants and apprentices " for services ren- dered the company.* No provision similar to this is found in the Business Act." ' AnU, § 189. ' Walton V. Coe, 110 N. Y. 109 ; affi'g 47 Hun, 160 ; overruling Kichards v. Beach, 19 Abb. N. C, 24; Kichards v. Coe, 19 Abb, N. C. 79. " liawyer o. Bosebi»ok, 48 Hun, 453. * Kichards v. Crocker, 19 Abb. N. C. 73. ' Cochran ». Am. Op. Co., Lim. 80 Abb.N. C. 110. See ante, § 112- Pfohl e. Simpson, 74 N". Y. 137. " AnU, § 189. Compare with § 99. ' Ante, § 175. Compare with §§ 129, 130. ' Ante, § 94. ' Richards ». BeacK, 19 Abb. N. C. 84. As to nature of stockholders 19 290 BUSINESS COEPOBATIONS. §§ 204, 205. § 204. Taxation and dissolution.— Section 30 ^ pro- vides, that companies hereunder shall be taxed upon their personal estate in "the town, city or village where its principal business office is situated; and what has been heretofore said upon the subject of tax- ation of corporations organized under the Manufactur- ing Act, applies to aU these companies.* There are no special provisions in either act speci- fying the manner of dissolution of corporations formed under them. They are, therefore, subject to the general law of the State in this respect.^ § 205. Certain provisions not in Act.— It is notice- able that the Business Act contains no provisions : In regard to carrying on business out of the State. Requiring directors in i"eports of the company to state that stock issued for property has been so issued. Regarding the right of a company to hold stock in any other company. Permitting a change of business by a company.* Authorizing stockholders to demand a statement, or requiring an annual statement. Allowing consolidation with another company." liability, method of enforcing, and general law applicable thereto, con- sult ante, § 93, et seq. ' AnU, § 182. ' Ante, §§ 144-147. ' See § 190, and ante, §§ 148-163. ' By the amendment of L. 1888, c. 513, the business of a company may be extended. Ante, § 190a. ' Manufacturing companies formed under this act may, however, con- solidate under L. 1884, c. 867. AnU, § 137a. APPENDIX. APPENDIX A. Extensions op the Genekal Manufacturing Act, and Special Enactments as to cebtain Companies theee- undeb.* L. 1851, c. 14. — An act to extend the operation and effect of the act passed February seventeenth, eighteen hundred and forty-eighth, entitled " An act to authorize the for- mation of corporations for manufacturing, mining, mechanical or chemical purposes." Passed February 7, 1851. § 1. Any three or more persons may organize and form themselves into a corporation in the manner specified and required in and by the act entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes, passed February seven- teenth, one thousand eight hundred and forty-eight," for the purpose of constructing and using machines for the raising of vessels or other heavy bodies. § 2. Every corporation so formed shall be subject to all the provisions, duties and obligations contained in the above-mentioned act, and shall be entitled to all the bene- fit and privileges thereby conferred, except that such cor- poration shall not be confined in their operations to the county in which their certificate shall be filed. § 3. This act shall take effect immediately. ' See ante, Part I, § 3 and § 5. 294 APPENDIX A. II, III. II. L. 1855, c. 301. — An act to extend the operation and eflfect of the act passed February 17, 1848, entitled " An act to authorize the formation of corporations for manu- facturing, mining, mechanical or chemical purposes." Passed April 13, 1856. § 1. Any three or more persons may organize them- selves into a corporation in the manner specified and re- quired in and by the act entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seven- teenth, one thousand eight hundred and forty-eight, for the purpose of collecting, storing and preserving ice, of preparing it for sale, of transporting it to the city of New York or elsewhere, and of vending the same. § 2. Every corporation so formed shall be subject to all the provisions, duties and obligations contained in the above mentioned act, and shall be entitled to all the bene- fits and privileges thereby conferred, except that such cor- porations shall not be confined in their operations to the county in which their certificate shall be filed. § 3. This act shall take effect immediately. III. L. 1863, c. 63. — An act to extend the operation and effect of the act passed February seventeen, eighteen hund- red and forty-eight, entitled " An act to authorize the formation of corporations for manufacturing, miningi mechanical or chemical purposes." Passed March, 31, 1863. Section 1. Any three or more persons may organize themselves into a corporation, in the manner specified and required in and by the act entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seven- IV. EXTENSIONS OF MANDFACTCRING ACT, 295 teen, eighteen hundred and forty-eight, for the purpose of bottling and selling mineral water drawn from any natural mineral spring. § 2. Eyery corporation so formed shall be subject to all the proYisions, duties and obligations contained in the above mentioned act, and shall be entitled to all the bene- fits and privileges thereby conferred. IV. L. 1864, c. 337. — An act to extend the operation and effect of the act passed February seventeen, eighteen hund- red and forty-eight, entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes." Passed April 23, 1864. Section 1. Any three or more persons may organize and form themselves into a corporation in the manner specified and required in and by the act entitled " An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes," passed February seventeenth, one thousand eight hundred and forty-eight, for the purpose of constructing, owning and using vessels and machines to be employed for hire in towing vessels carrying freight and passengers, and in aid- ing, protecting and saving vessels and their cargoes, wf ecked or in distress, on any of the navigable rivers and lakes in or bordering upon the State of New York, or on the high seas, or in the various arms of the seas and rivers running into the same, with all the rights appertaining by law to private individuals performing service as salvors. § 2. Every corporation so formed shall be subject to all the provisions, duties and obligations contained in the above-mentioned act, and shall be entitled to all the bene- fits and privileges thereby conferred, except that such cor- porations shall not be confined in their operations to the county in which their certificate shall be filed. 296 APPENDIX A. IV. § 3. Any three or more persons are hereby authorized to organize themselves into a corporation in the manner provided by the said act, and with all the powers, benefits and privileges thereby conferred, and subject to all the duties, liabilities and restrictions therein imposed, for the purpose of carrying on the business of constructing, main- taining and using stationary and floating elevators or ware- houses for all purposes pertaining to or connected with trade or commerce in the several kinds of grain, in the port of New York. L. 1868, c. 781. — An act to amend the act entitled " An act to extend the operation and effect of the act passed February seventeenth, eighteen hundred and forty- eight, entitled ' An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,' passed April twenty-third, eigh- teen hundred and sixty-four." Passed May 9, 1868. Section 1. Section three of the act entitled " An act to extend the operation and effect of the act passed February seventeenth, eighteen hundred and forty-eight, entitled ' An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical pur- poses,' passed April twenty-third, eighteen hundred and sixty-four," is hereby amended so as to read as follows : § 3. Any three or more persons are hereby authorized to organize themselves into a corporation in the manner provided by the said act, and with all the powers, benefits and privileges thereby conferred, and subject to all the duties, liabilities and restrictions therein imposed, for the purpose of carrying on the business of constructing, main- taining and using stationary and floating elevators or warehouses, for all purposes pertaining to or connected with trade or commerce in the several kinds of grain in the State of New York, or for the purpose of purchasing a suitable lot, and erecting thereon a building, to be used as T, VI. EXTENSIONS OP MANUEAOTUEING ACT. 297 a skatmg rink, and for holding fairs, meetings, exhibitions and all other lawful entertainments and amusements. § 2. This act shall take effect immediately. L. 1865, c. 234. — ^An act to authorize the formation of cor- porations for agricultural purposes. Passed March 29, 1865. Section 1. Any three or more persons may organize and form themselves into a corporation in the manner specified and required in and by the act entitled, " An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes." passed February seventeenth, eighteen hundred and forty-eight, for the purpose of propagating, cultivating and developing the different varieties of the grape, and the manufacture of wines and brandies therefrom, and cultivating sugar cane, cotton, rice, tobacco, indigo and other products of the earth, for preparing the same for market, and for trans- porting and disposing of the same. Every corporation so formed shall be subject to all the provisions and obliga- tions contained in the aforesaid act, and the several acts amendatory of the same, so far as they are or may be ap- plicable, and shall be entitled to all the benefits and privi- leges conferred by said act and " amendatory acts; except that such corporations shall not be confined in their operations to the counties in which their certificates shall be filed. § 2. This act shall take effect immediately. YI. L. 1865, c. 307. — An act to extend the operation and effect of the act passed February seventeenth, eighteen hundred and forty-eight, entitled " An act to author- 298 APPENDIX A. VII. ize the formation of corporations for manufacturing, mining, mechanical or chemical purposes." Passed April 6, 1865. Section 1. Any three or more persons may organize and form themselves into a corporation in the manner specified and required in and by the act entitled " An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight, for the purpose of buying and selling and transporting coal and peat of all kinds. § 2. Every corporation so formed shall be subject to all the provisions, duties and obligations contained in the above-mentioned act and amendments thereto, and shall be entitled to all the benefit and privileges thereby con- ferred, except that such corporation, shall not be confined in their operations to the county in which their certificate shall be filed. § 3. This act shall take effect immediately. VII. L. 1868, c. 161. — An act relative to incorporations for fish- ing purposes. Passed April 11, 1868. Section 1. At any time hereafter any three or more persons who may desire to form a company for the pur- pose of catching such fish in the salt waters of Suffolk County as are not fit for food for man, by seines or other- wise, to be used for or converted into fertilizers, may make, sign and acknowledge before some notary public, and file in the ofl&ce of the clerk of Suffolk County, and a duplicate thereof in the ofBce of the secretary of State, a certificate in writing, in which shall be stated the corpo- rate name of the company, the objects for which the com- pany shall be formed, the amount of the capital stock of the said company, the term of its existence, not to ex- VIII. EXTENSIONS OF MANUFACTUKIKG ACT. 299 ceed fifty years, tlie number of shares of which the said stock shall consist, the number of trustees and their names who shall manage the concerns of the company for the first year, and the name of the town in Sufiblk County in which the operations of said company are to be carried on. § 2. The companies formed under this act shall be sub- ject to the provisions of chapter forty of the laws of eigh- teen hundred and forty-eight, entitled " An act to author- ize the formation of corporations for manufacturing, min- ing, mechanical or chemical purposes," and the various amendments thereto, so far as the same may be applicable. Each stockholder shall be personally liable for the debts of said company in an amount equal to the stock held or owned by him. § 3. This act shall take effect immediately. VIII. L. 1871, c. 53.5. — An act to extend the operation and effect of the act passed February seventeenth, one thousand eight hundred and forty-eight, entitled "An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes." Passed April 15, 1871. Section 1. Any three or more persons may organize themselves into a corporation in the manner specified and required in and by the act entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seven- teenth, eighteen hundred and forty-eight, for the purpose of purchasing, acquiring and improving real estate for residences and homesteads, and apportioning and distrib- uting the same among the stockholders and members of such corporation. The corporation so formed shall be subject to all the provisions and obligations of the act aforesaid, and the acts amendatory thereof ; and it shall 300 APPENDIX A. VIU. have power to take and hold by purchase, contract or lease, and convey such real estate, as shall be necessary to carry out the objects of said corporation, and it may distribute and apportion the same among its members and stock- holders in such manner as shall be determined by its by- laws ; provided, however, that it shall not be lawful for said corporation to hold at any one time real estate the market value of which shall exceed the sum of five hundred thousand dollars. § 2. This act shall take effect immediately. L. 1881, c. 58. — An act to amend chapter five hundred and thirty -five of the laws of eighteen hundred and seventy- one, entitled "An act to extend the operation and effect of the act passed February seventeenth, one thousand, eight hundred and forty-eight, entitled ' An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical pur- poses.' " Passed March 24, 1881. Section 1. Section one of chapter five hundred and thirty-five of the laws of eighteen hundred and seventy-one, entitled " An act to extend the operation and effect of the act passed February seventeenth, one thousand eight hun- dred and forty-eight, entitled 'An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes,' " is hereby amended so as to read as follows : § 1. Any three or more persons may organize them- selves into a corporation in the manner specified and re- quired in and by the act entitled " An act to authorize the formation of corporations for manufacturing, mining, me- chanical or chemical purposes," passed February seven- teenth, eighteen hundred and forty-eight, for the purpose of purchasing, acquiring and improving real estate for residences, homesteads and apartment houses, to be leased and conducted by the corporation so formed, and occupied by the stockholders thereof and others, and apportioning VIIT. EXTENSIONS OP MANUFACTURING ACT. 301 and distributing the same among the stockholders and members of such corporation. The corporation so formed shall be subject to all the provisions and obligations of the act aforesaid, and the acts amendatory thereof, and it shall have power to take and hold by purchase, contract or lease, and convey such real estate as shall be necessary to carry out the object of said corporation ; and it may distribute and apportion the same among its members and stock- holders in such manner as shall be determined by its by- laws ; provided, however, that it shall not be lawful for said corporation to hold at any one time real estate the market value of which shall exceed the sum of five hundred thousand dollars. § 2. This act shall take effect immediately. L. 1881, 0. 232. An act to amend chapter fifty-eight of the laws of eighteen hundred and eighty-one, entitled " An act to amend chapter five hundred and thirty- five of the laws of eighteen hundred and seventy-one, entitled ' An act to extend the operation and effect of the act passed February seventeenth, one thousand eight hundred and forty-eight, entitled An act to au- thorize the formation of corporations for manufactur- ing, mining, mechanical or chemical purposes.' " Passed May 10, 1881. Section 1. Section one of chapter fifty-eight of the laws of eighteen hundred and eighty-one, entitled " An act to amend chapter five hundred and thirty-five of the laws of eighteen hundred and seventy-one, entitled ' An act to extend the operation and effect of the act passed February seventeenth, one thousand eight hundred and forty-eight, entitled An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical pur- poses,' " is hereby amended so as to read as follows : § 1, Any three or more persons may organize them- selves into a corporation in the manner specified and re- quired in and by the act entitled " An act to authorize the formation of corporations for manufacturing, mining, me- 302 APPENDIX A. VIII. chanical or ctemical purposes," passed February seven- teenth, eighteen hundred and forty-eight, for the purpose of purchasing, acquiring, maintaining and improving real estate for residences, homesteads and apartment houses to be leased and conducted by the corporation so formed, and occupied by the stockholders thereof and others, and also for the purpose of purchasing, acquiring, maintaining, im- proving and managing a building or buildings which shall contain a hall for public meetings and entertainments, and apportioning and distributing the same among the stock- holders and members of such corporation, and also for filling in and improving lands. The corporation so formed shall be subject to all the provisions and obligations of the act aforesaid, and the acts amendatory thereof, and it shall have power to take and hold by purchase, contract, or lease, and convey such real estate as shall be necessary to carry out the objects of said corporation ; and it may dis- tribute and apportion the same, and the rents, income and proceeds thereof, among its members and stockholders in such manner as shall be determined by its by-laws ; pro- vided, however, that it shall not be lawful fdr said cor- poration to hold at any one time real estate the market value of which shall exceed the sum of five hundred thou- sand dollars. §. 