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assent simultaneously with the filing of the mortgage for record. Welch v. 1. & T. N. Bk., ante; Rochester Sav. Bk. v. Averell, ante.

The security is not invalid for the reason that there were but two shareholders when the assent was signed. Welch v. I. & T. Nat. Bk., ante; nor by reason that there were but two persons legally qualified to act as trustees when its execution was directed. Id.; Castle v. Lewis, 78 N. Y., 131; Altas N. Bk. v. F. B. G. Co., 8 Biss., 537; Russell v. McLellan, 14 Pick., 63.

The assent of the holders of two-thirds of the stock actually issued is sufficient to authorize the making of a mortgage by the corporation, so long as there is no fixed, definite intention to increase the stock by future issues. Lyceum v. Ellis, 57 Super., 532; 30 N. Y. St. Rep., 242. The fact that some of the stock has not been paid for in full does not affect the validity of the assent. Id. Neither the issuing of a certificate for the shares nor payment therefor is indispensable to the ownership in shares in capital stock. Id.; Wheeler v. Millar, 90 N. Y., 389.

A corporation may mortgage its property and dispose of its bonds to raise money to be thereafter expended in carrying on its business, though for indebtedness not already incurred. Graham v. Altanta Hill, etc., Co. N. Y. Daily Reg., Oct. 14, 1884.

The fact that the consent does not specify the amount, that the mortgage is valid only in the county where most, if not all of the property is situated, that it is given to trustees and not to the creditors directly, or that the bonds are sold below par if not below actual value, does not render the mortgage void. Id.; Jones v. G. & I. Co., 101 U. S., 622; Central G. M. Co. v. Platt, 3 Daly, 263; Greenpoint S. Co. v. Whitin, 69 N. Y., 334.

Where the corporation has transferred by assignment, absolute on its face, certificates of stock so owned by it, as collateral security for debt, the shares so transferred at least can not be deducted. Vail v. Hamilton, 83 N. Y., 453.

Where the corporation is itself the owner of a portion of its stock, it can not give assent for the shares so owned by it, to make up the requisite two-thirds. Id. Nor can the assenting stockholders be deemed to represent a proportionate amount owned by the corporation. Id.

Whether the shares held by the corporation may be deducted from the whole number in ascertaining if the assent of the requisite two-thirds has been obtained, was not determined in Vail v. Hamilton, ante.

The assignee of stock, assigned by corporation as collateral security for debt, is, it seems, a stockholder within the meaning of this section and is entitled to sign the assent. Id.

A receiver of a corporation may maintain an action to set aside a mortgage executed by it without the requisite assent of stockholders. Id.

Creditor has no title in law or equity to bonds issued by corporation in trust to pay its debts, nor right in proceeds of sale under mortgage given to secure such bonds, until delivery and acceptance. Hubbell v. S. I. Works, 36 N. Y. St. Rep.,

902.

Consent of stockholders to execution of mortgage by corporation, is sufficient, if signed, acknowledged and recorded with mortgage. Everson v. Eddy, 36 N. Y. St. Rep., 763.

Such mortgage is valid where corporation is solvent. Id.

Fact that resolution authorizing execution of mortgage by corporation was adopted by votes of persons owning indebtedness to be secured, does not affect validity of mortgage, where it is valid indebtedness incurred for corporation. Rittenhouse . Winch, 32 N. Y. St. Rep., 506.

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§ 3. Reorganization upon sale of corporate property and franchises. When the property and franchises of any domestic stock corporation shall be sold by virtue of a mortgage or deed of trust, duly executed by it, or pursuant to the judgment or decree of a court of competent jurisdiction, or by virtue of an execution issued thereon, and the purchaser at such sale shall acquire title to the same in the manner prescribed by law, he may associate with him any number of persons, not less than the number required by law for the incorporation

of such corporation, a majority of whom shall be citizens and residents of this state, and they may become a corporation, and take and possess the property and franchises thus sold, and which were at the time of sale possessed by the corporation whose property shall have been so sold, upon making, acknowledging and filing in the offices where certificates of incorporation are required by law to be filed, a certificate in which they shall describe by name and reference to the law under which it was organized, the corporation whose property and franchises they have acquired, and the court by whose authority the sale had been made, with the date of the judgment or decree authorizing or directing the same, and a brief description of the property sold, and also the following particulars:

1. The name of the new corporation intended to be formed by the filing of such certificate.

2. The maximum amount of its capital stock and the number of shares into which it is to be divided, specifying the classes thereof, whether common or preferred, and the amount of and rights pertaining to each class.

3. The number of directors, not less nor more than the number required by law for the old corporation, who shall manage the affairs of the new corporation, and the names and post-office addresses of the directors for the first year.

4. Any plan or agreement which may have been entered into at or previous to the time of sale, in anticipation of the formatiou of the new corporation, and pursuant to which such purchase was made. Such corporation shall be vested with and be entitled to exercise and enjoy all the rights, privileges and franchises, which at the time of such sale belonged to, or were vested in the corporation, last owning the property sold, or its receiver, and shall be subject to all the provisions, duties and liabilities imposed by law on such corporations.

