L. 1909, ch. 40 Consolidation without compliance with statutory provisions. Where two corporations made an agreement "to consolidate the assets and members of the two corporations to combine them under a slightly different name," but did not attempt in any way to comply with the statutory provisions touching the consolidation of such corporations, the agreement was clearly ultra vires and a single dissenting member of one of the corporations could maintain an action to set aside the agreement and to restrain the corporation from proceeding therewith. Davis v. Congregation Beth Tephila Israel, (1899) 40 App. Div. 424, 57 N. Y. S. 1015. A consolidation even though assented to by all of the members of the corporation is void if not accomplished in the manner prescribed by law. Chevra Benat, etc., v. Chevra Bikur, etc., (1898) 24 Misc. 189, 52 N. Y. S. 712. Filing of certificate by secretary of state. Where the Supreme Court has made an order consolidating two membership corporations, and the court's direction that it be entered in the proper county clerk's office has been complied with, it is proper, upon request so to do, for the secretary of state to file a certified copy thereof in his office. Op. Atty.-Gen. (1912) 353. Substitution in pending action.- Substitution of a consolidated corporation will be granted in a suit commenced against one of its constituent corporations prior to the consolidation. Burrow v. Marceau, (1909) 132 App. Div. 797, 117 N. Y. S. 537. Liability for debts of constituent corporations.— Where at the time of a consolidation of two corporations they were severally indebted to a bank on certain promissory notes which were renewed after the consolidation, their payment could not be defeated on the ground that the taking of the renewal notes after the consolidation paid the notes which were outstanding against the constituent corporations at the time of their consolidation and discharged the consolidated corporation from its statutory liability for the payment of the debts of its constituent corporations, where it was established as a fact that the taking of the renewal notes was not intended by any of the parties to the notes or to the transaction as a payment, but merely as an extension, of the original obligations. Matter of Utica Nat. Brewing Co., (1897) 154 N. Y. 268, 48 N. E. 521, affirming 19 App. Div. 627 mem., 46 N. Y. S. 1102. Action against constituent corporation. It seems that a creditor may. even after the consolidation has been effected, still maintain an action against one of the constituent corporations on a liability existing at the time of the consolidation. Gale v. Troy, etc., R. Co., (1889) 51 Hun 470, 4 N. Y. S. 295, 21 N. Y. St. 702. See also Irvine v. New York Edison Co., (1911) 143 App. Div. 344, 128 N. Y. S. 297, affirmed (1913) 207 N. Y. 425, 101 N. E. 358, Ann. Cas. 1914C 441. Result of consolidation. It seems that the existence of the consolidated corporations ceases upon complying with the provisions of the Act, and an entirely new corporation comes into existence which cannot be said to be a partnership of the old ones. People v. Rice, (1890) 57 Hun 486, 11 N. Y. S. 249, affirmed (1891) 128 N. Y. 591, 28 N. E. 251. § 8. By-laws. The by-laws of a membership corporation, created by or under a general or special law, may be divided into different classes and designated as constitution, by-laws, rules, regulations or otherwise, and may provide different methods for amending and repealing such classes, respectively. The by-laws of any such corporation may make provisions, not inconsistent with law or with its certificate of incorporation, § 8 General Provisions L. 1909, ch. 40 regulating the admission, voluntary withdrawal, censure, suspension and expulsion of members; the fees and dues of members and the termination of membership on non-payment thereof or otherwise; the number, times and manner of choosing, qualifications, terms of office, official designations, powers, duties and compensation of its officers; what shall constitute a vacancy in the office of any such officer and the manner of filling it; the number of members, not less than one-third, or if one-third be nine or more, not less than nine, whose presence shall be necessary to constitute a quorum at its meetings; the qualifications of voters at its meetings; the eligibility of members to be directors; and the classification of its directors into not more than five classes, so that the term of office of all the directors of one class only shall expire each year, and that the term of office of their successors shall be as many years as there are classes, but not so as to change the term of office of any director then in office. Such by-laws may authorize holders of the bonds of the corporation secured by mortgage upon its property, to vote for the directors thereof, and may apportion the number of votes each such bondholder may cast to the amount of such bonds held by him. The by-laws of a membership corporation, incorporated for yachting purposes, may provide that the owners of each yacht shall, together, cast but one vote at the meetings of the corporation. This section was derived from the Membership Corporations Law of 1895, Quorum generally: see GENERAL CONSTRUCTION LAW, § 41. 