2. This act shall take effect immediately. L. 1881, c. 589. — An act to amend chapter two hundred and thirty-two of the laws of eighteen hundred and eighty-one, entitled " An act to amend chapter five hun- dred and thirty-five of the laws of eighteen hundred and seventy-one, entitled ' An act to extend the opera- tion and effect of the act passed February seventeenth, one thousand eight hundred and forty-eight, entitled An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical pur- poses.'" Passed June 27, 1881. Section 1. Section one of chapter two hundred and thirty-two of the laws of eighteen hundred and eighty- VIII. EXTENSIONS OF MANUFACTURING ACT. 303 one, entitled " An act to amend chapter five hundred and thirty-five of the laws of eighteen hundred and seventy-one, entitled ' An act to extend the operation and effect of the act passed February seventeenth, one thousand eight hun- dred and forty-eight, entitled An act to authorize the formation of corporations for manufacturing, mining, me- chanical or chemical purposes,' " is hereby amended so as to read as follows : § 1. Any three or more persons may organise them- selves into a corporation in the manner specified and re- quired in and by the act entitled " An act to authorize the formation of corporations for manufacturing, mining, me- chanical or chemical purposes," passed February seven- teenth, eighteen hundred and forty-eight, for the purpose of purchasing, acquiring, maintaining and improving real estate for residences, homesteads and apartment houses, to be leased and conducted by the corporation so formed, and occupied by the stockholders thereof and others, and also for the purpose of purchasing, acquiring, maintaining, im- proving and managing a building or buildings which shall contain a hall for public meetings and entertainments, and apportioning and distributing the same among the stock- holders and members of such corporation, and also for filling in and improving lands. The corporation so formed shall be subject to all provisions and obligations of the act aforesaid, and the acts amendatory thereof, and it shall have power to take and hold by purchase, contract or lease, and convey such real estate as shall be necessary to carry out the objects of said corporation ; and it may dis- tribute and apportion the same and the rents, income and proceeds thereof among its members and stockholders in such manner as shall be determined by its by-laws ; and may sell and convey to purchasers thereof such real estate as said corporations may have acquired by purchase or otherwise ; provided, however, that it shall not be lawful for said corporation to hold at any one time real estate, the market value of which shall exceed the sum of five hundred thousand dollars. 304 APPENDIX A. IX. § 2. This act shall take effect immediately. See, also, L. 1883, c. 71. — An act to promote building in the cities of this State, and to enable certain corporations to hold real estate therein. Passed March 1, 1883. Section 1. Any association or corporation duly or- ganized under the laws of this State for the purpose of acquiring, maintaining and improving real estate for residences, homesteads and apartment houses in any city having over twenty-five thousand inhabitants, may hold at any one time real estate in excess of the amount now limited by law, by filing with the clerk of the county where its certificate of incorporation is filed a resolution of its board of trustees, duly attested, fixing the amount desired to be held, together with a consent in writing of its mem- bers or stockholders representing two-thirds in amount of its capital stock, and the approval of a justice of the supreme court in said county. And thereupon it shall be lawful for such corporation to hold at any one time the amount of real estate so fixed, assented to and approved, but no such corporation or association shall hold real estate to exceed in value three millions of dollars. § 2. This act shall take effect immediately. IX. L. 1873, c. 814 — An act to extend the operation and effect of the act passed February seventeen, eighteen hun- dred and forty-eight, entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes." Passed June 19, 1873. Section 1. Any nine or more persons may organize themselves into a corporation in the manner specified and required in and by the act entitled " An act to authorize X. EXTENSIONS OP MANUFACTURING ACT. 305 the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seven- teen, eighteen hundred and fortj-eight, for the purpose of building, manufacturing, owning, furnishing, letting, sell- ing and maintaining locomotive engines, cars, rolling stock and machinery to be used or operated upon railways, or any one or more of such purposes. § 2. Every corporation so formed shall be entitled to all the benefits and privileges conferred by the before- mentioned act, and may contract and transact its business with any railway company or other person engaged in the operation of any railway in the United States or Canada, but shall otherwise be subject to all the provisions, duties and obligations in the said act contained. § 3. This act shall take effect immediately. X. L. 1875, c. 113. — An act to extend the operation and effect of the act passed February seventeenth, eighteen hun- dred and forty-eight, entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes." Passed April 17, 1875. Section 1. Any three or more persons may organize and form themselves into a corporation in the manner specified and required in and by the act entitled " An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight, for the storage, conveyance and transportation of petroleum and other oils, so that under said act and the acts amend- atory thereof, it shall be lawful to form companies for carrying on the business of storing, conveying and trans- porting petroleum and other oils, and of doing all things necessary and proper therefor, subject to such laws or regulations as are now, or may hereafter be, in force in 20 306 APPENDIX A. XI. the several cities of this State where such business may be conducted relating to the storage and safe keeping of petroleum and other oils. § 2. Every corporation so formed shall be subject to all the provisions, duties and obligations contained in the above-mentioned act, and shall be entitled to all the bene- fits and privileges thereby conferred. § 3. This act shall take effect immediately. XL L. 1875, c. 365. — An act to extend the operation and effect of the act passed February seventeen, eighteen hun- dred and forty-eight, entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes." Passed May 15, 1875. Section 1. Any three or more persons may organize and form themselves into a corporation in the manner specified and required in and by the act entitled " An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes," passed February seventeenth, one thousand eight hundred and forty-eight, for the purpose of constructing and using machines for dredging and filling of land, and dock build- ing, or for the construction and operation of inland wharves and basins, and the purchase improvement and sale thereof. § 2. Every corporation so formed shall be subject to all the provisions, duties and obligations contained in the above-mentioned act, and shall be entitled to all the bene- fit and privileges thereby conferred. § 3. This act shall take effect immediately. XIT. EXTENSIONS OF MANUPACTUEING ACT. 307 XII. L. 1880, c. 85. — An act supplemental to chapter forty of the laws of eighteen hundred and forty-eight, en- titled " An act to authorize the formation of corpora- tions for manufacturing, mining, mechanical or chem- ical purposes," and the amendments made thereto. Passed March 31, 1880. Section 1. Any three or more persons may organize and form themselves into a corporation in the manner specified and required in and by the act entitled " An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight, and the amendments thereof and supplements thereto, for the purpose of accumulating, storing, conducting, selling, furnishing and supplying water for mining, domestic, manufacturing, municipal and agricultural purposes, and may acquire, take, hold, lease and convey lands and water power suitable for those purposes. § 2. Every corporation so formed and the stockholders thereof shall be subject to all the provisions, duties and obligations contained in the above-mentioned act, and shall be entitled to all the benefits and privileges thereby con- " ferred, except that such corporations shall not be con- fined in their operations to the county in which their cer- tificate shall be filed. § 3. It shall and may be lawful for any corporation heretofore incorporated for mining purposes, under the act mentioned in the first section of this act, to conduct the business for which the formation of corporations is authorized by said first section ; provided the intention so to do shall be specified among the objects for which such corporation is formed in its certificate of incorporation. § 4. It shall and may be lawful for any corporation heretofore incorporated for mining purposes, under chapter forty of the laws of eighteen hundred and forty- eight, entitled " An act to authorize the formation of cor- 308 APPENDIX A. XTI. porations for manufacturing, mining, mechanical or chemi- cal purposes," or under any amendment of or supplement to the said acts, to conduct the business for which the formation of corporations is authorized by this act ; pro- Tided a certificate signed and acknowledged by a majority of the trustees of the said corporation shall be filed in the office of the clerk of the county where the original cer- tificate of incorporation was filed, and a certified copy thereof in the office of the secretary of State, stating that the said corporation intends to avail itself of the pro- yisions of this act, and to carry on the business provided for in this act in addition to the business specified in the said original certificate of incorporation. § 5. No corporation shall be formed under this act for the purpose of accumulating, storing, conducting, selling, furnishing and supplying water for domestic or municipal purposes in the cities of New York, Bufi'alo, Eoohester and Kingston, or either of them. § 6. This act shall take effect immediately. L. 1881, c. 472. — An act to amend chapter eighty-five of the laws of eighteen hundred and eighty, entitled " An act supplemental to chapter forty of the laws of eighteen hundred and forty-eight, entitled 'An act to authorize the formation of corporations for manufac- turing, mining, mechanical or chemical purposes,' " and the amendments made thereto. Passed June 6, 1881. Section 1. Section five of chapter eighty-five of the laws of eighteen hundred and eighty, entitled "An act supplemental to chapter forty of the laws of eighteen hundred and forty-eight, entitled ' An act to authorize the formation of corporations for manufacturing, mining, me- chanical or chemical purposes,' " and the amendments made thereto, is hereby amended so as to read as fol- lows : § 5. Any corporation formed under this act for the pur- XII. EXTENSIONS OF MANUFACTURING ACT. 309 pose, among other things, of supplying cities with water, may acquire title to land for the purposes of their business, in the same manner specified and required in and by the act entitled " An act to authorize the formation of rail- road corporations, and to regulate the same," passed April second, eighteen hundred and fifty, and the acts amenda- tory thereof and supplemental thereto, and such corpora- tion may lay pipes for the purpose of conducting water for the purposes of their business under any of the navi- gable waters of this State, provided they are so laid as not to interfere with the navigation of such waters. No cor- poration shall be formed under this act for the purpose of accumulating, storing, conducting, furnishing or sup- plying water for domestic, manufacturing or municipal purposes in the city of New York. § 2. Section six of said act is hereby amended so as to read as follows : § 6. Such corporation so formed under this act may contract with any corporation in this State, public or pri- vate, to furnish water for any of the purposes in this act mentioned, and every corporation in this State is hereby authorized to enter into such contracts with such corpora- tions formed under this act. § 3. This act shall take effect immediately. L. 1887, c. 486. — An act to amend chapter eighty-five of the laws of eighteen hundred and eighty, entitled " An act supplemental to chapter forty of the laws of eighteen hundred and forty-eight, entitled ' An act to authorize the formation or corporations for manufac- turing, mining, mechanical or chemical purposes,' " and the amendments made thereto. Passed May 26, 1887. Section 1. Section three of chapter eighty-five of the laws of eighteen hundred and eighty, entitled "An act supplemental to chapter forty of the laws of eighteen hundred and forty-eight, entitled ' An act to authorize the 310 APPENDIX A. XIII. formation of corporations for mamifacturing, mining, me- chanical or chemical purposes,' " and the amendments made thereto, is hereby amended so as to read as follows : § 3. It shall and may be lawful for any corporation heretofore incorporated or hereafter to be incorporated, for mining purposes, under the act mentioned in the first section of this act, to conduct the business for which the formation of corporations is authorized by said, first sec- tion ; provided, the intention so to do shall be, or, as the case may be, shall have been specified among the objects for which such corporation is or shall be formed in its certificate of incorporation. § 2. This act shall take effect immediately. XIII. L. 1881, c. 650. — An act to extend the operation and effect of chapter forty of the laws of eighteen hundred and forty-eight, entitled " An act to authorize the for- mation of corporations for manufacturing, mining, mechanical and chemical purposes." Passed July 16, 1881. Section 1. Any three or more persons may, and are hereby authorized, to organize and form themselves into a corporation in the manner (except as hereinafter provided) specified or required in or by the act entitled " An act to authorize the formation of corporations for manufactur- ing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight, or any amendment or amendments thereof, for the objects and purposes of carrying on the business and operations of owning, constructing, maintaining, using and operating warehouses, elevators, docks, wharves and basins. Every corporation so formed shall have and may exercise any and all powers and privileges necessary or proper in carry- ing on or connected with such business or operations, or XIV. EXTENSIONS OP MANUFACTDKIKG ACT, 311 any part or parts thereof, and all the capacities, powers, benefits and privileges mentioned in or conferred by the aforesaid act, passed February seventeenth, eighteen hundred and forty-eight, or any amendment or amend- ments thereof, and shall be subject to all the duties and obligations imposed by, and the provisions of said act as amended, except as herein otherwise provided. § 2. This act shall take effect immediately. XIV. L. 1882. c. 273. — An act to extend the operation and effect of chapter forty of the laws of eighteen hundred and forty-eight, entitled " An act to authorize the forma- tion of corporations for manufacturing, mining, me- chanical or chemical purposes," and of the several acts supplementary thereto and amendatory thereof. Passed June 3, 1883. Section 1. Any three or more persons may organize themselves into a corporation in the manner specified and required in and by chapter forty of the laws of eighteen hundred and forty-eight, entitled " An act to authorize the formation of corporations for manufacturing, mining, me- chanical or chemical purposes," for the purpose of purchas- ing, acquiring, building upon and improving real estate for union railway depots to be leased and occupied by any railroad company or companies owning, leasing or operat- ing a railroad within this State. The corporations so formed shall be subject to all the privileges and obliga- tions of the act aforesaid, and all acts amendatory thereof, or supplementary thereto, and shall have power to take and hold by purchase, contract or lease, and convey such real estate as shall be necessary to carry out the objects of said corporation. § 2. Any railroad corporation created under and by the laws of this State, or of any adjoining State, is hereby authorized to subscribe for, take and hold the stock of 312 APPENDIX A. XV. corporations created under and by virtue of this act in such amounts as the directors of the said subscribing corpora- tion may, from time to time, deem best for its interests, § 3. The directors of any corporation organized under and in pursuance of this act may, from time to time, make such just, proper and needful rules and regulations for the use of the union depot or depots owned or acquired by it as to the said directors or a majority of them may, from time to time, seem proper. § 4. This act shall take eflfect immediately. XV. L. 1884, c. 386. — An act to extend the operation and effect of chapter forty of the laws of eighteen hundred and forty-eight, entitled " An act to authorize the forma- tion of corporations for manufacturing, mining, me- chanical