Former section 3 without change.

See chap. 469 of 1873, section 1; chap. 430 of 1874, section 1; chap. 446 of 1876, and section 1, chap. 193 of 1890, now repealed.

This course of procedure was formerly applicable only to railroad companies, but has been, by these sections, extended to all stock corporations.

Under this section, any number of persons may, at a foreclosure sale, purchase the corporate property for themselves, and organize a new company, which will possess all the powers, rights, privileges and franchises of the prior corporation, and be subject to the provisions, duties and liabilities imposed by law on such corporations. Vatable v. N. Y., L. E. & W. R R. Co., 96 N. Y., 49. In such case, the rights of all the stockholders of the prior corporation will be absolutely barred and cut off by the foreclosure and sale. Id.

The purchasers at the foreclosure sale may, instead of buying absolutely for themselves, buy the property in pursuance of a plan, as mentioned in the next section, for the readjustment of the respective interests therein of the mortgages creditors and stockholders of the company. Id. Even in this case, the foreclosure becomes absolute against the corporation, and absolutely bars and cuts off all its rights and all the proprietary interests of the stockholders. Id. If the property is purchased under the plan provided in the next section, such plan must

be embodied in the certificate to be filed as required by this section. Id. In such case, each stockholder has the right, under section 6 of this act, to assent to the plan of readjustment and reorganization at any time within six months after the organization of the new company, and become, by complying with the terms and conditions of such plan, entitled to his pro rata benefits therein according to its terms. Id.

The only property interest which a stockholder of the old company has left is in the surplus, if any, after satisfying the mortgage and other preferential claims. Id. A corporation, organized under this section, is a new and entirely different one from that whose property and franchises were purchased under the foreclosure proceedings. People ex rel. Schurz v. Cook, 110 N. Y., 443. The right to be a corporation is not mortgaged or purchased, and is only obtained by the purchasers by direct grant from the state, on filing the certificate. Id.

When the purchasers at the foreclosure sale undertake to recognize under this section, and for that purpose to file in the secretary's office a certificate, upon the filing of which they become a body politic and corporate, the corporation thus formed is a new and entirely different one from that whose property and franchises the purchasers may have bought under the foreclosure proceedings. Id. The corporation about to be formed by the filing of the certificate, has, by force of the statute, when formed, all the rights, franchises, powers, privileges and immunities which were possessed before such sale by the corporation whose property was sold. Id. The purchasers obtain the right to be a corporation by direct grant from the state, and not in any degree by the sale and purchase of the franchises, etc., of the old corporation. Id. See Post v. Simmons, 16 N. Y. St. Rep., 246. The act authorizing the mortgaging of the franchises of corporations is in no sense a contract, on the part of the state, with the purchasers of bonds secured by such a mortgage, that the statutory provisions existing at the time of the execution of the mortgage for the incorporation of the purchasers on foreclosure sale shall remain the same. People ex rel. Schurz v. Cook, ante.

Where the property and franchises of a corporation have been sold under mortgage forclosure, and a new corporation has been organized under this section, chap. 143 of 1886, as amended in 1887, applies to such new corporation. Id. In such case, the Secretary of State is prohibited from filing any certificate of its articles of association until satisfied that the tax imposed by said act has been paid; Id; even though the mortgage foreclosed was executed prior to the passage of the corporation tax act. Id.

In the absence of an existing corporation, capable of taking and exercising the franchises sold, the purchaser is authorized to create a new corporation for the purpose of the transfer, but whose corporate life comes from the grant and authority of the state. People v. Brooklyn, etc., R. Co., 89 N. Y., 84. This provision was not intended to prevent a sale or transfer to a corporation already existing, and capable, under the law of its creation, of holding the property and exercising the franchises which passed to the purchaser by the mortgage sale. Id. See also Pratt v. Munson, 84 N. Y., 582.

The company formed under this section is a new corporation within the meaning of the Organization Tax act of 1886, as amended in 1887. People ex rel. Martins v. Cook, 10 N. Y. St. Rep., 650. And it is subject to the payment of the tax imposed by said act. Id.

§ 4. Contents of plan or agreement.-At or previous to the sale the purchasers thereat, or the persons for whom the purchase is to be made, may enter into a plan or agreement, for or in anticipation of the readjustment of the respective interests therein of the mortgage creditors and stockholders of the corporation owning such property and franchises at the time of sale, and for the representation of such interests of creditors and stockholders in the bonds or stock of the new corporation to be formed, and may therein regulate voting by the holders of the preferred and common stock at any meeting of the stockholders, and by the holders and owners of any or all of the bonds of the corporation foreclosed, or of the bonds issued or to

