except in the case of the reduction of the capital stock of an insurance corporation, as an alternative to make good an existing impair ment. (L. 1890, ch. 564, § 46, as amended by L. 1892, ch. 688, § 46; L. 1893, ch. 700, § 2; L. 1901, ch. 351, § 1; L. 1902, ch. 286, § 1; L. 1904, ch. 123, § 1.) 1. A person who was named as one of the trustees in the articles of association and had acted as such at a prior meeting, was held to be qualified to act as chairman at a meeting called under this section. Cuykendall v. Douglas, 19 Hun, 577. 2. The object of this provision in the statute was to provide a mode of proof of the instrument, to establish its genuine character. Id. Where the signature of the chairman is in the presence of the justice, and the latter has witnessed and certified it, the object of the statute is answered. Id. A certificate of acknowledgment is only required to be in "substantial compliance" with the statute. Id.; Thurman v. Cameron, 24 Wend. 87; West P. I. Co. v. Reymert, 45 N. Y. 703; Can. Acad. v. McKenchnie, 19 Hun, 63. 3. The amount of the capital may be reduced before it has been actually paid in. Strong v. Brooklyn C.-T. R. R. Co., 93 N. Y. 426. The reduced amount may still exceed the sum which has been actually paid in, and in that case, the stockholders must pay it in after the reduction. Id. In such case, there can be no surplus for distribution. Id. The reduced amount becomes the amount which the company is bound by law to provide as capital. Id. See Sullivan t. Parkes, 69 App. Div. 221, 74 N. Y. Supp. 787. § 65. Change in par value of shares. — The number of shares into which the capital stock of any stock corporation is divided may be increased or reduced by a two-thirds vote of all stock duly represented at a meeting held and conducted in like manner, and upon filing a like certificate, as required for the increase or reduction of its capital stock. If such increase or reduction of the number of shares be so authorized, the corporation shall issue to each stockholder certificates for as many shares of the new stock as equal in par value the shares of the old stock held by him, upon surrender and cancellation of such old stock. This section does not authorize the increase or reduction of the capital stock of such corporation. (L. 1893, ch. 196, § 1, as amended by L. 1901, ch. 354, § 1.) 866. Prohibited transfers to officers or stockholders. No corporation which shall have refused to pay any of its notes or other obligations, when due, in lawful money of the United States, nor any of its officers or directors, shall transfer any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt, or upon any other consideration than the full value of the property paid in cash. No conveyance, assignment or transfer of any property of any such corporation by it or by any officer, director or stockholder thereof, nor any payment made, judgment suffered, lien created or security given by it or by any officer, director or stockholder when the corporation is insolvent or its insolvency is imminent, with the intent of giving a preference to any particular creditor over other creditors of the corporation, shall be valid, except that laborers' wages for services shall be preferred claims and be entitled to payment before any other creditors out of the corporation assets in excess of valid prior liens or incumbrances. No corporation formed under or subject to the banking, insurance or railroad law shall make any assignment in contemplation of insolvency. Every person receiving by means of any such prohibited act or deed any property of the corporation shall be bound to account therefor to its creditors or stockholders or other trustees. No stockholder of any such corporation shall make any transfer or assignment of his stock therein to any person in contemplation of its insolvency. Every transfer or assignment or other act done in violation of the foregoing provisions of this section shall be void. No conveyance, assignment or transfer of any property of a corporation formed under or subject to the banking law, exceeding in value one thousand dollars, shall be made by such corporation, or by any officer or director thereof, unless authorized by previous resolution of its board of directors, except promissory notes or other evidences of debt issued or received by the officers of the corporation in the transaction of its ordinary business, and except payments in specie or other current money or in bank bills made by such officers. No such conveyance, assignment or transfer shall be void in the hands of a purchaser for a valuable consideration without notice. Every director or officer of a corporation who shall violate or be concerned in violating any provisions of this section, shall be personally liable to the creditors and stockholders of the corporation of which he shall be director or an officer to the full extent of any loss they may respectively sustain by such violation. (L. 1890, ch. 564, § 48, as amended by L. 1892, ch. 688, § 48; L. 1901, ch. 354, § 1.) 1. The prohibition of the statute against a transfer is not limited to cases where payment of some obligation of the corporation has previously been refused. Cole v. The Millerton Iron Co., 133 N. Y. 164, 28 Am. St. Rep. 615, 30 N. E. 847. 