or chemical purposes," and the amendments made thereto. Passed May Z8, 1884. Section 1, Any three or more persons may organize and form themselves into a corporation in the manner specified and required in and by chapter forty of the laws of eighteen hundred and forty-eight, entitled " An act to authorize the formation of corporations for manufactur- ing, mining, mechanical or chemical purposes," and the amendments thereof and supplements thereto, for the pur- pose of boring, sinking, digging for, accumulating, con- ducting by underground pipes, conduits and reservoirs, and furnishing water, to be used for power and fire pur- poses. § 2. Every corporation so formed and the stockholders thereof shall be subject to all the provisions, duties and obligations contained in the above-mentioned act and the amendments thereof and supplements, thereto, and shall be entitled to all the rights, benefits and privileges thereby conferred. XV. EXTENSIONS OP MANUPACTUKING ACT. 313 § 3. Any corporation formed under this act shall have power to lay its pipes and conduits through and under the streets, avenues and highways of any city, town or village where it may be located, with the consent of the municipal authorities of such city, or the local authorities of such town or village, and under such reasonable regulations and conditions as they may prescribe, except in the city of New York, where pipes and conduits may be laid in the streets and avenues by any such corporation with the con- sent and by the authority of the commissioners of the sink- ing fund of said city. § i. Any corporation formed under this act may con- tract with any city, town or village in which it may be located, to furnish water for the purposes stated in section one of this act; but any contract that may be made under the authority hereby conferred between the city of New York and any such corporation shall be made only by the commissioners of the sinking fund of said city upon such terms and conditions as the said commissioners shall deem for the best interests of said city. And the comptroller of the said city of New York is hereby authorized to issue revenue bonds of said city in sufficient amount to raise such sums as the said commissioners of the sinking fund shall certify to be necessary to execute any contract made in behalf of said city under the authority hereby conferred, and a sum sufficient to pay said bonds, with the interest thereon, shall be included in the final estimate, and raised *by taxation, either in the year in which said bonds are issued or in the following year. § 5, All acts or parts of acts inconsistent herewith are repealed. § 6. This act shall take effect immediately. 314 Al'PENDIX A. XVI. XVI. L. 1879, c, 317. — An act to authorize the laying of pipes in the streets, avenues and public places in the various cities, towns and villages of this State, for heating and other purposes. Passed May, 19, 1879. Section 1. The municipal authorities of the cities, towns and villages of the State of New York, are hereby authorized and empowered to carry out the provisions of this act. § 2. Any corporation or association formed or organized under the act entitled " An act to authorize the formation of corporations for manufacturing, mining, mechanical or chemical purposes," passed February seventeenth, eighteen hundred and forty-eight, or under any of the amendments to said act, or under the " act to provide for the organiza- tion and regulation of certain business corporations," passed June twenty-first, eighteen hundred and seventy- five, shall have full power to manufacture, furnish and sell such quantities of hot water, hot air, or steam, as may be required in the city, town or village where the same shall be located ; and such corporation shall have power to lay pipes or conductors for conducting hot water, hot air, or steam through the streets, avenues, lanes, alleys, squares and highways in such city, village or town, with the con- sent of the municipal authorities of said city, town or vil- lage, and under such reasonable regulations and conditions as they may prescribe ; and whenever any such permission shall be granted, it shall only be upon the condition that reasonable compensation shall be paid therefor, and upon a further condition that a satisfactory bond shall be given to secure the city, town or village against all damages in the use of said pipes. The amount of the compensa- tion, and the manner of its payment, and the amount of the bond shall be first fixed and determined by said munic- XVI. EXTENSIONS OF MANUEACTUEING ACT. 315 ipal authorities, before any pipes, as provided for by this act, shall be laid in any city, town or village of this State, and that all such permissions heretofore given by any of said municipal authorities, where the above terms have been complied with, are hereby confirmed. § 3. This act shall take effect immediately. APPENDIX B. Provisions of the Penal Code Applicable to Manupac- tueing and business corporations. THE PENAL CODE.^ § 518. An officer, agent, or other person, employed by any company or corporation existing under the laws of this State, or of any other State or Territory of the United States, or of any foreign goTernment,.who wilfully and with a design to defraud, sells, pledges or issues, or causes to be sold, pledged or issued, or signs or procures to be signed with intent to sell, pledge or issue or to be sold, pledged or issued, a false, forged, or fraudulent paper, writing or instrument, being or purporting to be a scrip, certificate or other evidence of the ownership or transfer of any share or shares of the capital stock of such com- pany or corporation, or • a bond or other evidence of debt of such company or corporation, or a certificate or other evidence of the ownership or of the transfer of any such bond or other evidence of debt, is guilty of forgery in the third degree, and upon conviction, in addition to the pun- ishment prescribed in this title for that offence, may also be sentenced to pay a fine not exceeding three thousand dollars. § 519. The false making or forging of an instrument or writing, purporting to have been issued by or in behalf of a corporation or association, state or government, and ' L. 1881, c. 676. PROVISIONS OF PENAL CODE. 317 bearing the pretended signature of any person, therein falsely indicated as an agent or officer of such corporation, is forgery in the same degree, as if that person were in truth such officer or agent of the corporation or associa- tion, state or government. *********** § 590. A person who signs the name of a fictitious per- son to any subscription for, or agreement to take, stock in any corporation, existing or proposed, and a person who signs, to any subscription or agreement, the name of any person, knowing that such person does not intend in good faith to comply with the terms thereof, or under any understanding or agreement that the terms of such sub- scription or agreement are not to be complied with or en- forced, is guilty of a misdemeanor. § 591. An officer, agent, or other person in the service of any joint-stock company or corporation formed or ex- isting under the laws of this State, or of the United States, or any State or Territory thereof, or of any foreign govern- ment or country, who wilfully and knowingly with intent to defraud ; either 1. Sells, pledges, or issues, or causes to be sold, pledged, or issued, or signs or executes, or causes to be signed or executed, with intent to sell, pledge, or issue, or to cause to be sold, pledged, or issued, any certificate or instrument purporting to be a certificate or evidence of the ownership of any share or shares of such company or cor- poration, or any bond or evidence of debt, or writing pur- porting to be a bond or evidence of debt of such company or corporation, without being first thereto duly authorized by such company or corporation, or contrary to the char- ter or laws under which such corporation or company ex- ists, or in excess of the power of such company or corpo- ration, or of the limit imposed by law or otherwise upon its power to create or issue stock or evidences of debt ; or 2. Ee-issues, sells, pledges, or disposes of, or causes to be re-issued, sold, pledged, or disposed of, any surrendered 318 APPENDIX B. or cancelled certificate, or other evidence of the transfer or ownership of any such share or shares ; Is punishable by imprisonment for not less than three years nor more than seven years, or by a fine not exceed- ing three thousand dollars, or by both. § 592. An officer, agent, or clerk of a corporation, or of persons proposing to organize a corporation, or to in- crease the capital stock of a corporation, who knowingly exhibits a false, forged, or altered book, paper, voucher, security or other instrument of evidence to any public officer or board authorized by law to examine the organ- ization of such corporation, or to investigate its affairs, or to allow an increase of its capital, with intent to deceive such officer or board in respect thereto, is punishable by imprisonment in a State prison not exceeding ten years and not less than three years. § 593. A person who, without authority, subscribes the name of another to, or inserts the name of another in, any prospectus, circular, or other advertisement or announce- ment of any corporation or joint-stock association existing, or intended to be formed, with intent to permit the same to be published, and thereby to lead persons to believe that the person whose name is so subscribed is an officer, agent, member, or promoter of such corporation or asso- ciation, is guilty of a misdemeanor. § 594. A director of a stock corporation who concurs in any vote or act of the directors of such corporation, or any of them, by which it is intended, 1. To make a dividend, except from surplus profits aris- ing from the business of the corporation, and in the cases and manner allowed by law ; or 2. To divide, withdraw, or in any manner pay to the stockholders, or any of them, any part of the capital stock of the corporation ; or to reduce such capital stock with- out the consent of the legislature ; or 3. To discount or receive any note or other evidence of debt in payment of an installment of capital stock actually PROVISIONS OF PENAL CODE. 319 called in and required to be paid, or with intent to provide the mfeans of making such payment ; or 4. To receive or discount any note or other evidence of debt with intent to enable any stockholder to withdraw any part of the money paid in by him on his stock ; or 5. To apply any portion of the funds of such corpora- tion, except surplus profits, directly or indirectly to the purchase of shares of its own stock ; or 6. To receive any such shares in payment or satisfac- tion of a debt due to such corporation ; or 7. To receive in exchange for the shares, notes, bonds, or other evidences of debt of such corporation, shares of the capital stock, or notes, bonds, or other evidences of debt issued by any other stock corporation. Is guilty of a misdemeanor. *********** § 602. A director, officer, or agent of any corporation or joint-stock association who knowingly receives or pos- sesses himself of any property of such corporation or as- sociation, otherwise than in payment of a just demand, and . with intent to defraud, omits to make, or to cause or direct to be made a full and true entry thereof in the books or accounts of such corporation or association ; and a director, officer, or agent, or member of any corporation or joint-stock association, who, with intent to defraud, de- stroys, alters, mutilates, or falsifies any of the books, papers, writings, or securities belonging to such corpora- tion or association, or makes, or concurs in making, any false entry, or omits, or concurs in omitting to make any material entry, in any book of accounts or other record or document kept by such corporation or association, is pun- ishable by imprisonment in a State prison not exceeding ten years, and not less than three years, or by imprison- ment in a county jail not exceeding one year, or by a fine not exceeding five hundred dollars, or by both such fine and imprisonment. § 603. A director, officer, or agent of any corporation or 320 APPENDIX B. joint-stock association who knowingly concurs in making or publishing any written report, exhibit, or statement of its affairs or pecuniary condition containing any material statement which is false, other than such as are elsewhere by this code specially made punishable, is guilty of a mis- demeanor. *********** § 609. A director of a corporation or joint-stock associa- tion must be deemed to have such a knowledge of the affairs of the corporation or association as to enable him to determine whether any act, proceeding, or omission of its directors is a violation of this chapter. § 610. A director of a corporation or joint-stock associa- tion who is present at a meeting of the directors at which any act, proceeding, or omission of such directors, in vio- lation of this chapter, occurs, must be deemed to have concurred therein, unless he at the time causes, or in writ- ing requires, his dissent therefrom to be entered in the minutes of the directors. § 611. A director of a corporation or joint-stock associa- tion, although not present at a meeting of the directors at which any act, proceeding, or omission of such directors, in violation of this chapter, occurs, must be deemed to have concurred therein if the facts constituting such viola- tion appear on the record or minutes of the proceedings of the board of directors, and he remains a director of the same company for six months thereafter without causing or in writing requiring his dissent from such illegality to be entered in the minutes of the directors. § 612. A director, trustee, or other ofl&cer of a joint- stock association or corporation upon whom a notice of application for an injunction affecting the property or business of such joint-stock association or corporation is served, who omits to disclose to the other directors, officers, or managers thereof the fact of such service, and the time and place of such application, is guilty of a mis- demeanor. PROVISIONS OF PBNAIi CODE. 321 § 614. The term " director," as used in this chapter, em- braces any of the persons having by law the direction or management of the affairs of a corporation, by whatever name such persons are described in its charter or are known in law.^ ' § 15 of the Penal Code provides, that: "A person convicted of a crime declared to be a misdemeanor, for which no other punishment is specially prescribed by this Code, or by any other statutory provision in force at the time of the conviction and sentence, is punishable by im- prisonment in a penitentiary, or county jail, for not more than one year, or by a fine of not more than five hundred dollars, or by both." § 538 provides that an officer of an association or corporation who appropriates property thereof in his charge to his own use, is guilty of larceny. 21 APPENDIX C. FOEMS UNDER THE MANUFACTUEING ACT. 1. Certificate of incorporation. 2. Certificate of payment of capital stock. 3. Annaal report. 4. Kotice of annual meeting. 5. Proxy to vote. 6. Stockholders' consent to mortgage. 7. Certificate increasing or diminisbing capital stock. 8. By-laws. 9. Acknowledgment. 1. Certificate of Incorporation.^ iCeetificate of Incoepohation op the [insert corporate name]. We [insert names of svbscribers, to he not less them three'], desiring to form a company pursuant to the provisions of an act, passed bj the Legislature of the State of New York, JFebruary 17, 1848, and entitled : " An act to authorize the formation of corporations for manufacturing, mining, me- cchanical or chemical purposes," and of the several acts ex- tending and amending the same, do hereby certify : That the corporate name of the said company is [insert mame of company]. That the objects for which said company is formed are ^insert objects for which company is formed]. That the amount of the capital stock of the said com- pany is [insert amount of capital stock]. • AnU, §J 6, 7. POEMS UNDER THE MANUFACTURING ACT. 323 That the term of the existence of said company is to be [insert number of years, not to exceed fifty]. That the number of shares of which the said capital stock consists is [insert number and par value of shares']. That the number of the trustees who shall manage the concerns of said company is [insert number, not less than three nor more than thirteen]. That the names of the trustees for the first year are [insert nam£s and residences]. That a majority of said trustees are citizens and resi- dents of the State of New York. That the names of the town and county in which the operations of the said company are to be carried on are [insert names of town amd county and of other places in the State where the business is to be carried on, if desired].^ In witness whebeof, we have hereunto set our hands this day of , 18 . [Signatures of svhscribers.] State op New Yobk, ) County of . ) " ' On this day of 18 , before me person- ally appeared [insert names of subscribers], to me known to be the individuals described in and who executed the fore- going certificate, and they severally, before me, signed the said certificate and acknowledged that they executed the same.' [Signature and title of officer.] ' Where a company is formed for the purpose of carrying on a part of its business out of this State, this last provision should be omitted from the certificate and the following inserted in its place: That said company is formed for the purpose of carrying on some part of its business out of the State of New York, namely, at [insert name of place], and that tbe names of the town and county in which the prin- cipal part of the business of said company is to be transacted in this State are [insert names]. ' The duplicate certificate to be recorded in the oflSce of the secretary of State must of course have attached to it the ordinary certificate from the county clerk's oflSce, showing the authority of the officer taking the acknowledgments. 