Sagory v. Dubois.

Mr. Justice Huntington, with an ability and cogency of reasoning which has excited my highest admiration, and which it would be vain for me to attempt to imitate. It is in my judgment, unanswerable upon the great question involved, the force and effect of a subscription for shares in these stock corporations; and it is reposed upon the solid foundations of the end and design of the legislature, and the sense and meaning of the act of subscription.

The learned counsel for the defendant, argued that the rail road case differs from this, in the fact that there was an express authority in the charter, to require payment of the stock, while here no such power is given. This is true as to an express power, for the general banking law contains none. But it of necessity confers on every association organized under it, the power to call in its capital stock, either by its directors or by such other officers as the persons associating may designate. This power is essential to the existence of the association as a legal entity.

In several of the Massachusetts cases, the charters and statutes confer an express authority to require the payment of the stock by instalments, but this was never held to render subscribers liable. In 12 Conn. R. 530, (The Hartford R. R. Co. v. Boorman,) on the same charter before stated, a stockholder who derived his stock by a transfer from an original subscriber, and received a certificate from the company, was held liable to pay the instalments subsequently called for, in an action of assump

sit.

These decisions in Connecticut, although they are not authority here, command my entire assent and concurrence.

The Society for the Illustration of Practical Knowledge v. Abbott, (2 Beavan, 559,) is analogous in principle. There, four projectors of a public company, obtained a charter, by which they and all persons who might become subscribers, were incorporated. The capital was declared to be £20,000, which was to be divided into 400 shares. The four projectors advanced and expended in the prosecution of their enterprise, about £8000, and before any other subscribers joined, they divided the 400 shares among themselves, agreed to call their investment £16,000, and the balance, £1000, they paid to the corporation. After this,

Sagory v. Dubois.

they disposed of a large number of the shares. On the facts becoming known to the new shareholders, a bill was filed by the corporation against the four projectors, to compel them to pay up the full consideration of £20,000, for the shares they had originally taken. Lord Langdale, Master of the Rolls, sustained the bill, and held that it was not competent for them to take the shares without paying the full consideration, although at the time they were the only persons interested in the company.

The authorities to which I have referred, with the few exceptions stated, concur in maintaining the principle upon which I deemed the defendant liable to pay for his shares of stock, and are decisive by their weight and character.

The defendant being liable by force of his subscription for the stock, the resolution of the directors in September, 1841, not to make any further calls upon the shares, was unavailing to discharge his obligation in respect of the association and its creditors. (See Mangles v. The Grand Collier Dock Company, 2 Railw. Cas. 359, & 10 Sim. 519.) A subsequent board might have rescinded the resolution, and a receiver acting for creditors must disregard it.

Another question of moment arises in respect of the dividends declared, and which were so arranged as to be cotemporary with the payments of three of the instalments called in on the capital stock, and were applied to the discharge of such instalments.

The 28th section of the general banking law, prohibits dividends by withdrawing the capital stock, or out of profits while the paid up capital is deficient, so long as there are any debts ow ing by the association. And the law relative to monied corporations, (1 Rev. Stat. 589, § 1,) makes it unlawful for such corporations to make dividends, except from their surplus profits.

The defendant was an active director of the New York Banking Company, and must be deemed chargeable with knowledge of the state of its affairs. According to the statutes, which I have just cited, his right to receive and apply the dividends in question, depends on the state of the institution, and the existence of surplus profits.

There is some doubt upon the testimony, whether the two first dividends did not exceed the profits actually earned when they

Sagory v. Dubois.

were paid, but the point is not so clear as to authorize me to say that any part of those dividends was made by a withdrawal of the capital.

In regard to the third dividend, payable Nov. 1, 1840, it is clear to my mind that it ought not to have been made. The Hernando Rail Road and Banking Company, had failed long before that period, to meet its engagements with the New York Banking Company, and the balance against it on the books of the latter company, was at that time more than $112,000. The failure of the Hernando Company, had been communicated to the board of directors of the New York Banking Company, in April, 1840, and again on the 19th of October, 1840, when the dividend was declared. I have no doubt but that the directors believed what the president hoped, that there would be no ultimate loss from this debt, and that they declared the dividend in good faith; but I think it was improvident and improper, to divide their apparent surplus, when nearly a third part of their whole capital was locked up in a suspended debt of an uncertain, if not doubtful character. In support of this opinion, I refer to the chancellor's observations in De Peyster v. The American Insurance Company, (6 Paige, 486;) and Scott v. The Eagle Fire Company, (7 ibid. 198.)

The consequence is, that the credit which the defendant received upon his capital stock for the amount of the third dividend, is not to be regarded as a payment of such amount, and the same is still due and payable upon his subscription.

