Vanorden v. Johnson.

six hundred dollars. The lot released was of less value than two hundred dollars. The second mortgagee was therefore benefited by the release of the lot, instead of the additional advance of two hundred dollars. The claim of the complainant to the benefit of the release is a mere equity resulting from the fact that his security is impaired by the giving of the release. It is no technical discharge of the lands covered by the complainants' mortgage, nor will it operate as a release, unless upon principles of justice and equity it ought thus to operate. Thus, where the land released is sold at a fair price, and the purchase money is applied in part satisfaction of the first mortgage, no equity will accrue in favor of the second mortgagee, because it is obvious that his interests are in no wise prejudiced by the release. Patty v. Pease, 8 Paige 277.

The claim of the second mortgagee, being a mere equity, can be extended no further than is required by the clear demands of natural justice and equity.

The entire premises covered by the complainants' mortgage cannot, under the pleadings in the cause, be directed to be sold. All the equity to which the complainant is entitled under the case as it now stands is, that the complainant, upon the payment of Bolles' claim, shall be substituted in his place, with all his rights as against the premises covered by the first mortgage. This assignment Bolles, in his answer, proffers himself ready and willing to make. Upon general principles of equity, the complainant is entitled to the benefit of such subrogation.

Leonard, the purchaser of the lot released, and in whose favor the release operates, cannot be affected by any equities subsisting between the mortgagees. Reilly v. Mayer, 1

Beasley 59.

He is entitled to the costs of his defence.

CITED in Hoy v. Bramhall, 4 C. E. Gr. 571; Hill's Adm's v. McCarter, 47

Hilles v. Parrish.

NATHAN HILLES and others vs. WILLIAM D. PARRISH and

others.

A supplement to the act concerning corporations, approved February 28th, 1849, requires all companies incorporated under the laws of this state, whose charters do not designate their place of meeting, to hold their business meetings and the meetings of their directors in the state of New Jersey.

Independent of this statutory provision, it is a rule of law that a private corporation whose charter has been granted by one state, cannot hold meetings and pass votes in another state. It exists by force of the law that created it, and when that law ceases to exist, and is not obligatory, the corporation can have no existence.

When it appears that resolutions of the board of directors of a corporation of this state authorizing the transfer of stock were passed at a meeting held in Philadelphia, such resolutions are void, and the transfer of stock, in pursuance of them, to the directors who participated in the illegal proceedings can vest no title in them.

On a bill filed to restrain the holders of certain stock in a corporation from selling or transferring the same, or from voting thereon at the then next ensuing election for directors, which was to be held within three days after filing the bill, it was held that, as the effect of restraining the defendants from voting upon the stock might have been to change the result of the election, and the consequent control of the affairs of the company, without giving an opportunity to those holding the legal title to a majority of the shares of being heard in their defence, the injunction in that respect should be denied.

The granting and continuing of injunctions rests mainly on equitable grounds, and is not exercised for the mere purpose of protecting legal rights, irrespective of the claim of the party to equitable relief.

A resolution passed by the board of directors of a corporation, the design and effect of which was to transfer the property of the company to the directors without value, or by way of inducement to them to pay their honest debts to the company, is illegal and void.

The fact that the only party to be injured by the transfer of stock, in pursuance of such a resolution, was himself acting fraudulently towards the company, will not justify a violation of their duty on the part of the directors.

The acceptance by a stockholder of a dividend upon his stock can be no ratification of the illegal conduct of the directors.

S. H. Grey and P. S. Voorhees, for complainants, cited Grey v. Portland Bank, 3 Mass. 364; Attorney General v.

Hilles v. Parrish.

Utica Ins. Co., 2 Johns. C. R. 389; Verplanck v. Mercantile Ins. Co., 1 Edwards' Ch. R. 87; Redmond v. Dickerson, 1 Stock. 507; Angell & Ames on Corp., § 312–13; Skrine v. Simmons, 11 Georgia 401; Hargroves v. Nix, 14 Ibid. 316; Gale v. Gale, 19 Barb. 249; People v. Cook, 4 Selden 67; Clark v. White, 12 Peters 178; Gould v. Gould, 3 Story 516; Munn v. Worrall, 16 Barb. 231; Creath v. Sims, 5 Howard 192; Cunningham v. Shields, 4 Haywood 44; Russell v. Clark, 7 Cranch 69; Fleming v. Slocum, 18 J. R. 403; Hazard v. Irwin, 18 Pick. 95; Mickles v. Rochester City Bank, 11 Paige 118; Nix. Dig. 154; 2 Story's Eq., § 439; Miller v. Ewer, 14 Shepley 509; Slee v. Bloom, 19 Johns. 457.