324 APPENDIX C. 2. Certificate of Payment of Capital Stock.* Oebtiitcate op Payment op Capital Stock op the [ijisert corporate name]. We, A. B., C. D., E. F. and G. H., trustees, and a ma- jority thereof, of the [insert corporate name'], and the said A. B., being president of said company, do hereby certify : That the amount of the capital stock of the [insert cor- porate name] is [insert amount] dollars, and that the whole thereof has been paid in. [If the capital stock or any part thereof has been issued in payment for property, that fact should he stated in the certificate, which should show the amount paid m in cash aaid the amount paid in in property.] Witness our hands, this day of , 18 , A. B,, President. C. D., ) E. P., )■ Trustees. G.H..J State op New York, ] ^^ . Cownty of . ) ' ' A. B., C. D., E. P. and G. H., being each duly sworn, jointly and severally, depose and say that the said A. B. is president of the [insert corporate name], and the said A. B., C. D., E. P. and G. H. are trustees of said company and a majority thereof, and that the foregoing certificate of pay- ment of capital stock made and subscribed by them is true. A. B., President. Sworn to before me this ) C. D., ) E. P., y Trustees. G.H.,) day of , 18 [Signature ofojicer.] < Antt, $§ 99, 100. FORMS UNDER THE MAXUFACTURIKG ACT. 325 3. Annual Report.' Annual Eepobt of the [insert corporate name]. The capital stock of this company is [insert whole amount of authorized capital]. The said capital stock has been paid in as follows : dollars thereof in cash, dollars thereof in property necessary for the company's business.' The existing debts of the company do not exceed dollars. Witness our hands, this day of January, 18 . A. B., President. G. D., ) MoQority E. R, [ of G. H., j Trustees. State op New Yobk, ) County of . ]^^'- A. B.,' being duly sworn, says that he is the president of said [ym&rt corporate name], and that the foregoing annual report is true to the best of his knowledge, infor- mation and belief. A. B. Sworn to before me, this ) day of January, 18 . ) ]Signature of officer,] 4. Notice of Annual Meeting. The annual meeting of the stockholders of the company for the election of trustees for the ensuing year ' AnU, § 28. " If all of the stock has been paid in in cash, or if all of it has been issued for property, the report should, of course, be drawn to correspond with the fact. ' The secretary may verify the report in the place of the president. 326 APPENDIX C. and of inspectors of election to serve at the next annual meeting, and for the consideration of such other business as may properly come before the meeting, will be held at the office of the company at on the day of ,18 , at o'clock in the noon. Trans- fer books will be closed from the day of to the day of Dated, New York, , 18 A. B., Secretary. Proxy to Tote. Know all men by these presents, that I, A. B., of , do hereby constitute and appoint C. D., of , attorney and agent for me, and in my name to vote as my proxy, at the annual election of trustees for the company, to be held on the day of , and at any adjoarned meeting thereof, according to the number of votes that I should be entitled to vote if then personally present. In witness whereof I have hereunto set my hand and seal, this day of , 18 . [Signed] A. B. (l. s.) In presence of 6. Stockholders' Consent to a Mortgage of Property and Franchise. We, the undersigned stockholders of the company, owning and holding the number of shares of the capital stock in the said company set opposite our respective names, being a majority of the stockholders thereof and FORMS UNDER THE MANUFACTURING ACT. 327 owning at least two-thirds of the capita! stock thereof, do hereby assent to the mortgaging by the said company, of all or any part of its real and personal property, its fran- chises, privileges, rights and liberties, to secure the pay- ment of any debt heretofore contracted or which may be contracted by the said company in the business for which it was incorporated, provided that the same shall not ex- ceed the sum of dollars ; and to the making and issuing, by the said company, of its bonds, promissory notes or other evidences of such debt. \^8ignature of stockhciders.] [No. of shares.'\ * Certificate Increasing or Diminishing Capital Stock.^ Cebtificate Increasing [or, Diminishing] the Capital Stock op the Company. State of New Yobk, ) . County of . ) " I, , do hereby certify : That I am one of the trustees of the company, a corporation duly organized under an act passed by the Legislature of the State of New York, Feb. 17, 1848, and entitled : " An act to authorize the formajtion of corpora- tions for manufacturing, mining, mechanical or chemical purposes," as now amended and extended. That the capital stock of the said company was fixed by its certificate of incorporation at dollars, and was divided into shares of the par value of dol- lars each. That the said company, desiring to increase [or, dimin- * See, for the provisions regulating the making and filing of this con- sent, ante, § 134. \Ante, §§ 81, 83. 328 APPENDIX C. ish] its capital stock, the trustees thereof did publish a notice, signed by more than a majority of them, in the [insert ruime of netospaper], a newspaper published in the county of [insert name of county], in which said county the principal business office of said company is situated, for three successive weeks prior to the date of the meeting called thereby, beginning on the day of , 18 , which said notice was in the words following : New York, , 18 . A special meeting of the stockholders of the company will be held at the office of said company, at No. Street, in the city of , on the day of at 12 o'clock M. of that day, to determine whether the capital stock of said company shall be increased [or, diminished] to the amount of dollars, to consist of shares of the par ralue of dollars per share. [Signatures of trustees.] That the said trustees did also, at least three weeks previous to the day fixed upon for holding said meeting, to wit, on the day of , 18 , deposit in the post-office of the city of a printed [or, written] copy of said notice, inclosed in a post-paid envelope, addressed to each shareholder at his usual place of residence. I do further certify : That at the time and place specified in the notice pub- lished and mailed as aforesaid, that is to say on the day of 1 18 , at the office of the company, at No. Street, in the city of , at 12 o'clock noon, there appeared in person and by proxy stockhold- ers representing more than two-thirds of all the shares of stock of the said company, and that the meeting organized by choosing myself, the said , as chairman, and as secretary thereof. That the call for the meeting having been read, and proof of the proper publishing and mailing thereof having been presented, the following resolution was adopted : Eesolved : That the company does increase [or, FORMS UNDER THE MANUFACTURING ACT. 329 diminish] its capital stock from the present amount there- of, yiz., the sum of dollars, consisting of shares of the par value of dollars per share, to the amount of dollars, to consist of shares of the par value of dollars per share; and that the officers of this meeting are hereby instructed to take the necessary legal steps to perfect such increase [or, diminution] of capital. That the vote of those present in person and by proxy upon said resolution being duly canvassed, it appeared that shares of the capital stock of said company, being more than two-thirds of all the stock thereof, voted in favor of said resolution. And I do further certify : That the entire capital of said company has been paid in ; dollars thereof having been issued for properties required by it in its business, and dollars thereof for cash ; and that the amount of the existing debts and liabil- ities of the company does not exceed the sum of dol- lars, and, as nearly as can be stated, is dollars ; ' and that the amount to which the capital- stock of said com- pany is increased [or, diminished] is dollars. In witness whereof, I have hereunto set my hand, and the secretary of said meeting has countersigned this cer- tificate, this day of , 18 . Chairjnan. Countersigned by , Secretary. State of New Yoek, ) County of . i"®^' ' [Insert name], chairman, being duly sworn, deposes and says, that he has read the foregoing certificate subscribed by him, and knows its contents, and that the same is in all respects true. , Chairman. Sworn to before me this j day of , 18 . f [Signature of officer.] ' The capital cannot be so diminished that the debts of the company exceed its capital. 330 appendix c. State op New Yoek. ) County of . \^^'- On this day of , a. d. 18 , before me per- sonally came , to me personally known, and known to me to be the person described in and who executed the fore- going certificate, and he acknowledged to me that he ex- ecuted the same. In witness wheeeof, I hare hereunto affixed my hand and seal of office, the day and year above stated. [Signature of officer.] (L. S.) Note. — Companies organized since May 15, 1878, must, when diminishing their capital stock, have the approval of the comptroller of the State indorsed upon the duplicate copy of the certificate to be filed in the office of the secretary of State, to the efiect that the reduced capital is sufficient for the proper purposes of the company, and is in excess of all debts and liabilities of the company exclusive of debts secured by trust mortgages, and that the actual market value of the stock of the company prior to the reduction of the capital was less than the par value of the same ; and it is advisable that the certificate should show the necessary facts to enable the comptroller to make this indorse- ment. Consult ante, §§ 81 , 82. 8. By-laws. Abticle I. — Teustees. § 1. The number of trustees of [here insert fvR name of company'] shall be [insert number], who shall respectively be stockholders in such company, and a majority of whom shall be citizens and residents of the State of New York. Such trustees shall be elected annually, by ballot, at a meeting of the stockholders of said company held for that purpose as hereinafter set forth. § 2. At such stockholders' meeting the election of such trustees shall be made by ballot by such of the stockhold- ers as shall attend for that purpose, either in person or by BY-LAWS UNDEE THE MANUFACTURING ACT. 331 proxy. At such election each stockholder shall be entitled to as many votes as he owns shares of stock in said com- pany, and the persons receiving the greatest number of votes cast shall be trustees for the ensuing year. § 8. If for any cause the annual meeting of the stock- holders shall not be held at the time prescribed in § 1, article VI, or an election of trustees shall not then be made, the trustees then in oflBce shall hold over and con- tinue in office until a new election is held ; and they shall appoint the time and place for such new election; and shall give due notice thereof by mail and publication as provided in article VI, § 1. § 4. This board of trustees shall have the management and control of the affairs and business of the corporation, and shall employ such agents and employees as they deem advisable ; and fix the rate of compensation of all officers, agents and employees. § 5. Whenever any vacancy shall occur in the board of trustees by death, resignation, or otherwise, the same shall be filled without undue delay by a majority vote, by ballot, of the remaining members of the board, and the person so chosen shall hold the office until the next annual meeting, or until a new board is elected. § 6. The board of trustees shall meet regularly once every month on [insert day, e. g. the first Tuesday thereof}. On the written request of any trustee, the secretary shall eall a special meeting of the trustees. § 7. [Insert number, not less than a majority of the whole'] trustees shall constitute a quorum for the transac- tion of business at all meetings of the board of trustees. Abticle II. — Officers. § 1. The board of trustees shall, immediately after or- ganizing, elect the officers of the company for the ensuing year, and a majority vote of the whole number of trus- 332 APPENDIX C. tees shall be necessary for the election of each of said officers. § 2. The officers of this company shall consist of a pres- ident, vice-president, secretary and treasurer who shall be elected annually. § 3. The president shall preside at all meetings of the board of trustees, and shall act as temporary chairman at, and call to order all meetings of the stockholders ; and he shall perform all the duties incidental to his office. § 4. The vice-president shall, in the absence or incapac- ity of the president, perform the duties of that officer. § 5. The treasurer shall have the custody of, and be re- sponsible for, all moneys, papers, books and accounts of the corporation, save only such papers, books and records as are hereinafter, by the following section, directed to be kept by the secretary ; subject always to the control of the board of trustees. He shall deposit all funds of the company which may come into his hands in such bank or banks as the trustees may designate : he shall keep his bank account in the name of the company, and shall exhibit his books and accounts to any trustee upon application at the office at any time during ordinary business hours ; he shall sign all certificates of stock of the company, and shall record all transfers of stock, and cancel and preserve all certificates of stock transferred ; and at each annual meeting of stock- holders shall present a full statement of the affairs of the company. He shall also keep a book containing the names, alphabetically arranged, of all persons who are, or within six years have been, stockholders of this company, showing their places of residence, the number of shares of stock held by them respectively, and the time when they respectively became the owners of such shares, and the amount of stock actually paid in ; and shall generally per- form all the duties appertaining to his office.* ' Provisions requiring a bond from the treasurer may be inserted if BT-IiAWS UNDER THE MANUFACTUEING ACT. 333 § 6. The secretary shall keep a record, in proper books provided for that purpose, of all the meetings and proceed- ings of the board of trustees ; and also the minutes of the stockholders' meetings ; he shall record all the votes of the corporation, and shall keep such other records, and shall attend to such correspondence of the company as the board of trustees shall direct ; he shall notify the trustees and stockholders of their respective meetings ; he shall attend to the giving and serving of all notices of the com- pany, and shall in general do and perform all the duties appertaining to his office. § 7. In case any vacancy arises in the board of trustees and in the offices of the company, the trustees shall have full power to fill the same. Abtiole III. — ^Inspectors op Election. § 1. In addition to the officers named in the foregoing articles, two persons holding stock in this company shall be chosen, by ballot, at each annual meeting of the stock- holders, to serve as inspectors of election for the ensuing year ; and at the annual meeting first held after the or- ganization of this company, such inspectors of election to serve at said meeting shall be chosen viva voce, by the stockholders then present. In case of a vacancy in the office of inspector of elections, the same shall be filled by a majority vote of the trustees then in office, voting by bal- lot, and the person or persons so chosen shall hold office until their successors are elected at the next annual meet- ing. Article IV. — Stock Cebtificates. § 1. Each holder of stock shall be entitled to a certificate, under the seal of the corporation and signed by the pres- ident, or in his absence by the vice-president, and by the desired, and also provisions regtdating the method of making commer- cial paper in the name of the company. 