In regard to interest upon the unpaid balance of the defendant's stock, the rule at law appears to be, that the shareholder is liable for interest on the sums called in on his stock, from the times when the calls are payable respectively. By analogy to this rule, it will be proper to charge the defendant with interest from the day fixed in the receiver's advertisement under the statute, for the debtors of the association to make payment, which was the 15th of January, 1844.

As to costs, I have with some hesitation concluded that the defendant should not be charged with the complainant's costs, and they must be borne by the fund. This is a pioneer suit, presenting a question of great importance, and which was an open question in this court. The defendant has made the litigation

Borst v. Boyd.

more burthensome than was necessary, but on the other hand the complainant claimed more against him than he was entitled

to recover.

The decree will direct the defendant to pay to the receiver the unpaid balance of his twenty-five shares of stock, without any credit for the third dividend, and with interest from January 15, 1844. The amount can be ascertained and inserted in the decree, without going into the master's office.

BORST V. BOYD and others.

COREY and others v. BoYD and others.

COREY and others v. INGOLD and others.

An assignment of a mortgage as security for a debt, by a mortgagee in possession, is evidence that the mortgage is redeemable.

The mortgagor, on a bill to redeem, may rebut the objection of lapse of time, by proof of such an assignment, or of similar acts by the mortgagee, although the mortgagor was not a party to the same.

A mortgagee's possession, within the period of limitation, is not adverse to the title of the mortgagor, so as to defeat a conveyance executed by the latter to a stranger.

While the mortgage is redeemable, the mortgagee's possession is deemed to be in trust for the mortgagor.

Where the mortgagee in possession, has sold and conveyed a portion of the lands, the mortgagor coming to redeem, may affirm the sale, and require the mortgagee to account for the purchase money; in which event, there will be no account of the rents and profits of such portion, subsequent to the sale. Pending a suit to redeem from a mortgagee in possession, lands which he claimed absolutely, the mortgagor made an assignment of the subject matter, for the benefit of creditors.-Held, 1. That the assignment transferred all the mortgagor's estate and interest. 2. That it was not within the provision of the revised statutes against champerty.

The mortgagor's assignment conveyed all his real estate and things in action, in trust, to sell and dispose of the same, and to apply the proceeds for the benefit of creditors.-Held, that the assignees took the estate and property, and not a mere

Borst v. Boyd.

power in trust; and that the words "real estate," were sufficient to pass the equity of redemption.

In this state, the equity of redemption is a legal estate; and so continues, notwithstanding the lapse of the day of payment, and although the mortgagee may be in possession; until it is cut off by foreclosure or otherwise.

Where one, pendente lite, acquires the interest of a party in the suit, and thereupon files a supplemental bill; he must make all the parties to the original bill, whether complainants or defendants, parties to his supplemental bill. The assignees of a mortgagor, pendente lite, who was prosecuting a suit for redemption, filed a supplemental bill, against the original defendants; and afterwards filed a second supplemental bill against one who, pending the suit, had purchased at a sheriff's sale, the right of the mortgagee in possession, under a judgment recovered by a stranger, prior to the suit.-Held, that the right of such purchaser, having originated prior to the original suit, the second supplemental bill was an original bill in the nature of a supplemental bill, and was as to him, a new suit. And that the proceedings and testimony in the original suit, and first supplemental suit, (except so much of the same as were introduced into the second supplemental bill,) could not be read against such purchaser. The mortgagee in possession and his assignee, claiming some rights in the premises, were held to be necessary parties with such purchaser, in the second supplemental bill.

Testimony taken by the complainants in the latter suit, cannot be read against the defendants in the prior suits.

Albany, January 12, 13, 14; April 2, 1846.

THE original bill was filed, in December, 1836, by Martin I. Borst, against Alexander Boyd, William A. Boyd, and David Zeilley, for the redemption of six equal undivided seventh parts of a farm of one hundred and twenty acres, situated on the Schoharie Creek, in the town of Middleburgh, in the county of Schoharie, with certain mills and mill privileges thereon.

The premises were mortgaged by John D. Lawyer and wife, to David Lawyer, Junior, on the 29th of April, 1820, to secure $3500, to be paid in three annual instalments, with annual interest, according to J. D. Lawyer's bond of the same date. D. Lawyer, Jr., on the 2d of July, 1821, assigned the bond and mortgage to Alexander Boyd and Henry Hamilton, in trust to pay certain judgments and other debts. Hamilton declined the trust; and on the 5th of October, 1821, D. Lawyer, Jr., made an absolute transfer of the bond and mortgage to A. Boyd. This transfer was recorded in July, 1822.

D. Lawyer, Jr., went into possession of the premises at the