be issued by the new corporation, and such right of voting by bondholders shall be exercised in such manner, for such period, and upon such conditions, as shall be therein described. Such plan or agreement must contain suitable provision for the bondholders voting by proxy and must not be inconsistent with the laws of the state and shall be binding upon the corporation, until changed as therein provided, or as otherwise provided by law. The new corporation when duly organized, pursuant to such plan or agreement and to the provisions of law, may issue its bonds and stock in conformity with the provisions of such plan or agreement, and may at any time within six months after its organization, compromise, settle or assume the payment of any debt, claim or liability of the former corporation upon such terms as may be lawfully approved by a majority of the agents or trustees intrusted with the carrying out of the plan or agreement of reorganization, and may establish preferences in respect to the payment of dividends in favor of any portion of its capital stock and may divide its stock into classes, but the capital stock of the new corporation shall not exceed in the aggregate, the maximum amount of stock mentioned in the certificate of incorporation, nor shall the bonds issued by it exceed in the aggregate the amount which a corporation is authorized by the provisions of this article to issue.

Former section 4 without change.

See section 2, chap. 430 of 1874, section 2, chap. 446 of 1876, and section 2, chap. 193 of 1890, now repealed.

§ 5. Sale of property; possession of receiver and suits against him. The supreme court may direct a sale of the whole of the property, rights and franchises covered by the mortgage or mortgages, or deeds of trust foreclosed at any one time and place to be named in the judgment or order, either in case of the non-payment of interest only, or of both the principal and interest due and unpaid and secured by any such mortgage or mortgages or deeds of trust. Neither the sale nor the formation of the new corporation shall interfere with the authority or possession of any receiver of such property and franchises, but he shall remain liable to be removed or discharged at such time as the court may deem proper. No suit or proceeding shall be commenced against such receiver unless founded on willful misconduct or fraud in his trust after the expiration of sixty days from the time of his discharge; but after the expiration of sixty days the new corporation shall be liable in any action that may be commenced against it, and founded on any act or omission of such receiver for which he may not be sued, and to the same extent as the receiver, but for this section would be or remain liable, or to the same extent that the new corporation would be had it done or omitted the acts complained of.

Former section 5 without change.

See section 2, chap. 446 of 1876, and section 3, chap. 193 of 1890, now repealed. The effect of this section is to devolve the liability from the receiver to the new corporation. Abbott v. Jewett, 25 Hun, 603. An amendment substituting in such case the new corporation in the place of the receiver as defendant is allowable. Id.; Tighe v. Pope, 16 id., 180.

§ 6. Stockholders may assent to plan of readjustment. Every stockholder in any corporation, the franchises and property whereof shall have been thus sold, may assent to the plan of readjustment and reorganization of interests pursuant to which such franchises and property shall have been purchased at any time within six months after the organization of the new corporation, and by complying with the terms and conditions of such plan become entitled to his pro rata benefits therein. The commissioners, corporate authorities or proper officers of any city, town or village, who may hold stock in any corporation, the property and franchises whereof, shall be liable. to be sold, may assent to any plan or agreement of reorganization which lawfully provides for the formation of a new corporation, and the issue of stock therein to the proper authorities or officers of such cities, towns or villages in exchange for the stock of the old or former corporation by them respectively held. And such commissioners, corporate authorities or other proper officers may assign, transfer or surrender the stock so held by them in the manner required by such plan, and accept in lieu thereof the stock issued by such new corporation in conformity therewith.

Former section 6 amended.

See sections 3, 4, chap. 430 of 1874, now repealed.

Under this section, it is entirely optional with the stockholder whether he will come in under the plan and join the new company. Vatable v. N. Y., L. E. & W. R. R. Co., 96 N. Y., 49. If he elects to join the new company, he gets a proportional interest therein, but such right, so far as it depends upon the statute, must be exercised within the six months. Id. If he fails to do so within such time, he can not take or claim any rights under the plan. Id. In such case, the courts can not give him any relief. Id.; Robinson v. Cropsey, 2 Edw. Ch., 138; Gorman v. Low, id., 324; Weed v Weed, 94 N. Y., 243.

Trust company, appointed on reorganization of railroad, to fix amount to be paid by stockholders for new stock, etc., need not give notice of time and place of hearing. Gernsheim v. Cent. T. Co., 40 N. Y. St. Rep., 967.

Unratified attempt by certain of its officers to fix amount does not exhaust power of company. Id.

Court will not substitute its judgment for that of company, nor review its honestly formed determination upon legitimate matter.

Id.

Stockholder who acquired stock from those who voted for plan of reorganization, can not insist upon its being ultra vires, or enjoin its accomplishment. Hollins v. St. P. M. & M. R. R. Co., 29 N. Y. St. Rep., 208.

Contract construed so that rights of non-assenting parties can not be changed by majority vote of certificate holders, taken after creation of new corporation. Dutenhoffer v. A. R. R. Co., 38 N. Y. St. Rep., 710.

Stockholder of former corporation, who did not sign agreement to exchange for stock in new corporation, is not prejudiced by action thereunder. Bean v. A. L. & T. Co., 34 N. Y. St. Rep., 620.

$ 7. Combinations abolished.- No domestic stock corporation and no foreign corporation doing business in this state

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