334 APPENDIX C. treasurer, stating the capital stock of the company, the number of shares into which it is divided, the par value of each share, the number of shares to which said holder is entitled, and the manner in which said certificate is trans- ferable. § 2. All certificates shall be issued in order from a cer- tificate book, and duly numbered and registered in the order of their issue; opposite each certificate, in the margin of said book, it shall be the duty of the treasurer to enter the name and residence, or place of business, of the owner thereof ; and in case of the transfer or cancellation of such certificate, the date of such cancellation or transfer ; and at the time of issue of any certificate it shall be receipted for on said margin by said owner, or by his duly author- ized agent. Shares may be transferred upon the books of the company by the holder or owner, either personally or by power of attorney, on the surrender of the certificates of such shares. Akticle v. — Seal. § 1. The seal of the corporation shall be circular in form, with the words [here insert /uU, corporate name'] on the circumference, and the figures [here insert year of incorpora- tion, e. g., 1890] in the center. It shall be kept in the charge and custody of the treasurer, and must be affixed to all instruments requiring a seal, together with the signa- tures of the treasurer and president, or, in his absence or incapacity to act, of the vice-president. Article VL — Meetings. § 1. An annual meeting of the corporation shall be held at the office of the company at [insert street number'] in [in- sert name of tovm and county], on the [insert date, day and month, e. g., first day of February], in each and every year, at such hours as the trustees may appoint ; and due notice of such meeting shall be given by a written or printed no- BY-LAWS UUDBB THE MANDFACTURING ACT. 335 tice, signed by the secretary of the corporation, and sent through the post-office at least ten days prior to such meeting, to each stockholder of record appearing on the books of the corporation, at the address given in such books ; and public notice of the time and place of holding such meeting and the election of trustees shall be pub- lished, not less than ten days previous thereto, in the news- J)aper printed nearest to the place where the operations of the company are carried on. § 2. Special meetings of the stockholders, other than those provided for and regulated by statute, may be called by the trustees whenever they deem necessary, and they shall order and call such meeting whenever persons not less than {insert number, e. g., five] in number, and owning not less than [insert proportion, e. g,, one-third] of the capi- tal stock shall in writing request the same. Said meeting shall be held at said office of the company as aforesaid, and notification thereof shall be given by mail and publication in all respects as hereinbefore provided in the case of annual meetings ; but at all such special meetings of stockholders at least one-half of the shares of the capital stock, exclu- ■sive of stock held by the company, must be represented to constitute a quorum ; and neither at an annual or at a special meeting shall any stock held by the company be voted upon. Abticle VII. — Dividends. § 1. Dividends, payable from the net profits in hand, shall be declared and paid, at such times and to such amounts as the board of trustees may from time to time designate. Abticle VIII. — Amendments. § 1. These by-laws may be amended by a majority vote of the issued stock of the company at any annual meeting or at any meeting of stockholders called especially for that 336 APPKNDIX C. purpose ; provided that the notice of such meeting shall state such amendment to be one of the objects of such meeting, and shall specify the by-law or by-laws which it is proposed to amend. At such meeting only the by-laws specified in such notice shall be amended. Note.— Other by-laws, of course, will be inserted to meet the require- ments of particular cases. See, as to the power to adopt by-laws, ante §§ 34, 25. The statute requiring the publication of by-laws aflfecting elections should be noticed. Ante, p. 51. 9. Acknowledgment by Corporation. State of New Tobk, ) County of . j- ss. . On this day of in the year 18 , before me personally came A. B., the president of the company, with whom I am personally acquainted, who, being by me duly sworn, said, that he resided in the city of ; that he was president of the company ; that he knew the corporate seal of said company ; that the seal affixed to the above instrument was such corporate seal ; that it was affixed by order of the board of trustees of said company, and that he signed his name to the above instrument as president of the said company, by the like order. [Signature of officer^] APPENDIX D. FOEMS UNDEE THE BUSINESS ACT. 1. Certificate of incorporators. 3. Commissioners' verified record of proceedings. 3. Annual report. 4. Certificate of payment of capital. 5. Certificate extending existence. 6. Certificate changing principal place of business. 7. Certificate increasing or diminishing capital stock. Certificate of Incorporators. Ante, §§ 155, 193. We the undersigned, A. B., C. D., E. F. and G. H., all of the city of , in the State of New York, and J. K., of the city of , in the State of proposing to form a limited [or, full] liability company, pursuant to the pro- visions of an act of the Legislature of the State of New York, entitled " An act to provide for the organization and regulation of certain business corporations," passed June 21st, 1875, and the acts amendatory thereof and supple- mentary thereto, do hereby certify : First. The name of said corporation is to be [here in- sert corporate name, adding word " Limited," if the corpora- tion is of that doss}. Second. The object for which said corporation is to be formed is [here state object, describing the nature of the busi- ness to be carried on], and the locality of its business is to be at county of , State of New York. Third. The amount of the capital stock of said corpora- tion is to be [insert amounf] dollars, of the following de- scription : 22 338 . APPENDIX D. Fourth. The number of shares of which said capital stock shall consist is [insert number of shares']. Fifth. The location of the principal business office of said corporation is to be in the city of [insert name of city], in the State of New York. Sixth. The duration of said corporation is to be for the term of [insert number of years, which must not exceed In witness wheeeop, we have hereunto set our hands in the city of , on the day of A, D. 18 . [Signature of proposed corporators.] ^ State of New Yobk, ) County of . p^" • On this day of , a. d. 18 , before me per- sonally came [insert names of proposed, corporators], to me known to be the individuals described in and who exe- cuted the foregoing instrument, and they severally ac- knowledged that they executed the same for the purposes therein mentioned. [Signature of officer.] 2. Commissioners' Yerifled Record of Proceedings. Ante, §§ 159, 193. We, the undersigned, licensed and empowered by the secretary of State of the State of New York, by license bear- ing date the , day of 18 , as commissioners to open books for subscriptions to the capital stock of the [insert corporate name infulT] hereby report : That on the day of , 18 , in the of , we opened books for subscriptions to the capital stock of said company. ' Upon the filing of the above certificate a " license " will be issued by the secretary of State. FORMS UNDER THE BUSINESS ACT. 339 That the following is a true list of the subscriptions to the said capital stock : NAMES. RESIDENCES. NUMBER SHARES. That at the time of making such subscriptions each subscriber paid to us in cash ten per cent, of the par value of each share subscribed for by him. That on the day of , a. d. 18 , it ap- pearing that at least one-half of the capital stock of the said [giving name in full as iefore] had been duly sub- scribed in accordance with the requirements of § 5 of the aforesaid act, we called a meeting of the subscribers for the purpose of adopting by-laws for said corporation, and of electing directors therefor. That such meeting was called by depositing a notice in the post-office, addressed to each and every subscriber at his last known place of residence, and with the proper postage thereon prepaid, at least five days previous to the time appointed for said meeting. That at the time and place named in said notice, to wit : on the day of 18 , at No. , street, in the city of , the subscribers met and or- ganized, by choosing Mr. chairman, and Mr. secretary. The following by-laws were then adopted : [Sere insert h/-laws.] The following matters must be provided for therein : 1. The number of directors of the corporation. 2. The term of office of such directors, which shall not exceed one year. 3. The manner of filling vacancies among directors and officers. 4. The time and place of the annual meeting. 5. The manner of calling and holding special meetings of the stockholders. 6. The number of stockholders who shall attend, either in person or by proxy, at every meeting, in order to con- stitute a quorum. 340 AI'PENDIX D. 7. The officers of the corporation, the manner of their election by and among the directors, and their powers and duties. But such officers shall always include a president, a secretary, and a treasurer. 8. The manner of electing or appointing inspectors of election. 9. The manner of amending the by-laws.^ The meeting then proceeded to the election of directors, and the following were duly elected directors to manage the affairs of the company for the first year : [Insert names.] There being no further business the meeting then ad- journed. And we, the undersigned commissioners, being severally and duly sworn, do severally depose and say, that the foregoing is a true and correct record of the proceedings had under the aforesaid license. Subscribed and sworn to ' before me, this day of A. D. 18 . [Signature of officer.] [Signatures of Commissioners.] Annual Report of the Company (Limited). Ante, §§ 170, 199. The capital stock of this company is [here state amount, which must not exceed $5,000,000]. The said capital stock has been paid in as follows : shares thereof in cash, shares thereof in property necessary for the company's business, and shares thereof in labor performed for the company. The existing assets of the company amount to [insert amount], and consist of [here describe assets in, general terms]. ' See ante, § 158, and for form of by-laws under Manufacturing Act see Appendix C. FOEMS UNDER THE BUSINESS ACT. 341 The existing debts of the company do not exceed linsert amounf], and consist of [here describe debts in general terms]. The names of the stockholders are : [here insert names]. The company has declared dividends, since the last an- nual report, amounting to $ , being per cent, on its capital stock. Witness our hands this day of January, 189 . President. (Majority dtrectors. State of New Tobk, ) County of . j ' ' A, B., being duly sworn, deposes and says that he is the president of the \insert corporate name in full], that the foregoing annual report is signed by a majority of the directors of the said company, and that the same is true to the best of his knowledge, information and belief. Sworn to before me, this ) A. B. day of January, 18 [^Signature of officer.] Certificate of the Payment of the Capital Stock of a Limited Liability Company. Ante, §§ 189, 203. We, A. B., C. D., E. F. and G. H., being directors of the {insert corj>orate name in full], and a majority thereof, and the said A. B. being president of said company, do hereby certify : That the capital stock of said company is [here insert amount]. That the whole of said capital stock has been paid in in full, as follows : shares thereof in cash, shares thereof in property necessary for the company's business. 342 APPENDIX D. shares thereof for labor performed for the company.' That the payment of the last installment of the said capital stock was made on the day of 189 , and this certificate is made within thirty days thereof. Witness our hands, this day of , 189 . A. B., President. C. D. ) Majority E. F. I _ of G. H. j directors. State of New Yoek, ) County of , P«- = A. B., C. D., E. F. and G. H., directors of the \insert corporate name, with the addition of the word "Limited"], and the said A. B., president of said company, being duly sworn, each for himself deposes and says, that he has read the foregoing certificate, and knows the contents thereof, and that the said certificate is in all respects correct and true. Prest. Subscribed and sworn to ' before me, this day of 18 . A. B CD. E. F. G.H \Signature oi officer.l Certificate Extending Term of the Corporate Existence. Aide, %% 181, 198. This is to certify that we, the undersigned stock- holders of the \inseH corporate name infuU\, a corporation formed under an act of the Legislature of the State of New York, entitled : " An act to provide for the organization and regulation of certain business corporations," passed June 21, 1875, owning at least two-thirds in amount of the capital stock of the said company, do hereby consent that ' If all the stock has been issued for cash, or property, or labor, such fact, of course, should be stated. FORMS UNDER THE BUSINESS ACT. 343 the corporate existence of the said company, which, by the original certificate of the incorporators, was fixed at years, commencing on the day of 18 , be extended from the day of 18 , for a period of years ; and for the purpose of effecting such extension we do, in accordance with the provisions of said act, execute the within certificate. Dated, New York, , 18 . NAMES. RESIDENCES. NUMBER SHARES. State of New Yobk, ) Cmmty of , ] On this day of , 18 , before me personally appeared \j/n,sert names of stockholders signing certificate], to me known to be the individuals described in, and who signed the foregoing certificate, and severally acknowl- edged to me that they signed the same for the purposes therein mentioned. In witness wheeeop, I have hereunto affixed my hand and seal oi office, in the city of , on the day and year above set forth. [Signature of officer.} 6. Certificate Changing Principal Place of Business. Ante, §§ 183, 204. This is to certify that we, the undersigned stockholders of the {insert corporate name in fvlV], a corporation formed under an act of the Legislature of the State of New York, entitled " An act to provide for the organization and re- gulation of certain business corporations," passed June 21, 1875, owning at least two thirds in amount of the capital stock of the said company, do hereby consent that the principal place of business of the said company, which by the original certificate of the incorporators was fixed at in the State of New York, be changed to in 344 APPENDIX D. the said State, and for the purpose of effecting such change of the principal place of business of the said company, we do, in accordance with the provisions of said act, execute the within certificate. Dated, New York, , 18 . NA.ME8. RESIDENCES. NUMBER SHARES. State of New York, ) County of , P^' ' On this day of , 18 , before me personally appeared [insert names of stockholders signing certificate'], to me known to be the individuals described in, and who signed the foregoing certificate, and severally acknowl- edged to me that they signed the same for the purposes therein mentioned. In witness whereof, I have hereunto afl&xed my hand and seal of ofl&ce, in the city of , on the day and year above set forth. [Signature of officer.] 7. Certificate Increasing or Diminishing ^ Capital Stock. Ante, §§ 167, 197. State of New York, 1 „„ . County of > [ ' I, , do hereby certify : • That I am one of the directors of the Company (Limited), a corporation duly organized under an act passed by the Legislature of the State of New York, June 21, 1875, and entitled : " An act to provide for the . or- ganization and regulation of certain business corpora- tions," as now amended and extended. That the capital stock of the said company was fixed by its certificate of incorporation at dollars, and was divided into shares of the par value of dollars each. ' See fost, n. 1, p. 345. FORMS UNDER THE BUSINESS ACT. 345 That the said company desiring to increase [or, dimin- ish] its capital stock, the directors thereof did cause to be served upon each stockholder, by depositing in the post-office, properly addressed to his last known place of residence, with the postage thereon prepaid, at least five days before the time fixed therein for the meeting thereby called,^ that is to say, on the day of , 18 , a written [or, printed] notice, signed by at least a majority of said directors, in the words following : New Toek, , 18 . A special meeting of the stockholders of the Company (Limited) will be held at the office of said company, at No. , street, in the city of , at 12 o'clock M. of that day, to determine whether the capital stock of said company shall be increased [or, diminished] to the amount of dollars, to consist of shares of the par value of dollars per share. [Signatures of directors.'] That at the time and place specified in the notice so served as aforesaid, that is to say, on the day of , 18 , at the office of the Company (Limited), at No. , street, in the city of , at 12 o'clock noon, there were present a majority in number of the stockhold- ers of the said company, representing a majority ^ of the stock of said company, and that the meeting organized by ' In case a company organized since May 15, 1878, diminishes its capital stock it must comply with L. 1878, c. 264, as amended {ante, § 81). A certificate, therefore, drawn for such a company, so acting, must contain statements showing that the notice of the stockholders' meeting was published and maile,d as is therein prescribed. (See Form 7, Appendix C, which should be followed by companies under this Act, if formed since May 15, 1878.) ' L. 1878, c. 364, as amended, require a vote of two-thirds of all the shares of stock of the company. (See Form 7, Appendix 0.) 346 APPENDIX D. choosing myself, the said , as chairman, and as secretary thereof. That the call for the meeting having been read, and proof of the proper mailing thereof having been presented, the following resolution was adopted : Resolved, That the Company (Limited) does increase \or, diminish] its capital stock from the present amount thereof, viz. : the sum of dollars, consisting of shares of the par value of dollars per share, to the amount of dollars, to consist of shares of the par value of dollars per share ; and that the officers of this meeting are hereby instructed to take the ne- cessary legal steps to perfect such increase \or, dim- inution] of capital. That the vote of those present upon said resolution being duly canvassed, it appeared that stockholders, being more than a majority of the whole number of stock- holders of said company, representing shares of stock therein, being more than a majority ^ of the entire number of shares of stock of said company, voted in fayor of said resolution. In witness wheeeof, I have hereunto set my hand, and the secretary of said meeting has countersigned this cer- tificate this day of , 18 . , Chairmcm. Countersigned by , Secretary. \The ceriifieate should he verified and acknowledged as shown in Form 7, Appendix C] ' See note 2, p. 345. Also see note following Form 7, Appendix C. INDEX. INDEX TO PART I. GENERAL MANUFACTURING ACT. ACT. Scope of Manufacturing Act, § 1. See Statutes. ACTIONS, as to joinder of, under sections 10, 12, 15, and 23 of the Gen- eral Manufacturing Act, §§ 48, 66. what, against trustees can be joined, § 48. against trustee, not maintainable out of New York, when, § 45. against stockholder, may be maintained out of New York, § 116. against one as stockholder, no bar to action against him as trustee on same debt, and sice versa, § 48. against trustee for false report, no bar to action against him for omitting report, § 66. prior, against company, essential to action against stockholder, when, §§ 97, 99, 131, 123. such prior, not essential to action against trustee, §§ 30, 36, 46. See Individual LiaWiity of Stockholders; Individual lAa- Mlity of Trustees. ADMINISTRATOR holding stock, not personally liable, § 129. but may vote thereon without transfer, §§ 14, 15. AMENDED CERTIFICATE of incorporation, when and how made, § 11. ANNUAL ELECTION, provisions as to, § IS. not set aside for mere irregularity, § 14. when set aside because votes improperly rejected, § 14. efiect of election of unqualified persons, § 14. acts of persons improperly chosen at, when binding, § 14. right to vote, how determined, § 14. administrators may vote without transfer, § 14. executor, administrator, guardian or trustee, or pledgor, may vote, §§ 14, 15. pledgee of stock owned by company may vote thereon, when, §14. married women may vote, § 14. inspectors of, to take oath, § 14. notice of, how given, § 12. by-laws regulating, to be published, how, § 14. 