2. A transfer by a corporation of all its property and effects, the effect of which is to make it unable to pay its debts, is made in contemplation of insolvency and illegal. Ib. 3. The directors of an insolvent corporation have no right to secure equality of distribution for all the creditors by means other than those pointed out by statute and which, apart from the object sought, would be irregular and fraudlent. Nat. Broadway Bank v. Wessel's Metal Co., 59 Hun, 470, 13 N. Y. Supp. 744. 4. The purpose of the statute is simply to restrain the corporation or its officers, by their affirmative action, from giving preferences. They are under no legal duty in case of its insolvency to procure a disposition of its property without preferences. Silence or omission to act on their part is therefore not a violation of the statute even to allowing judgments to be obtained against it by default, knowing that the creditor designs to obtain and will thereby obtain a preference. Varnum v. Hart, 119 N. Y. 101, 23 N. E. 183. 5. The statute places no restraints upon creditors, and they are permitted to pursue their legal remedies and obtain judgments by default against the corporation, the effect of which is to give the judgment creditor a preference. Ib. 6. An assignment of corporate assets may be made by a corporation under guise of a judgment, and an attachment lien acquired by the plaintiff with the aid and connivance of the insolvent corporation is an assignment or transfer of the corporate assets within the statute. Throop v. The Hatch Lithographing Co., 125 N. Y. 530, 26 N. E. 742. 7. The statute disables a director or other officer of an insolvent corporation from acquiring a preferential lien on the corporate assets. Hence, where a director of an insolvent corporation which had executed mortgages and given offers of judgments to various creditors with a view of giving preferences, in an action against the corporation on a valid claim for money loaned, obtained an attachment and levy upon the corporate property in hostility to the board of directors and other officers of the corporation, Held, affirming an order vacating the attachment, that it (attachment) was a step in a proceeding which had for its ultimate object the transfer of the title through a sale on an execution upon the judgment which might be obtained in the action, and to enable the plaintiff thereby to realize his debt, which was equivalent to procuring an assignment or transfer by the voluntary act of the corporation. Ib. See also Kingsley v. First Nat. Bank of Bath, 31 Hun, 329. 8. While it is not unlawful for an insolvent corporation to permit its creditors to obtain preferences among themselves by diligence in legal proceedings tending to secure their claims, and may permit judgment to be taken by default, yet when the creditor, who is also a stockholder and director of the corporation, undertakes to obtain a preference by legal proceedings with the co-operation of his associates in the board of trustees, the case is within the statutory prohibition against preferences by way of assignment in contemplation of insolvency. King v. The Union Iron Co., 33 St. Rep. 545, 11 N. Y. Supp. 603; Dickson v. Mayer, 22 Abb. N. C. 257. 9. The president of a corporation with a knowledge of, or in contemplation of, its insolvency is not authorized to provide for the payment of a debt to his wife out of the assets of the corporation to the exclusion of other creditors, and such preference will not be permitted to be carried out. West v. The West, Bradley & Casy Mfg. Co., 9 N. Y. St. Rep. 255. 10. A director may legally obtain possession of corporate property as collateral security for a present or precedent debt justly due him from the corporation, and may acquire absolute title by foreclosure. Duncomb v. N. Y. H. & N. R. R. Co., 84 N. Y. 191; Harpending v. Munson, 91 N. Y. 650. 66 11. Proof that at the time of a transfer or assignment by a corporation it was in fact insolvent, was held not to be conclusive evidence that the transfer or assignment was made in " contemplation of the insolvency of such company" under the corresponding provision of the revised statutes (1 R. S. 603, § 4). To come within the prohibition of the statute the act must have been done because of existing or contemplated insolvency. Paulding v. Chrome Steel Co., 94 N. Y. 334. 12. The preference must be given to one to whom the company is indebted – an existing creditor — and who is unjustly preferred over others to whom it owes the same duty. It does not apply to one who becomes a creditor by the very act of transfer, and for which ample consideration was paid at the time. (Citing Curtis v. Leavitt, 15 N. Y. 112, 142, 175.) Marine Bank of N. Y. v. Clements, 31 id. 45. 13. Taking for a precedent debt does not make holder a purchaser for valuable consideration, but taking mortgage and parting with value does. Curtis v. Leavitt, 15 N. Y. 178. 14. That directors may confirm an act done without their authority, four judges that they cannot, so as to render the act valid, three judges. Id., 48, 137, 174, 189, 249. Gillett 15. A transfer of a note of over $1,000 not authorized by previous resolution of directors is void, unless to a purchaser for value and without notice. v. Phillips, 13 N. Y. 118. 