1. By-laws, 18 II. Elections, dues, and assessments, 20 I. BY-LAWS Corporate by-laws generally: see GENERAL CORPORATION LAW, § 11, subd. 5. Constitution as equivalent of by-laws." Charters are not created by the act of the corporation or association, but are granted by the sovereign power of the state. A constitution of a voluntary association or corporation is nothing more than a by-law under an appropriate name.' See Burns v. Manhattan Brass Mut. Aid Soc., (1905) 102 App. Div. 467, 92 N. Y. S. 846. L. 1909, ch. 40 General Provisions 88 Nature of power to make by-laws. The power to make by-laws and regulations, although given in general terms, is not an arbitrary or unlimited one. They cannot be " contrary to, nor inconsistent with, the laws of the state." People v. Erie County Medical Soc., (1857) 24 Barb. 570; Stein v. Marks, (1904) 44 Misc. 140, 89 N. Y. S. 921. Nor can they frustrate or contravene the purpose and meaning of the statute under which the corporation was organized. New York Protective Ass'n v. McGrath, (1889) 5 N. Y. S. 8, 23 N. Y. St. Rep. 209. Extent of corporate power.-A corporation organized "under the General Manufacturing Act of 1848 (Chap. 40) for the purpose of making butter, cheese, concentrated or condensed milk, and other products of the farm and dairy," enacted a by-law which provided "that each stockholder should furnish twenty pounds of milk per day for each share owned by him, and that upon a failure to do so to pay the association one-eighth of a cent per pound for the amount of the deficiency." In an action to enforce the penalty prescribed, it was held that the by-law in question was void "not merely as unreasonable, but as being beyond its corporate power." Monroe v. Dairy Ass'n v. Webb, (1899) 40 App. Div. 49, 57 N. Y. S. 572. Where a member of an employers' association, organized under the Membership Corporations Law, gave his note to the association upon becoming a member thereof, which, it was claimed was given as a penalty or forfeit for disobedience to the association's rules and resolutions, although nominally in payment of membership fees, it was held that the corporation should be restrained from negotiating such note upon a breach by the member of a regulation which prohibited all members from taking back striking union workers who had refused to arbitrate, such a regulation being contrary to the constitution of the associa tion. Sackett, etc., Lithographing, etc., Co. v. National Ass'n of Employing Lithographers, (1908) 61 Misc. 150, 113 N. Y. S. 110, reversed 148 App. Div. 598, 133 N. Y. S. 372, but affirmed (1914) 211 N. Y. 554 mem. Effect of assent to unauthorized by-law.-Assent by a member to an unauthorized by-law of a membership corporation is not sufficient to justify a holding that he may be deprived of property rights thereunder. People v. St. Franciscus Benev. Soc., (1862) 24 How. Pr. 216. Regulation of resignations. A county medical society organized as a membership corporation, not only has power to expel a member for unprofessional conduct, not directly involving the relations of the member as such to the society but it also has power to pass a by-law to the effect that no member shall be permitted to resign under charges. Ewald v. New York County Medical Soc., (1911) 144 App. Div. 82, 128 N. Y. S. 886, reversing 70 Misc. 615, 130 N. Y. S. 1024. "the Publication of news items.—A corporation organized under an Act "to incorporate the Associated Press of the State of New York" (L. 1867, ch. 754), adopted a by-law prohibiting its members from receiving or publishing regular news dispatches of any other news association covering a like territory and organized for a like purpose." A suspension of all the rights and privileges of the association was provided as a penalty for a violation of said provision. In an action to restrain such corporation from enforcing this penalty, it was held that the association had power to enact the by-law; that it was not objectionable either as unreasonable and oppressive, as tending to restrain trade and competition and to create a monopoly, or as an unlawful interference with vested property rights (at least in the absence of evidence that the alleged violation for which the penalty was sought to be enforced grew out of acts in the performance of a contract entered into before the passage of the by-law), or that it created a restriction upon the liberty of the press. Matthews v. New York Associated Press, (1893) 136 N. Y. 333, 32 N. E. 981, 32 A. S. R. 741. Binding force of by-laws and rules.-A by-law of a corporation enacted pursuant to power given to the corporation by the state legislature is effective 88 General Provisions L. 1909, ch. 40 within the limits of the power conferred in the same manner as an Act of the legislature itself. McDermott v. Board of Police, (1857) 5 Abb. Pr. 422. "The general rule is that 'when an individual joins an incorporated club or legally organized body with power to make laws and rules for its own government and for the regulation of the conduct of its members, the member becomes bound by those laws and rules.'" Stein v. Marks, (1904) 44 Misc. 140, 89 N. Y. S. 921. Where the certificate of an interest in the relief fund of a benevolent society issued to one of its members provided that the holder thereof must conform to the by-laws, rules and regulations of the society, such by-laws, rules and regulations became a part of the contract evidenced by the certificate and control with regard to the member's recovery thereunder. French v. Society of Select Guardians, (1898) 23 Misc. 86, 51 N. Y. S. 675. Alteration of by-laws.