350 INDEX TO PART I. ANNUAL ELECTION— con«!n««(i. summary application to supreme court may be made by parties aggrieved, when, § 14. provisions allowing election after proper date, § 18. such subsequent election should be called, within what time, p. 56, note 1. remedy of stockholders if directors do not provide for meeting, p. 139, note 3. ANNUAL REPORT, provisions as to, § 28. when, how and by whom to be made, filed and published, §§ 38, 33, 33, 34. corporations organized since 1875 must make, when, § 30. no excuse for not making, that company has not commenced business, § 30. what must state, §§ 38, 30. will be liberally construed, when, § 31. stock issued for property should he so stated in, §§ 31, 78. effect of not so stating in, § 31. debts, amount of, how stated in, § 31. effect of innocent mistake as to amount of debts in, §. 31. who must sign, § 32. what signing sufficient, § 33. trustees, and not officers liable for omission of, § 33. who must verify, § 33. what verification sufficient, § 83. must be made, within what time, § 34. must be ffied and published, within what time, §§ 34, 58. when properly filed, § 34. when necessity of making, terminates, §§ 34, 59. penalty for omitting, §§ 28, 39, 30, 35, 36, 37, 38, 39, 40, 41, 43, 43, 44, 48, 49, 50, 51. form of, p. 335. See Individual Liability of Trustees. APPRENTICES, stockholders' liability to, §§ 94-98. ARREST, is trustee liable to, quare, § 50. ASSIGNEE of claim against company may sue stockholders, §§ 98, 118. may sue trustees, § 43. BOARDS OF TRUSTEES, different, may be liable for same debts, when §39. See Trustees; Individual Liabiliiy of Trustees. BOOKS. See Corporate Boohs. BUSINESS, what kinds may be carried on, § 1. different kinds not to be combined, S 1. GENERAL MANUFACTURING ACT. 351 BVSmESS— continued. as to agricultural, horticultural, medical or curative, § 4. as to news companies, § 4a. manufacturing, mining, mechanical or chemical, what included under §§ 1, 146. may be carried on in one or more places, §§ 6, 7. ■when carried on out of State, certificate to show what, §§ 6, 7. designation of place of, out of State, § 7. principal place of, in this State, deemed place where operations of company are carried on, when, § 7. to what extent may be carried on out of State, § 143. when carried on out of State, to what laws subject, § 143. may be extended, how, §§ 81, 83. place of, how changed, § 141. See Purposes. BY-LAWS, pro^sions as to, § 34. must provide for annual elections, §§ 13, 13. stockholder's remedy of this not provided for, p. 139, n. 3. regulating annual election, to be publishod, §§ 13, 14. for filling vacancies in board of trustees, § 13. to provide for appointment or election of subordinate oflicers, §§ 20, 31. should specify duties of officers, § 33. should regulate transfer of stock, § 73. must be within charter, reasonable, equal and fair, § 35. void, instances of, § 35. ' effect of, if lawful, § 35. form of, p. 330. CALL for annual meeting of stockholders, § 13. form of, p. 335. CALLS, provisions as to, | 83. to be paid before stock can be transferred, § 73. forfeiture for non-payment of, §§ 83, 87. See Subicribers. CAPITAL STOCK, amount of, allowed, § 7. provisions as to issuing, § 78. to be issued for money or necessary property, §§ 78, 79. issued to pay debt, deemed issued for money, when, § 79. is a trust fund for creditors, § 79. not to be issued for less than par, § 79. to be paid in within what time, § 79. judgment of ouster necessary to effect dissolution for non-pay- ment of, §§ 79, 153. 352 INDEX TO PART I. CAPITAL STOCK— continued. may be wholly issued for properties, § 79. if issued honestly for properties at a fair valuation, is full paid, §79. property of company cannot be given to take up, § 79. may be issued to purchase stock of certain other companies, § 79. as stock dividend, § 79. certificate of payment of, to be recorded, § 80. Increase or diminution of capitai stock under act. in diminishing, companies formed since May 15, 1878, must comply frith law of that date, § 83. provisions as to increase or diminution of, § 81. may not be diminished so that debts exceed capital, §§ 81, 82. may be increased to any amount, § 83. meeting to increase or diminish, bow called, §§ 81, 82. chairman of meeting must be a trustee, §§ 81, 82. two-thirds of all, must be represented to adjourn or organize such meeting, § 82. uote of two-thirds of, necessary to change capital, § 81. certificate of increase or diminution of, how to be made, signed, verified and acknowledged, §§81, 82. such certificate, what to state, and where filed and recorded, §§ 81, 82. tax to be paid on increase of capital, § 6. presumption that meeting for increase or diminution of, was properly called, when, § 83. change of, when effected, § 83. increased, how may become full paid, § 82. issued beyond lawful limit, void, § 82. informality in issue of lawful, curable, § 82. number of shares of, may be increased, p. 127. certificate of payment of increased capital to be recorded, § 100. Diminution of capital stock under law op 1878. provisions of law of 1878 as to diminution of, p. 123, note 1. to what corporations applicable, p. 123, note 1, and § 82. See Stock; Shares; Individital Liability of Stockholders. CAR COMPANIES, special powers of, § 143. CERTIFICATE OF INCORPORATION, who may make, §§ 6, 7. what must state, §§ 6, 7. when business is to be carried on out of State, §§ 0, 7. to be executed, how, §§ 6, 7. where filed and recorded, §§ 6, 8. fees for filing and recording, § 6. GENEEAL MANUFACTURING ACT. 353 CBRTinCATE OF INCORPORATION— conimMeo!. effect of due filing and recording of, § 6. requisites of, § 7. duplicate to be filed and recorded, where, §§ 6, 8. tax to be paid before filing, § 6. failure to file and record duplicate, effect of, § 8. copy of, certified by county clerk, evidence when, §§ 8, 10. amended, how, S? i 1. form of, p. 323. CERTIFICATE OF INCREASE or diminution of capital stock, §§ 81, 83. form of, p. 337. CERTIFICATE OF PAYMENT of capital stock; provisions as to, § 99. who must make, §§ 80, 99, 100. must be, verified §§ 80, 99, 100. should be recorded, within thirty days after full payment of capital, §§ 80, 99. provisions as to time of recording, directory, not mandatory, §100. should be recorded even if all stock is issued for property, § 80. should be recorded after increase of capital, § 100. effect of county clerk's neglect to record, §§ 80, 100. form of, p. 334. See Individual Liability of StookholderB. CERTIFICATE, showing principal business office, for purposes of taxa- tion, what to contain and how made, § 144. CERTIFICATE OF STOCK. See Stock Certifieatea. CESTUI QUE TRUST, liable as stockholder, when, § 139. CHANGING CORPORATE name, how to be accomplished, § 138. CHANGING PLACE OF BUSINESS, how may be effected, § 141. COLLATERAL SECURITY, one holding stock as, not personally lia- ble, §§ 139, 130. CONSOLIDATE, two or more companies may, how and when, § 137. CONTINGENT OBLIGATIONS, trustees not liable on, when, § 37. CONTRIBUTION, amongst trustees, §§ 38, 30. amongst stockholders, §§ 95, 128. CORPORATE BOOK, containing names of stockholders, &c., to be kept, §88. stockholders and creditors may inspect, and make extracts from, § 88. neglecting to make entries in, or refusing inspection of, a mis- demeanor, § 88. to be evidence, |§ 88, 89. if transfer of stock not entered in, effect, §§ 88, 103, 103. penalty imposed on company not keeping, § 88. stockholder may compel company to keep, § 89. 23 354 INDEX TO PART I. CORPORATE EXISTENCE, not to exceed fifty years, § C. may be extended, when and how, § 140. CORPORATE POWERS. See Powers of Companies. CORPORATORS, number necessary to form corporation, §§ 6, 7. liabilities of, in de facto corporation, § 8. relation of, to general subscribers, § 8. See Subscribers. COSTS of prior action against company when recoverable against trus- tee, §§ 46, 68. not recoverable against stockholder, § 106. COUNTY, in what, action against trustee should be brought, § 49. CREDITORS OF COMPANY, trustee's liability to. See Individual Liability of Trustees. stockholder's liability to. See Individual Liability of Stock- holders. DEBTS, company, how stated in annual report, §§ 28, 31 . what recoverable against trustee for failure to file annual report, §§ 35, 36, 37, 41, 46, 53. 53, 56. what recoverable against oflBcers for false report, §§ 65, 66. what recoverable against trustees who declare and pay prohibited dividends, §§ 67, 68. what recoverable against trustees who permit indebtedness to exceed capital, §§ 69, 70. what recoverable against officers who make loans to stock- holders, §§ 77, 78. what recoverable under act against stockholders by laborers, servants and apprentices, §§ 94, 97, 98. what recoverable under act against stockholders by creditors of company, §§ 93, 99, 101. what recoverable, and when, from stockholders apart from act, §131. what may be secured by mortgage, § 1356. , See Individual Iddbility of Trustees ; Individual Liability of Sloclcholders. DEFAULT in filing annual report. See Annual Beport; Individual Liability of Trustees. DIMINISHING CAPITAL STOCK. See Capital Stock DISSOLUTION may be enforced by legislative action, § 149. how effected, § 153. de facto, what sufficient to excuse further annual report, § 59. de facto, does not prevent suit by creditor, § 126. not worked by failure to elect trustees, § 18. does not terminate stockholder's relationship to company, § 136. GENERAL MANUFACTURING ACT. 355 UlSmLVTlON— continued. who to take and manage property of company upon, p. 184, note, § 9. for non-payment of capital stock within specified time, §§ 79, 99. does not destroy any existing liability of officers or stockholders, ? 149. DIVIDENDS, what prohibited ; penalty, §§ 67, 68. who entitled to, § 90. may be paid without production of certificate, § 90. undivided earnings do not pass as, § 90. when declared, may be assigned ; nature of, § 90. when right to, accrues, § 90. when stockholders may not compel company to pay, § 90. ELECTION of trustees, how conducted, §§ 13, 14. proof of, does not alone establish trusteeship, § 60. See Anniuil Election. EQUITY, suits in, against liable stockholders, § 113. See Individual Liability of Stockholders. ESTATES of deceased persons liable, when, §§ 139, 130. held by executors, administrators, etc., liable, when, § 139. EVIDENCE, judgment against company, not against trustee, when, §§ 36, 46, 54. judgment in favor of company conclusive in favor of trustee^ when, § 50. judgment against company not against stockholder, when, § 133. judgment against company prima facie against stockholder when, § 131. of incorporation, what is, §§ 8, 9, 10. books of corporation as, § 88. EXECUTION against company, return of, essential prerequisite to ac- tion against stockholder, §§ 99, 131. nature of such preliminary, § 131. when excused, § 133. not essential to action against trustee, §§ 30, 86. allegation regarding, in complaint against trustee, may be; stricken out, § 46. EXECUTOR, of creditor, may sue stockholder, when, §§ 98, 108.. may sue trustee, when, § 43. of trustee, as to suits against, § 43. of stockholder, not personally liable, §§ 129, ISO., may vote on testator's stock, § 14. 356 INDEX TO PAET I. EXECUTORY CONTRACTS, trustees not liable on, when, § 37. See Individual Liability of Trustees. EXTENDING EXISTENCE OF COMPANY. See Corporate Exist- ence. EXTENSIONS OF ACT described, §§ 3, 5. text of, p. 293. FALSE CERTIFICATE AND REPORT, provisions as to, § 65. See Individual Liability of Trustees. FORFEITURE OF STOCK, for non-payment of calls, § 83. See Subscribers. FORMATION OF COMPANIES, what number may form company, § 6. provisions as to, § 6. to carry on business out of State, § 6. when completed, §§ 6, 8. corporation dejure, when, and when not, § 8. company to organize and commence business within one year from incorporation, p. 182, note 2 (§ 7). See Certijieate of Incorporation. FORMS. Certificate of incorporation, p. 322. Certificate of payment of capital stock, p. 324. Annual report, p. 335. Notice of annual meeting, p. 325. Proxy to vote, p. 326. Stockholders' consent to a mortgage of property and franchise. p. 326. Certificate of increase or diminution of capital stock, p. 327. By-laws, p. 330. Acknowledgment by corporation, p. 336. GENERAL MANUFACTURING ACT. See Statutes. GUARDIANS, not personally liable as stockholders, when, §§ 129, 130. may vote on stock, §§ 14, 15. INCREASING or reducing number of trustees, § 27. number of shares of capital stock, p. 97. or reducing capital stock, §§ 81, 82. See Capital Stock. INDIVIDUAL LIABILITY OF OFFICERS. See Officers. INDIVIDUAL LIABILITY OF STOCKHOLDERS, general statement of, § 93. two classes of, under act, § 93. GENERAL MANUFACTURING ACT. 357 INDIVIDUAL LIABILITY OP STOCKHOLDERS— wnhrawec?. 1. To LABOBEBS, SEBVANTS AND A'PPEENTICBS. provisions of act, § 94. stockholdevs liable substantially as partners, §§ 93, 95. who are meant by laborers, servants and apprentices, § 96. laborer, etc., who is also stockholder, cannot sue fellow-stock- holder, § 95. stockholder, who has paid claim to laborer, can enforce con- tribution, how, § 95. what claims recoverable by laborer, etc., § 97. what statutory requisites to such recovery, § 97. judgment against company no evidence against stockholder, §97. assignee may sue, § 98. 3. To CBBDITOBS OF THE COMPANY. this liability a qualified one, §§ 93, 101. several and individual, of each stockholder to each creditor, §107. terminated by payment of capital and recording proper certifi- cate, § 100. but certificate not conclusive, p. 150, note 1. no defense that defendant paid up his stock, if any part of cap- ital stock unpaid, § 100. full payment presumed, § 100. certificate, when to be recorded, §§ 99, 100. effect of omission by county clerk, § 100. wbat debts recoverable, § 101. against what stockholders, §§ 101, 107, 124, 129. holders of stock honestly issued for property exempted from, §§ 80, 124, 135. lona fide and completed transfer of stock terminates liability, §103. what constitutes such transfer, § 102. sale of stock alone does not terminate, § 102; vendee in such case, when liable to vendor, § 103. increased capital, when not paid in, who liable, p. 169, note 2. defect in organization no defense, when, § 104. fraudulent representation that stock was full paid, no defense, §105. to what amount stockholder liable, § 106. executors, trustees, pledgees, etc., not personally liable, §§ 129,. 130. Action bt cbeditoes. creditor's right several, can sue alone at law, § 107. 358 INDEX TO PAET I. INDIVIDUAL LIABILITY OF STOCKHOLDERS— con^z/iwi. ■ when such separate action can be restrained, § 114. ■who to be made defendant, § 107. action can be maintained outside of New York, § 1 16. who may sue, §§ 107, 117, 118. receiver of the corporation cannot sue, § 115. what creditor must show to recover, § 119. when increased capital not paid in, what must show, p. 169, note 2. necessity of preliminary suit, judgment and execution against company, §§ 99, 119. a proceeding in rem not suflScient, § 121. when such suit must be brought, § 120. judgment against company, in what court to be obtained, § 121. judgment against company no evidence of debt as against stockholder, § 122. but cannot be assailed for irregularity, when, § 122. no more recoverable from stockholder than was recovered against company, § 121. when preliminary suit, judgment, and execution against com- pany excused, § 123. action at law by single creditor, when defeated by equitable ofEset, § 108. what claims may be thus offset, §§ 109, 111. rule where stockholder is both creditor of, and debtor to, com- pany, § 110. creditor may also bring equitable suit, § 112. rules governing such suit, § 113. separate actions at law may be restrained, § 114. no action of any kind maintainable against holders of stock honestly issued for property, §§ 78, 124. such stock presumed to be honestly issued, § 125. what must be established to charge holder of such stock, §125. liability of holder of such stock when improperly issued, § 125. stockholders ceasing to be such, how long liable thereafter, §126. statute of limitations, six years, § 127. when begins to run, § 127. contribution between stockholders, § 128. Liabilities of stockholders apart from act. to creditor on unpaid subscriptions, § 131. to creditor for assets of corporation, § 131. effect of judgment against company in these actions, § 131. GEIJERAL MANUFACTURING ACT. 359 INDIVIDUAL LIABILITY OF TRUSTEES. FOK OMITTING ASWUAL REPORT. provisions of act, § 38. liable jointly and severally, § 30. single creditor may sue, § 30. liability, original and primary, § 30. no right of subrogation, § 80. but statutory right to contribution, §§ 28, 30. concurrent remedy against defaulting trustees and company, §30. no prior action against company necessary, §§ 30, 86. all trustees liable in case of omission to report, § 33. general nature of debts for which trustees are liable, § 35. effect of prior judgment against company, § 36. liability is for original debt, §§ 86, 46. judgment against company not evidence against trustee, §§ 36, 46, 54. as against trustee, original claim not merged in judgment against company, § 36. costs of action against company when recoverable against trustee, § 36. an accrued liability necessary, §§ 35, 87. trustees not liable on executory or contingent obligations, § 37. but will be, if these become fixed and certain, g 87. who liable : three circumstances must concur, § 38. trustees actively defaulting, for what liable, § 38. trustees coming in after, and continuing default, for what li- able, § 88. different boards liable for same debt, when, § 89. liability once fixed not affected by subsequent default, § 40. liability on renewal notes and notes given for preceding indebt- edness, § 41. assignee of original creditor may sue, § 43. executor of original creditor may sue, when, § 43. executor of trustee, as to suits against, § 43. fellow-stockholder may sue trustee, § 44. co-trustee de facto or d^ jure cannot, § 44. nor can firm of which such trustee is a member, § 44. suit not maintainable out of New York, § 45. trustees holding over, how liable, § 61. de facto trustees, how liable, § 63. resignation of trusteeship, what effects as to liability, § 63. what essential to valid resignation, § 68. limitation of actions three years, § 64. 