Volume 85 — New York Supreme Court Reports

<p>Payment by a stockholder of the bonds of the corporation — not a purchase of an equity in surplus money resulting on a mortgage foreclosure sale — hypothecation of bonds, not a payment of the debt for which, they a/re pledged — a person diverting bonds cannot; acquire a good title thereto.</p> <p>An agreement was made between two of the stockholders of an insolvent corporation, organized under chapter 611 of the Laws of 1875, which recognized the insolvency of the company and the liability of the stockholders for -its debts, and whereby the parties thereto agreed to pay the debts of the company (included in which were certain mortgage bonds), such parties taking assignments of all evidences of such debts for the purpose of enforcing contribution from the other stockholders. It was also agreed that a mortgage given by such corporation should be foreclosed and the proceeds of the sale had thereunder, together with all moneys realized from the personal property of such corporation, should be applied to the satisfaction of the debts.</p> <p>Held, that, in executing the arrangement, it was impracticable for such persons to turn their payments of obligations (in which were included certain bonds secured by the mortgage) into a purchase of an equity in the proceeds of the funds, realized by the sale under foreclosure of the mortgage which was given to secure the corporate mortgage bonds, as against holders of other similar bonds, who had purchased the same for value.</p> <p>The hypothecation of bonds to secure the payment of the debts of a corporation, does not pay the debts, but it does subject the bonds to the risk of their transfer at a price less than par, as a sale upon pledge would be to the highest bidder without regard to the limit of any resolution of the company prescribing the selling price.</p> <p>A person cannot acquire a good title to bonds, which were originally diverted from their purpose by being pledged by him to an innocent holder, by thereafter taking upon himself the obligation for which such bonds were improperly pledged.</p>

Appeal by Amos J. ITurlbutt, personally and as administrator, etc., of Mary ITurlbutt, deceased, from a decree of the Surrogate’s Court of Cayuga county, entered in the office of the clerk of the Cayuga County Surrogate’s Court on the 23d day of February, 1894, judicially settling and allowing the accounts of the executors of the estate of Amos Hurlbutt, deceased.

Appeal by the defendants, Sarah J. Decker and another, from an order of the County Court of Monroe county, entered in the office of the clerk of the county of Monroe on the 16th day of November, 1893, modifying and confirming as modified the report of a referee in surplus money proceedings.