Opinion
March 8, 1912.
Charles Blandy, for the appellant.
Charles S. Mackenzie, for the respondent.
The action is in replevin to recover a pearl necklace. The jury have found, upon what we shall assume was sufficient evidence, that the necklace was delivered to one Conrad Schickerling by "Edelhoff Brothers Company," the bankrupt corporation, for the sole purpose of selling it to a Mrs. Adler for $12,500, and that Schickerling, without authority of said corporation, pledged it with the defendant on or about December 21, 1905. The undisputed evidence shows that Schickerling procured a Mr. Mayer to redeem the necklace for the purpose of selling it, and that subsequently, and on the 15th day of February, 1906, with the full knowledge, consent and active participation of Gustave Edelhoff, the president of said corporation, it was again pledged with the defendant for a loan of $3,000, the pawn ticket being delivered to said Edelhoff. The jury found, however, that said Edelhoff did not consent to the repawning with full knowledge of the former pawning. The original complaint charged that Schickerling wrongfully and unlawfully pledged the necklace with the defendant on February 15, 1906, but on the trial the plaintiff was permitted to amend the complaint to change the date to December 21, 1905.
The finding of the jury as to the second pawning is plainly against the evidence, and we think the amendment of the complaint does not affect the situation. Assuming that the original possession of the necklace by Schickerling was larcenous so that the defendant would not have the benefit of the Factors' Act (see Freudenheim v. Gütter, 201 N.Y. 94; Schmidt v. Simpson, 204 id. 434), the second pledge or pawning was procured by the corporation itself through its president. The defendant's possession is under the pledge of February fifteenth. The corporation, by its president, not only assented to, but actively participated in procuring, that pledge to be made. It was, therefore, binding on the corporation irrespective of the Factors' Act. (See Laws of 1830, chap. 179; Pers. Prop. Law [Consol. Laws, chap. 41; Laws of 1909, chap. 45], § 43.)
The plaintiff adduced considerable evidence to show, and now argues, that the corporation, Edelhoff Brothers and Company, was organized by said Schickerling as a part of a scheme to defraud the wholesale jewelers; that said Gustave Edelhoff, its president, was a mere dummy and the corporation itself a mere shell without capital; and the proposition is asserted that the corporate entity can be distinguished from its officers and stockholders, and that the scheme in its inception having been fraudulent, the taking and pledge of the necklace amounted to a theft from the corporation, even though every officer and member of it knew of, assented to and participated in the act. We are unable to follow the argument leading to that conclusion. The plaintiff can maintain this action only in the right of the corporation. It would be a novel doctrine in the law and lead to unexpected results if the corporate entity could be so far distinguished from its members and officers as to prevent its being bound by the acts of the only persons through whom it can act. Of course there is no question here of ultra vires acts. If the corporation was a device to steal from the wholesale jewelers, it may be that they could recover their property. The theft in such case would be from them, not from the bankrupt corporation of which the plaintiff is trustee.
The respondent also argued that the pledge was in violation of section 66 of the Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61), the corporation being insolvent, and was, therefore, void. This section re-enacted section 48 of the former Stock Corporation Law (Gen. Laws, chap. 36 [Laws of 1892, chap. 688], as amd. by Laws of 1901, chap. 354). There would be point in that contention if the defendant had been an officer, director or stockholder, and if the pledge had been made to secure a pre-existing debt. He is not accountable for the use which Edelhoff and Schickerling made of the money obtained on the pledge.
The judgment and order should be reversed and a new trial granted, with costs to appellant to abide the event.
INGRAHAM, P.J., McLAUGHLIN, LAUGHLIN and CLARKE JJ., concurred.
Judgment and order reversed, new trial ordered, costs to appellant to abide event.