360 INDEX TO PART I. INDIVIDUAL LIABILITY OF TRUSTEES— continued. Action AGArssT trustee fob omitting annual keport. is upon a statute for a penalty, §§ 39, 64. what debts recoverable therein, §§ 35, 36, 87, 41, 46, 53, 52, 56. against whom maintainable, §§ 38, 39, 48, 44, 61, 62, 63. by whom maintainable, §§ 42, 44. in what county should be brought, § 49. compulsory reference cannot be ordered, § 50. summons, how indorsed, § 51. three years' limitation, when statute begins to run, § 64. effect of successive defaults, §§ 47, 64. not maintainable out of New York, § 45. plaintiff held to great strictness in pleading and proof, § 46. what complaint must show, §§ 46, 47. two or more trustees may be joined as parties defendant, §47a. burden of proof on plaintiff, §§ 46, 47, 58, 60, 63. costs of prior action against company not recoverable therein, §46. judgment against company not evidence against trustee, § 54. judgment in favor of company conclusive in favor of trustee, §55. defenses, three main, open to trustee, g 52. (1.) trustee may deny any debt, §§ 52, 58, 56. may deny that claim constitutes "debt" under stat- ute, §§ 35, 36, 37, 53. cannot set up, hereunder, defenses not open to com- pany, §§ 53, 54. (2.) trustee may deny default, § 58. dissolution de facto or de jure, when a defense, § 59. what constitutes such dissolution, § 59. (3.) defendant may deny trusteeship, § 60. proof of election merely, does not establish trustee- ship, § 60. resignation and its effect, § 68. defense based on time debt arose, §§ 38, 57. action against one as stockholder no bar to action against him as trustee, when, § 48. limitation of actions, § 64. POS MAKING FALSE CEBTIFICATES, REPORTS, ETC. provisions of act, § 65. not confined to annual report, to what applies, § 66. who liable, g 66. GENERAL MANUFACTURING ACT. 361 INDIVIDUAL LIABILITY OF TR\]STE^3-continued. joint and several liability, § 65. what must be shown, § 66. scienter must be proven, § 66. for what debts officers liable, § 66. who liable therefor, §§ 65, 66. actions against, should be prosecuted separately; what joinder improper, § 66, what complaint must allege, § 66. action hereunder no bar to action for omitting report, § 66. Foe payment of prohibited dividends. for what debts liable, § 67. dissenting trustee may escape liability, how, § 67. penalty exclusive, § 68. trustee not liable for costs of prior action against companv, §68. limitation of actions, § 68. who liable therefor, when and to what extent, §§ 67, 68. costs of prior action against company not recoverable in action hereunder, § 68. action must be brought within three years from declaration of dividend, § 68. For permitting indebtedness to exceed capital. provisions of act, § 69. assenting trustees, to what extent liable, § 69. what creditor must show, § 70. what form of action necessary, § 70. what recovery possible, § 70. For making loans to stockholders. provisions of act, § 78. who liable therefor, § 71. for what and to what extent, § 71. action maintainable against whom, §§ 71, 78. what debts recoverable in, §§ 77, 78. cannot be maintained by receiver of corporation, § 71. General liabilities not comprised in act. statement of, § 78. See Annual Report; Action; Penal Code. INSPECTORS OF ELECTION must take oath, form of, § 14. should be at least two, p. 50, note 6. 362 INDEX TO PART I. JUDGMENT, against company not evidence against trustee, when, §§ 36, 46, 54. in favor of company, conclusive in favor of trustee, when, § 55. against company not bar to, or merger of claim against trustee, § 36. against company no evidence of debt as against stockholder, when, § 122. against company evidence against stockholder, when, § 131. preliminary, against company, where to be recovered, to charge stockholder, § 121. when cannot be assailed for irregularity, § 122. preliminary, against company, essential prerequisite to action against stockholder, when, §§ 97, 99, 121, 133. when obtaining, excused, § 123. not essential to action against trustee, §§ 30, 36. when allegation of, in such action, may be stricken out, § 46. LABORERS, SERVANTS AND APPRENTICES, stockholders' lia- bility to, §§ 94-98. LAWS. See Statutes. LIABILITY, of stockholders apart from act, § 131. under act. See Individual Liability of Stockholders. of trustees, apart from act, § 72. under act. See Indimdual LiaUlity of Trustees. LIMITATION OF ACTION, against trustee, under act, §§ 64, 68. against one who has ceased to be stockholder, §§ 99, 126. against continuing stockholder, § 127. LOAN of money to stockholder, penalty for making, g§ 71, 78. LOST CERTIFICATES. See Stock Certificates. MANUFACTURING COMPANIES, what are, g§ 1, 146. may consolidate, § 137a. exempted from State taxation, p. 219, § 3. MARRIED WOMEN, may vote on their stock, § 14. MEETINGS, provisions as to annual, § 12. special, §§ 81, 137, 141. should be within this State, § 17. Siee Annual Election ; Capital Stock ; Stockholders; Powers; Trustees' Meetings. MINING COMPANIES, powers of, § 5. exempt from State taxation, p. 219, § 3, GEKEEAL MAUUFACTUEING ACT. 363 MONET, only, to be considered as payment of capital stock, § 78. ■what deemed equivalent to, §§ 78, 79. not to be loaned to stockholders, §§ 71, 78. MORTGAGE. See Pmcers. MORTGAGE SALE, privileges of purchaser at, § 136. NAME, corporate, may be what, § 7. how changed, § 138. NEWS COMPANIES, statement as to, § 4. NOTES of company, trustees' liability on, §g 87, 41. NOTICE, of annual election, to be what, § 13. of meeting to increase or diminish capital stock, what, § 81. of meeting to extend business of company, what, g 81. See Meetings. OATH of inspectors of election, § 14. OBJECTS, for which company may be formed, must all fall under one general head, §§ 1, 7. many companies may form under general heads, § 1. OFFICERS, provisions as to, § 20. president to be selected from trustees, §§ 30, 31. subordinate, to be chosen as by-laws direct, §§ 30, 31. duties and powers of, § 23. duties of, should be specified in by-laws, § 22. powers of, how far third persons bound to know, § 22. unauthorized acts of, how ratified, § 33. individual liability of, for false reports, statements, etc., § 36. , for loaning company money to stockholders, §§ 71, 78. See President; Secretary; Treasurer; Individual Lia- hility of Trustees; Penal Code. OMISSIONS, in certificate of incorporation, how amendable, § 11. OPERATIONS OF COMPANY, where cai-ried on, to be stated in cer- tificate of incorporation, §§ 6, 7, 144. place where so stated to be carried on, principal place of busi- ness for taxation, when, § 144. See Business. ORGANIZATION. See Formation of Companies. ORGANIZATION TAX, to be paid before certificate received, § 6. PENAL CODE, provisions of, Appendix B, pp. 316-332. PENALTY, action against trustee for statutory, §§ 39, 45, 46, 64, 65, 67, 68, 69, 71, 78. for violating provisions as to stock-book, § 88. See Individual Liability of Trustees. 364 INDEX TO PAET I. PLACE OF BUSINESS, how changed, § 141. See Business. PLEDGEE of stock, not liable as stockholder, when, §§ 139, 130. of stock owned by company, may vote thereon, when, § 14. PLEDGOR of stock personally liable thereon, § 129. may vote thereon, §§ 14, 15. POWERS OP COMPANIES general, under Section 2 of Act, §§ 6, 133. provisions as to general, § 132. general, of corporations, under R. S., page 183, note 2. may not carry on banking business, page 183, note 2, § 4. corporate, forfeited by omission to organize and transact busi- ness, page 182, note 2, § 7. to acquire and convey real estate, § 133. real estate may be held out of State, §§ 133, 142. does not revert to grantors upon dissolution of company, p. 184, note, business to be confined to purposes for which company is forme d , § 133. details of business to be carried on, § 133. mortgages, restrictions as to, and liens, § 6. provisions of Act and amendments governing, § 134. nature of provisions, § 135. of franchises, and real and personal property, may be made, §§ 134, 135. two-thirds of stockholders must consent thereto, § 1.34. nature of consent, § 135a. form of. Appendix C. assent to, must be in writing and filed in proper county, §§134, 135. assent to, when to be filed, §§ 134, 135. assent to, may sometimes be filed in county where company has office, § 134. assent to, when may be filed nunc pro tunc, § 134. assent of stockholders liberally construed, § 135. company cannot assent on its own stock, § 135. assent by pledgee of stock, § 134. proper assent to, defectively filed, how creditor-stockholder affected by actual knowledge of, § 135. proper assent to, presumption of, after entry of judgment of foreclosure, § 135. for what debts company may make mortgage, § 1356. as to mortgage for future advances, § 135ft. invalid, receiver of company may set aside, § 135. sale under, of corporate franchises and property, privileges of purchasers at, § 136. GENERAL MANCPACTUKING.ACT. 365 POWERS OP C0MPA:^IES.— continued. to consolidate, §§ 137, lB7a. to change corporate name, § 138. to hold stock of certain other corporations, § 139. to extend duration of corporate existence, § 140. to change place of business, § 141. to carry on business out of the State, § 143. to increase or diminish the capital stock, §§ 81, 83, 148. to extend business, |§ 81, 83, 143. to build railroad for their own use, when, § 143. to purchase adjacent real estate, when, § 143. car companies may lay down, and maintain track, when, § 143. steam heating companies, may manufacture, &c., steam, and lay pipes, &c., how, where, and when, § 143. other special privileges, § 143. PREFERRED STOCK, only to be issued by company upon organization, § 133. certificates for, may be exchanged for common, p. 185, note 6. PRESIDENT, to be designated from trustees, § 20. general duties and powers of, § 33. must make, sign, swear to, and record certificate of payment of capital stock, §§ 80, 99. must sign annual report, §§ 38, 33. or secretary must verify annual report, §§ 38, 33. See Annical Beport ; Officers ; Penal Code. PRIVILEGES, special, of companies, under act, § 143. See Pow&rs. PROMOTERS, liability of, § 9. between, and stockholders, scrupulous fairness and openness re- quired, § 9. corporation held on contract made by, when, § 9. PROPERTY, stock may be issued for necessary, §§ 31, 78, 134. stock issued for, should be so stated in annual report, §§ 31, 78. trustees held not liable for penalty, although not so stated, § 31. See Annual Seporl; Individual Liability of Trustees; Indi- vidual Liability of Stockholders. PROXY, votes for election of trustees may be by, § 13. objections to proxies, when to be made, p. 49, note 6. form of, p. 336. PURPOSES for which corporations may be formed under act, §§ 1-5. alphabetical table of such, § 5. from what prepared, §§ 1-4. amendments to Section 1 of Act included in, § 3. extensions of Act included in, § 3. 366 INDEX TO PART I. PURPOSES— wnfiTiMet?. • different kiods of extensions included in, § 3. general purposes include many companieB, § 1. See Appendix A, p. 294. RECEIVER OF CORPORATION, cannot sue stockholders on their individual liability, § 115. may however sue for subscriptions, § 115. pendente lite, not proper defendant, when, § 126. REFERENCE, compulsory, cannot be ordered, when, § 50. REPORT. See Annual Report; False Seport; Individual Liability of Trustees. RESIGNATION, of trusteeship, effect of, § 63. REVISED STATUTES. See Statutes. SALT COMPANIES, when capital to be paid in, p. 119, note 3. SEAL, as to use and necessity of, p. 182, note 2. SECRETARY, general duties and powers of, § 22. may verify annual report, § 22. See Officers. SERVANTS, stockholders' liability to, §§ 94-98. See Individual Liability of Stoehholders. SHARES, of stock, into what number capital divided, § 7. face value of, to be what, § 7. how to increase number of, p. 127, forfeiture of, § 87. See Capital Stock ; Subscribers ; Steele Certificates. STATEMENT of affairs of company to be rendered by treasurer, when, §91. STATUTE OF LIMITATIONS. Bt^ Limitation of Actions. STATUTES : L. 1848, c. 40 [The General Manufacturing Act], Section 1 p. 2 and § 6. 2 p. 3 and § 6. 3 p. 4 and §12. 4 p. 4 and § 18. 5 p. 5 and § 30. 6 p. 5 and §83. 7 p. 5 and §24. 8 p. 5 and § 73. 9 ,. p. 6 and §10. 10 p. 6 and § 99. 11 p. 6 and §99. 12 p. 7 and §28. GENERAL MANUFACTURING ACT. 367 STATVT'EiS— continued. Section 13 p. 7 and § 67. 14 p. 8 and §78. 15 p. 8 and §65. 16 p. 8 and § 139. 17 p, 9 and §15. 18 p. 9 and § 94. 19 p. 9 and §148. 20 p. 9 and § 81. 21 p. 10 and §81. 23 p. 11 and §81. 23 p. 11 and § 69. 24 p. 12 and § 99. 25 p. 12 and § 88. 26 p. 18 and § 132. 27 p. 18 and §91. L. 1853, c. 383, § 1 p. 14 and § 6. L. 1853, c. 333, § 2 p. 15 and § 78. L. 1857, c. 29, § 1 p. 15 and p.419, note 3. L. 1857, c. 29, § 3 p. 16 and § 6. L. 1857, c. 29, § 2 (as am'd,L. 1867, c. 12, § 1). .p. 15 and § 140. L. 1860, c. 269, § 2 (as am'd, L. 1867, c. 248, § 2, and L. 1878, c. 316, § 1) p. 16 and § 27. L. 1861, c. 170, § 3.... p. 17 and §144. L. 1864, c. 517, § 1 p. 18 and §141. L. 1864, c. 517, § 2 (as am'd, L. 1871, c. 481, § 2)p. 19 and § 134. L. 1866, c. 73 p. 19 and § 82. L. 1866, c. 838, §§ 3, 4 (as am'd L. 1876, c. 358}. ..p. 30 and § 139. L. 1867, c. 960 § 187. L. 1878, c. 163, § 1 p. 21 and § 134. See Svbject headings for other statute law. STEAM HEATING COMPANIES, special power of, § 143. special powers, rights, privileges and restrictions of, p. 34, note 1. STOCK, provisions as to, and its transfer, § 73. personal estate, § 73. nature of, § 74. company may hold, of other corporations, when, § 139. preferred, only to be issued upon organization of company, § 133. See Capital Stock ; Shares ; Subscribers. STOCK-BOOK, provisions as to, § 88. what to contain, to be open to inspection, § 88. penalty for violating provisions, § 88. 368 INDEX TO PART I. STOCK-BOOK— continued. presumptive evidence, §§ 88, 89. stockholder may compel company to keep, § 89. company may not take advantage of its neglect to keep, § 75. STOCK CERTIFICATES, distinct from stock, § 74. evidence of what, § 74. how far negotiable, § 74. how transferable, § 75. how new should be issued, § 75. what is an issuing, § 75. transfers to be entered in stock-book, ^ 75. respective rights, privileges and liabilities of transferrer and transferee, § 75. between the parties transferee sole owner, when, § 75. transfer of, as collateral, passes title to vendee, § 75. effect of a written assignment, without transfer of certificate, §75. pass as gifts causa mortis or inter vivos, § 75. when vendor relieved from liability as stockholder, §§ 75, 103. not transferable until previous calls paid, § 76. not to be made subject to debts of stockholder to the com- pany, § 25. lost or destroyed, how replaced, § 77. preferred may be exchanged for common, § 133. See Capital Stock; Stockholders. STOCKHOLDERS, annual meeting of, § 12. notice of, who to vote at, § 12. not to interfere in management of ordinary affairs of company, §16. consenting to transfer of all the assets of company, bound thereby, § 16. right to dividends, § 90. provisions authorizing certain, to demand statement, § 91. certain privileges of, § 92, p. 139, note 2. See Capital Stock; Subscribers; Individual Liability of Stockholders. SUBROGATION, trustee sued under act has no right of, § 30. SUBSCRIBERS, how to pay subscriptions, §§ 83, 84. when stockholders, § 84. what constitutes one a, § 84. when not to be released as, § 16. effect of agreements between, § 84. liability of one signing fictitious or firm name as, § 84, p. 318. when and how relieved from subscriptions, § 85. GENERAL MANUFACTDRING ACT. 369 SUBSCRIBERS— (»»ii?iMC£Z. bound to know charter and by-laws of company, § 85. what may not give in payment of subscriptions, § 85. See Subscriptions; Individual Liability of Stockholders; Calls; Penal Code. SUBSCRIPTIONS, unpaid, nature of, § 85. enforceable by and against whom, § 85. forfeiture of stock for unpaid, § 85. effect of forfeiture, § 85. company may forfeit stock or sue for, § 85. what may not be taken as payment of, § 84. See Subscribers; Calls; Penal Code. SUMMONS, how indorsed, when, § 51. TAX UPON ORGANIZATION, amount of, § 6. when to be paid, §§ 6, 8. TAXATION, where companies taxable, § 144. office for, established, how and when, § 144. tax law of 1880, as amended, § 145. object and effect of act (omit word "all" in text, p. 228, line 2), § 145a. companies excepted from provisions of, p. 219, § 3. construction of act, § 146. tax imposed thereby is on franchise, § 146. when distributing surplus, declaring a dividend thereunder, §146. manufacturing companies carrying on manufacture in this State exempted therefrom, § 146. what are such manufacturing companies, § 146. general method of corporate taxation apart from act of 1880, §147. owner of shares of company not taxable thereon, § 147. tax upon organization, § 147as. TITLE OF ACT, when altered, § 4. incongruous with text of, § 4. TRANSFER OF STOCK. See Capital Stocl. TREASURER, general powers and duties of, § 22. or clerk to keep record of stockholders, transfers of stock, '&c.,, §88. must furnish annual statement, § 91. must furnish sworn statement to certain stockholders, when,. §91. penalty upon refusal or neglect to furnish such statement, § 91, See Officers. 