16. Bank having claim against surety and principal, collected judgment against surety. Held, that bank had no beneficial interest in judgment after surety had paid same, and its assignment was not within statute. An assignment can only be attacked for this reason, by the corporation, its stockholders, or creditors. Eno t. Crooke, 10 N. Y. 60. 17. The authority of an officer will be presumed until the contrary is shown. Com. Bank v. Kortright, 22 Wend. 348, 34 Am. Dec. 317; Lovet v. S. S. Mill, 6 Paige, 54. It would seem that a purchaser would not be defeated, if the officer making sale had been forbidden to do so by directors, if the purchaser had no notice thereof. Bank of Vergennes v. Warren, etc., 7 Hill, 93. 18. Where the officer of a bank purchased property and gave notes in the corporate name for the purchase money, and the corporation claimed the property and converted it to its own use, held that they ratified the transaction; and even if the notes were originally given without authority, the corporation was liable upon them. Moss t. Lead Mining Co., 5 Hill, 137. 19. And the fact that the company has allowed judgment to be taken by default is additional evidence of such ratification. Id. 20. Where the management of the affairs of a corporation is intrusted by its charter to a board of directors, the president and cashier, unless specially authorized, have no authority or power to assign its choses in action to a creditor of the corporation as security for a precedent debt. Such an assignment is not voidable merely, but is absolutely void. Hoyt v. Thompson, 5 N. Y. 320. 21. An assignment by a banking corporation of a security for more than $1,000 is not within the prohibition of this section. Gillett v. Campbell, 1 Denio, 520. 22. This statute was designed to protect the corporation against its officers. A transfer in violation thereof is not void, but only voidable at suit of corporation, or one claiming under it. The debtor cannot avail himself of it as a defense. Elwell v. Dodge, 33 Barb. 336. 23. Action was brought by the receiver of the City Bank of Rochester, to recover the value of certain drafts, amounting in the aggregate to the sum of $3,180.32, transferred to the defendant in violation of sections 186 and 187 of chapter 409 of 1882, and with an intent of giving it a preference over other creditors of the bank. It appeared that the defendant made deposits in the bank of the 16th, 17th, 18th and 19th days of December, 1882, and that, at the close of business, on the 19th, there was a balance due to it of $3.004.22; that during these days the bank was insolvent, and that this fact was known to its financial officers; that at a meeting of the directors on the evening of the 19th, it was resolved to discontinue business and apply for the appointment of a receiver; that on the morning (20th), the cashier, knowing of the insolvency of the bank and of the action of the directors, telephoned for an officer of the defendant, and when he arrived gave him certain drafts belonging to the bank, no one of which amounted to $1,000, but which amounted in all to $3,180.32, and took the defendant's check therefor, dated December 19. The bank was not again opened for business. All the drafts so transferred were paid to the defendant, but one, upon which an action was brought by the defendant. Held, that the total amount of the transactions brought the subject-matter within sections 186 and 187, although the amount of each draft was less than one thousand dollars. Atkinson, Receiver, v. Rochester Printing Co., 43 Hun, 167, aff'd 114 N. Y. 168, 21 N. E. 178. 24. Payment of check of depositor wholly ignorant of insolvency of bank is not within the statute. An act done by corporation in the ordinary and usual course of its business, uninfluenced by its financial condition, cannot be said to be done in contemplation of insolvency. Robinson v. Bank of Attica, 21 N. Y. 406; Brouwer v. Harbeck, 5 Seld. 589, distinguished; Dutcher, Assignee, v. Importers & Traders' Nat. Bank, 59 N. Y. 5, rev'g s. c. 1 T. & C. 400. 25. A transfer is in contemplation of insolvency, as well where the insolvency actually exists, as where it is anticipated. Haytun v. Brace, 3 Wend. 17, disapproved as to this point. Robinson v. Bank of Attica, 21 N. Y. 409 et seq. 26. This section is not violated, unless assignment is made to give a preference to some particular creditor over others. The intent is a fundamental fact to be proved. Curtis r. Leavitt, 15 N. Y. 109. 27. Where a corporation is insolvent in such a sense that all its debts cannot probably be discharged from its assets, the payment of any one creditor in full is a preference within the meaning of the statute. Gillett v. Phillips, 13 N. Y. 119. 28. A general assignment without preference is valid. In re Bowery Bank, 16 How. Pr. 58, 5 Abb. Pr. 417. 29. A transfer by a moneyed corporation of negotiable notes, as collateral security to secure a present loan to be used in the course of its business, is not a transfer with intent to give preference to one creditor over others, within this act. Nelson et al. v. Wellington, 5 Bosw. 178-186; Holbrook v. Bassett et al., id., 148. 30. A person who loans money to a company in good faith, on transfer to him as collateral security of subscription notes given for premiums in advance, amounting to over $1.000, and without due notice that there had been no previous resolution of the board of directors authorizing the transaction, is entitled |