- It has been held that an order of Odd Fellows had the right to alter a by-law prescribing the amount payable to members as sick benefits after a member had been taken ill and that having done so he could not recover the amount payable before such alteration. Poultney v. Bachman, (1883) 31 Hun 49. "There can be no doubt that a valid modification of a by-law of a corporation fixing the salary of its officer can be effected by an executed parol agreement between the company and the officer and that the conduct of the parties is evidence on the question of such agreement.” Bowler v. American Box Strap Co., (1898) 22 Misc. 335, 49 N. Y. S. 153. Equitable relief against by-law provisions. A member of such corporation, on being served with notice to show cause why he should not be punished for violations of a corporate by-law, brought an action to have the same declared illegal and void, and to restrain the directors from enforcing it against him. It was held that the action was not maintainable, as a remedy at law existed to protect him from the injury threatened, if inflicted, and the enforcement of the by-law would not subject him to irreparable injury, so as to entitle him to a preventive remedy. Thomas v. Musical Mut. Protective Union, (1890) 121 N. Y. 45, 24 N. E. 24, 8 L. R. A. 175. Impairment of vested rights by repeal of by-law.—A private corporation cannot repeal a by-law, so as to impair rights which have been given and become vested by virtue of the by-law, although the power is reserved in its charter to alter, amend or repeal its by-laws. Kent v. Quicksilver Min. Co., (1879) 78 N. Y. 159. II. ELECTIONS, DUES, AND ASSESSMENTS Necessity of notice of election.- Where the by-laws do not require notice of an election of officers, an election held at the regular time and place set by the by-laws is not invalid by reason of a failure to give notice thereof. Matter of New York Electrical Workers' Union, (1907) 122 App. Div. 764, 107 N. Y. S. 886. Obligation to hold elections. It seems that the omission to adopt by-laws regulating the manner of holding elections does not impair the right or obligation of the directors or members to provide therefor. In re David Jones Co., (1893) 67 Hun 360, 22 N. Y. S. 318. Quorum how determined.— Where the by-laws are inconsistent with respect to the provisions regulating what constitutes a quorum, the common law rule in this regard cannot be invoked, but the matter is governed by the provisions of this section. Matter of New York Electrical Workers' Union, (1907) 122 App. Div. 764, 107 N. Y. S. 886. Meaning of "dues.”— With reference to clubs and other membership corporations, the meaning of the word "dues" is settled, and means the obligation into which the members enter to pay a sum to be fixed, usually by the corporate by-laws, at recurring intervals, for the maintenance of the organization. Thompson v. Wyandanch Club, (1911) 70 Misc. 299, 127 N. Y. S. 195. Power to increase dues.-A " voluntary association " incorporated under the Act of May 12, 1875, entitled "An Act for the incorporation of societies or clubs for certain lawful purposes " for "the enforcement of the game and fish laws, the propagation of game and fish, and the hiring and leasing of lands and waters for shooting, fishing and hunting purposes," has power to increase the amount of the dues payable by its members. Thompson v. Wyandanch Club, (1911) 70 Misc. 299, 127 N. Y. S. 195. Power to levy assessments. To levy assessments of different amounts upon nembers not consenting thereto, at irregular intervals, by the vote of the members, either to pay for property acquired by an association or to meet deficiencies in its ordinary revenues, is not within the powers of a membership corporation; nor can the long continued exercise of such a power with the acquiescence of its members confer upon a corporation the right to exercise it unless conferred by the law of its organization. Thompson v. Wyandanch Club, (1911) 70 Misc. 299, 127 N. Y. S. 195. A deed of property by an incorporated club to one of its members and the by-laws of the corporation may be construed together to ascertain whether an assessment made on such member relating to the land in question is valid. Whiteside v. Noyac Cottage Ass'n, (1894) 142 N. Y. 585, 37 N. E. 624, affirming 68 Hun 565, 568, 23 N. Y. S. 63. § 9. Members. Each person signing the certificate of incorporation of a membership corporation, and each person admitted to membership therein, in pursuance of law or its by-laws, shall be a member of the corporation until his membership shall terminate by death, voluntary withdrawal, or otherwise, in pursuance of the by-laws. The right of a member to vote, and all the right, title and interest of a member in or to the corporation, or its property, shall cease on the termination of his membership, unless otherwise provided by law, or by the by-laws of the corporation. This section was derived from the Membership Corporations Law of 1895, § 9. 1. Generally, 21 II. Expulsion, suspension, and resignation of members, 22 I. GENERALLY Term" member of a corporation": see GENERAL CORPORATION LAW, § 3, subd. 8. Qualifications of incorporators: see GENERAL CORPORATION Law, § 4. Qualification of members as voters: see GENERAL CORPORATION LAW, § 23. What constitutes membership in unincorporated association: see 17 Ann. Cas. 1145, note. Right to membership.- The phrase "thereby to promote the interests of the public generally," at the end of the enumeration of the objects of an incorporated association organized for the purpose of improving the breed of cattle "does not tend to show an intention to admit the public at large to the corporation." People v. Holstein-Friesian Ass'n, (1886) 41 Hun 439, 3 N. Y. St. Rep. 142. Mandamus to compel admission to membership. One who has a clear right to membership in a county medical society may obtain a writ of mandamus to compel his admission. People v. Erie County Medical Soc., (1865) 32 N. Y. 187. |