24 370 IKDEX TO i'ART 1. TRUSTEE FOR ANOTHER, one holding stock as, not personally liable on, § 139. , but may vote thereon, § 14. TRUSTEES, number, names and residences of, for first year to be stated in certificate of incorporation, §§ 6, 7. provisions as to number, qualifications and election, &c., § 12. must be not less than three nor more than thirteen, § 13. number of, how increased or reduced, § 27. majority of, must be citizens and residents of New York, §§ 13, 13. must all be stockholders of company, §g 12, 13. how designated for first year, § 12. those named as, in certificate, responsible as such, § 14. annual election of, when and how to be called, § 13. how conducted, who chosen at, §§ 13, 14. vacancies in board, how filled, § 12. trustees exclusive managers of company, § 16. must not exceed charter or by-laws, § 16. cannot dispose of all the assets of the company, § 16. cannot vary charter, § 16. - caunot release an original subscriber to stock, § 16. may borrow money for company, § 16. are trustees for stockholders and creditors of company, § 16, less than three may do what, § 16. hold over until successors are chosen, §§ 18, 19. when holding over, bind company by their acts, and are trus- tees dejure, § 19. are presumed to leave office at expiration of term ; positive ac- tion necessary to charge them, §§ 19, 60. resignation, how effected, § 63. when holding over, to call meeting of stockholders within sixty days, p. 56, note 1. what notice of this meeting required, § 19. stockholders may compel trustees to call this meeting, § 19. must select officers, § 21. must record certificate of payment of capital stock, § 80. duties of, under act, enumerated, § 26. See Individual Liability of Trustees: Pmal Code; Officers. TRUSTEES' MEETINGS, to be held, § 17. trustees must act as a board, § 17. majority of board a quorum, § 17. should be held in this State, § 17. companies carrying on business out of State may meet, where §17. GBNEBAL MAKUFACTURINa ACT. 371 UNPAID SUBSCIPTIONS. See Subscribers. VACANCY, in board of trustees, how filled, § 13. VENDEE OF STOCK, when liable to creditor, §g 75, 88, 103. when liable to vendor, § 103. VENDOR OF STOCK, when liable to creditor, §§ 75, 88, 102. VERIFICATION, of annual report, what sufficient, § 33. by whom to be made, §§ 28, 83. essential to efficacy of certificate of payment of capital stock, §80. VOTES, may be by proxy, § 12. may be by executors, administrators, guardians or trustees, § 14. may be by married women, § 14. right to cast, how determined, § 14. improper rejection of, effect of, § 14. WARD, liable as stockholder, when, §§ 139, 130. INDEX TO PART II. BUSINESS CORPOEATION ACT. ADMINISTRATOK, not personally liable as a stockholder, § 175. may vote as such, § 176. AMENDED CERTIFICATE, to extend business, § 190ffi. ANNUAL ELECTION, when and where held, §§ 178, 194. notice required therefor, §§ 178, 194. who may vote thereat, §§ 176, 178, 194. manner of voting, §§ 178, 194. how diflfers from provisions of Manufacturing Act, § 194. who elected directors at, §§ 178, 194. may be held within three months of proper date, §§ 179, 194, what notice of subsequent meeting required, § 179. ANNUAL REPORT, when, how and by whom made, §§ 170, 199. when to be made by company doing business outside the U. 8., § 170. where to be filed, §§ 170, 199. need not be published, or filed in county clerk's office, § 199. what it must contain, §§ 170, 199. minority report allowed, what to state, §§ 170, 199. penalty upon omission to report, §§ 170, 109. report under Manufacturing Act contrasted herewith, § 199. See Individual Liability of Directors. APPLICATION FOR LICENSE, gee Preliminary Certificate. BANKING CORPORATIONS cannot form under act, §§ 153, 184. BOARD OF DIRECTORS. See Directors. BONDS may be issued, of what character, § 165. must not exceed one-half the value of the corporate property, §165 directors, when liable for overissue, and to whom, § 165. for what may be issued, § 166. treasurer to give such, as by-laws require, § 162. For Index to Manufacturing Act, see ante, pp. 340-371. 374 INDEX TO PART II. BOOKS. See Corporate JBoois. subscription, to be opened by commissioners, § 157. BUSINESS, what kinds of, may be transacted under act, §§ 153, 193. BUSINESS CORPORATIONS, what are, under act, § 153. of two classes, § 185. what companies may re-organize hereunder, § 184. BUSINESS CORPORA.TION ACT, distinct from General Manufactur- ing Act, § 191. general statutory provisions applicable to both, § 191. decisions and text in Part I applicable thereto, § 191. comprehensive in character, § 192. certain provisions omitted therefrom, § 205. corporations under, of two classes, § 185. BY-LAWS, to be adopted at first meeting of subscribers, what to pro- vide, §§ 158, 195. what patrons of husbandry, etc., may provide therein, § 158. copy of, to be included in commissioner's report, § 159. amendment to, of no effect until filed, §§ 158, 195. company cannot organize without, § 195. different rule under Manufacturing Act, § 195. CAPITAL STOCK, ataount thereof limited, §§ 163, 196. may be divided into what shares, §§ 163, 196. subscriptions therefor, how payable, § 1 64. - forfeiture of stock declared, when, | 164. stock, how sold upon forfeiture, § 164. proceeds of sale, how used, § 164. for what stock may be issued, §§ 166, 196. provisions compared with those of Manufacturing Act, § 196. how increased or reduced, § 167. vote required to change, §§ 167, 197. how changed under Manufacturing Act, § 197. statement of change of capital, how and by whom made and executed, § 197. not to be reduced so that debts exceed capital, § 167. in reducing must comply with Act of 1878, g 197. liability of directors when indebtedness exceeds capital, § 174. not to be increased beyond $3,000,000, § 197. of limited liability companies, when to be paid in, § 189. certificate of payment thereof, to be recorded, § 189. number of shares of stock may be increased, § 190 J. CERTIFICATE OP INCORPORATION, when to issue, §§ 159, 198. what to contain, and where filed and recorded, §§ 159, 193. fees to be paid therefor, § 159. certified copy of, evidence, § 159. BUSINESS COEPORATION ACT. 375 CERTIFICATE OF PAYMENT OF CAPITAL STOCK, how made and recorded, where, § 189. effect of not recording, § 303. CERTIFICATES OF STOCK, by whom to be signed, § 164. to be sealed with corporate seal, § 164. how transferable, §§ 164, 169, 196. privileges and liabilities of transferee, §§ 164, 169. limitation of holder's right of transfer, §§ 164, 196. COLLATERAL SECURITY, holder of stock as, not liable as stock- holder, § 175. COMMISSIONERS, those making preliminary certificate to be such, §156. to open books for subscriptions to stock, §§ 157, 193. to call meeting of subscribers, when and how, §§ 157, 193. report to be filed within ten days after meeting, § 159. contents of report, §§ 159, 193. when powers to act cease, § 160. CORPORATE BOOKS, account-books to be kept, and to be open to inspection, § 168. stock book to be kept ; its contents, § 169. when to be open to inspection, § 169. transfers of stock to be registered therein, § 169. , such book presumptive evidence, § 169. penalties upon neglect to keep book, § 169. secretary to keep minute book and record of votes, § 163. CORPORATE EXISTENCE, not to exceed fifty years, § 155. how extended, § 181. See Dissolution. CORPORATORS, must be at least three, §§ 155, 193. majority thereof must be citizens and residents of New York, §§ 155, 193. rules under Manufacturing Act, p. 209, notes 2 and 3. See formation of Company. CUMULATIVE VOTING, allowed under act, §§ 178, 194. DEBTS, not to exceed capital af company, § 174. amount and general nature of, to be stated in annual report, §170. DIMINISHING CAPITAL STOCK, companies formed since May 16, 1878, must comply with act of that date, § 197. DIRECTORS, managers of company, §§ 163, 194. first board, when elected, §§ 157, 159. For Index to Manufacturing Act, see ante, pp. 349-371. 376 INDEX TO PAET II. DIRECTORS— continued. subsequent boards, when and how elected, § 178. term of office not to exceed one year, § 158. may act until successors are chosen, § 163. to be not less than three, nor more than thirteen, § 162. each must own five shares of stock, § 162. existing number may be changed, how, §§ 168, 194. majority thereof need not be residents and citizens of New York, § 194. vacancy in board, how filled, § 178. hold over if election not held, §§ 179, 194. may resign simultaneously, § 194. duties thereof, §§ 164, 168, 169, 170, 171, 173, 173, 174, 187, 188, 189. majority of whole number necessary to constitute a quorum, §162. See Individual Liability of Directors. DISSOLUTION, provisions as to, § 190. general law applicable thereto, § 204. DIVIDENDS, certain dividends prohibited, § 171. See Individual Liability of Directors. ELECTION. See Annual Election. EVIDENCE, copy certificate of incorporation, certified by secretary of State, is, § 159. copy amended by-laws, so certified, is, § 159. stock book is, § 169. EXECUTOR, not personally liable as stockholder, § 175. may vote on stock held by him, § 176. See Trustee. EXISTENCE OF COMPANY. See Corporate Existence. EXISTING COMPANIES, what companies may re-organize under act, how, § 184. powers of such company, § 184. FALSE CERTIFICATE OR REPORT, to be false in "material repre- sentation," § 173. liability of officers signing, § 173. See Individual Liability of Directors. FORFEITURE OF STOCK. See Capital Stock. FORMATION OF COMPANY, how efiected, §§ 155, 159, 183. within what time must be completed, § 160. rules in reference thereto, under the Manufacturing Act, § 193. what companies may fonn hereunder, §§ 153, 193. BUSINESS COKPORATION ACT. 377 FORMS. Certificate of incorporators, p. 337. Commissioners' verifled record, p. 338. Suggestions as to by-laws, p. 339. Annual report, p. 340. Certificate of payment of capital stock of limited liability com- pany, p. 341. Certificate extending term of the corporate existence, p. 342. Certificate changing principal place of business, p. 343. Certificate increasing or diminishing capital stock, p. 344. FULL LLA.BILITT COMPANIES, classified, and nature of, §§ 185, 186. capital thereof not required to be paid in, § 301. may re-organize as limited liability companies, § 190c. See Indwidual Liability of StockTwlders. GUARDIAN, not personally liable as stockholder, § 175. may vote on stock held by him, § 176. voluntarily investing trust funds, personally liable, § 189. INCORPORATORS, three necessary, § 155. INDIVIDUAL LIABILITY OF DIRECTORS, for damages resulting upon over issue of bonds, § 165. for failure to make annual report, §§ 170, 199. nature thereof ; contribution between directors, §§ 170, 199. for voting to declare prohibited dividends, §§ 171, 199. for consenting to loan to stockholder.'!, §§ 172, 199. for signing false certificate or report, §§ 173, 199. for allowing indebtedness to exceed capital, §§ 174, 199. for omission to use word " limited," § 188. INDIVIDUAL LIABILITY OF STOCKHOLDERS. 1. Full liabilitt companies. what debts only, included therein, §§ 177, 301. how long continues, after transfer of stock, §§ 177, 201. statement as to general liability, § 186. execution not to issue against, in first instance, §§ 186-301. contribution between stockholders, §§ 186, 301. 2. Limited liability compaihes. general statement of liability therein, §§ 189, 303. qualification thereof, §§ 177, 303. who are stockholders, § 189. For Index to Manufacturing Act see ante, pp. 349-371. 25 378 IITOEX TO PART II. INDIVIDUAL LIABILITY OP BTOCKROLD^nS— continued. liability, how enforced, upon what debts, and when, §§ 189, 203. capital stock, when to be paid in, § 189. certificate to be filed, § 189. liability compared with stockholders' liability under Manufac- turing Act, § 203. INSPECTORS, to take and subscribe oath or affirmation, § 180. penalty for violation of same, § 180. INSURANCE CORPORATIONS, cannot form under act, § 153. cannot re-organize under act, § 184. LIABILITY OF DIRECTORS. See Individual Liability of Directors. LIABILITY OF STOCKHOLDERS. See Individual Liability of Stock- holders. LICENSE, application for, § 155. naming commissioners, when to issue, g 156. when deemed revoked, § 160. LIMITED LIABILITY COMPANIES, classified, and nature of, §§ 186, 188. must use word "limited " as part of corporate name, §§ 186, 203. penalty for neglect, §§ 186, 202. who are stockholders therein, § 189. LOANS, company may obtain, § 165. not to be made by company to stockholders, § 172. MEETING. See Notice ; Annual Election ; Capital Stock. MORTGAGES, not to exceed one-half value of corporate property, § 165. two-thirds of stock must approve, § 165. NAME, of existing company not to be selected, § 156. word " limited," when to be used as part of, §§ 186, 202. NATURAL GAS COMPANIES, powers of, § 190(?. NOTICE, of meeting of subscribers, what, how given, § 157. of meeting to change number of trustees, §§ 157, 162. of meeting to change amount of capital stock, §§ 157, 167. of annual election of directors, what and how given, § 178. of meeting of stockholders of company desiring to re-organize under act, § 184. of sale of forfeited stock, § 163. OATH, inspectors of election to take and subscribe, § 180. OBJECTS for which companies may be formed. See Business. BUSINESS CORPORATION ACT. 379 0PFICER8, must include president, secretary and treasurer, § 158. to be elected by and from among directorSi §§ 156-168. liabilities of, §§ 169, 173, ITS, 187, 188. Bee I^esident ; Secretmy ; Treasurer. ORGANIZATION. Bee Formation oj Companies. PENAL CODE, provisions of, applicable hereto, pp. 236-340. See Appendix B. PENALTY, for omission to pay installment due on stock subscription, §163. for neglect to make proper entry in stock book, § 169. for refusing or neglecting to exhibit stock book, § 169. for violation of oath by inspector, § 180. for omission to use word " limited," § 188. See Individual Liability of Direetors. PLACE OP BUSINESS, to be stated in preliminary certificate, § 155. taxable at principal, § 182. principal may be changed, § 183. PLEDGEES of stock not liable as stockholders, § 175. PLEDGORS of stock may vote thereon, § 176. POWERS, general powers stated, § 154. may borrow money and issue bonds, § 165. may change place of business, how, §§ 183, 198. may extend corporate existence, how, §§ 181, 198. as to real and personal estate, §§ 154, 198. PRELIMINARY CERTIFICATE, how prepared, its contents, §§ 155, 193. where to be filed, §§ 155, 193. PRESIDENT, must be a director, § 163. must sign certificates of stock, § 164. must sign and may verify annual report, § 170. powers and duties of, to be prescribed by by-laws, § 158. See Directors ; Individual lAaMlity of Directors. PROXY, stockholders may vote by, at annual election, § 178. for what time continues in force, § 178. PURPOSES for which companies may be formed. See Business. RAILROAD COMPANIES cannot form under act, § 153. cannot re-organize under act, § 1 84. REAL ESTATE, powers of companies as to, § 154. RECORDS of company to be open to stockholders, § 168. RE-ORGANIZATION of companies, what may come under act, § 184. For Index to Manufacturing Act, see ante, pp. 349-371. 380 INDEX TO PART II. SAFE DEPOSIT COMPANIES cannot form under act, 153. cannot re-organize under act, § 184. SEAX, to be affixed t6 certificates of stock, § 164. word " limited," when to be engraved on, §§ 187, 188. SECRETARY must be a director, §§ 158, 162. must record corporate votes, and keep minute-book, § 163. may verify annual report, § 170. See Directors; Officers; Individual Liability of Directors. STOCK. See Capital Stock. STOCKHOLDERS, how to be registered, § 169. loans to, prohibited, § 172. executors, etc., may vote as, § 176. pledgors may vote as, § 176. who are regarded as, § 189. SUBSCRIBERS. See Formation of Companies ; Subscriptions. SUBSCRIPTIONS, not effectual until ten per cent, thereof paid in cash, §157. how payable, g§ 157, 163. effect of default in payment, § 163. TABLE of companies to be published annually, § 161. TAXATION, companies, where taxable, § 182. statement as to law governing, § 204. TRANSFER OF STOCK, how registered, §§ 164, 169. liability of transferrer and transferee, § 169. TREASURER, must be a director, § 158. to give bonds if by-laws so require, § 162. to sign certificate of stock, § 164. to keep stock book, § 169. See Directors ; Officers; Individual lAability of Directors. TRUST AND LOAN COMPANIES, cannot form under act, § 153. cannot re-organize under act, § 184. TRUSTEE, not personally liable upon stock, § 175. unless trust fund invested therein without authority, § 189. TRUST ESTATE, when held responsible as stockholder, § 189. VACANCIES in board of directors, how filled, g§ 158, 178. among officers, how filled, § 158. VOTES, may be by proxy, § 178. record of, to be kept, § 163. for directors, how may be .east, § 178. Wholb Ndmbee of Pages 406