For defendants, Mr. Beasley cited Slee v. Bloom, 5 J. C. R. 385.

THE CHANCELLOR. The parties in this cause are stockholders, and the defendants are directors of "the Riverton Improvement Company," a corporation created by the laws of this state. The bill is filed to set aside a transfer of six shares of the capital stock of said company, made by order of the board of directors to themselves individually, and to restrain the holders of the said stock from selling or transferring the same, or from voting thereon at the next or any ensuing election of the said company. The bill was filed three days before the then next ensuing election for directThe injunction was allowed, so far as to restrain the defendants from a sale or transfer of the said shares. But as the effect of restraining the defendants from voting upon the stock might have been to change the result of the election, and the consequent control of the affairs of the company against the wishes of those holding the legal title to a majority of the shares, without an opportunity of their being heard in defence of the charges in the bill, the injunction in that respect was denied. Answers have been filed, and the cause has been brought on for final hearing upon the pleadings and evidence.

ors.

Hilles v. Parrish.

The capital stock of the company consisted of $60,000, divided into one hundred and twenty shares, of $500 each. Of these shares, on the first of June, 1859, the company held fifty shares, which had been taken in payment for land purchased at the par value of $500 each, thirty-six shares which had been taken at the value of $400 each, and ten shares which were held by the company as collateral security for debts due, leaving but twenty-four shares in the hands of individual stockholders. Of these twenty-four shares, eleven were held by the defendants; thirteen shares were held by other stockholders, twelve of which were held by the complainants.

At a meeting of the directors, held on the second of April, 1861, the following resolutions were adopted: The treasurer is hereby directed to require the payment of all sums due by members for interest on or before the fifteenth instant. The treasurer shall notify each member who complies with the foregoing resolution that he is entitled to purchase from the company one share of stock at a price equivalent to that paid for stock by the company in settlement of land balances, on the twenty-fourth of December, 1857. On the sixteenth of April, the treasurer reported to the directors that, pursuant to the resolution of the board at the last meeting, he had demanded the payment of all interest due, as directed by the minutes of the last meeting, and that all have paid the same, excepting Daniel L. Miller, jun. A committee was thereupon appointed to confer with Miller in relation to his indebtedness to the company for land and interest. A dividend of thirty per cent. on the stock of the company, equivalent to $150 per share, was declared payable in cash on demand, and it was resolved that all resolutions heretofore passed to receive stock as a security at a named valuation, or to buy or to sell the same at a fixed value, shall be of no binding effect hereafter. At the date of the resolution, the only stockholders indebted to the company were six of the directors, who are defendants in this cause, and Daniel L. Miller, jun. Miller's stock, though standing partly

Hilles v. Parrish.

in his name, was held either by individuals or by the company, as collateral security for his indebtedness. The six directors having paid the interest due from them, respectively, to the company, one share of stock was transferred to each of them, and a dividend of $150 paid on each share. It is this transfer which the bill seeks to set aside as fraudulent.

The resolutions of the board of directors, authorizing the transfer of the stock to themselves, were unauthorized and illegal.

By a supplement to the act concerning corporations, approved on the twenty-eighth of February, 1849, and which was in force at the date of the charter of the Riverton Improvement Company, it is enacted that all companies incorporated under the laws of this state, whose charters do not designate their places of meeting, shall hold their business meetings and the meetings of their directors in the state of New Jersey. The annual meetings of the company are directed to be held at Riverton. Independent of these statutory provisions, it is a rule of law that a private corporation whose charter has been granted by one state, cannot hold meetings and pass votes in another state. It exists by force

of the law that created it; and where that law ceases to exist, and is not obligatory, the corporation can have no existence. Miller v. Ewer, 14 Shepley 509; Bank of Augusta v. Earle, 13 Peters 588; Runyan v. The Lessee of Coster, 14 Peters 129; Angell & A. on Corp., § 104, 274.

It appears that the resolutions of the board of directors which authorized the transfer of the stock in question were passed at a meeting held not in this state, but in the city of Philadelphia. They are therefore void, and the transfer of stock in pursuance of such resolutions to the directors who participated in the illegal proceedings can vest no title in them.

This consideration alone would be sufficient to dispose of the claim of the defendants, and establish the right of the complainants to the relief prayed for. But the granting and