App. Div.] Second Department, March, 1920. A conveyance of real estate for a nominal consideration cannot be held to be fraudulent merely because at the time of the conveyance an action for death caused by negligence had been begun against the grantor, there being no proof of actual fraud or of the grantor's insolvency at that time. To raise any presumption of fraud there must be existing creditors at the time a conveyance without a valuable consideration is made. Such suit cannot be maintained by a trustee in bankruptcy of the grantor, the action for negligence having been begun over two years before the adjudication in bankruptcy, but, it seems, a different rule may apply in actions of contract, since the plaintiff may have been a creditor under the bankruptcy statute. APPEAL by the plaintiff, Philip J. Termini, as trustee, etc., from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Kings on the 13th day of July, 1917, upon the decision of the court rendered after a trial at the Kings County Special Term dismissing the complaint at the close of the plaintiff's case. Plaintiff sought to set aside as fraudulent two conveyances of real estate executed by the bankrupt on October 4, 1913. On August 5, 1913, Edward C. Schlueter, as administrator of the goods of Frank Schlueter, deceased, had begun an action against William Huth for negligently causing Frank Schlueter's death. On October 4, 1913, William Huth and wife made both conveyances (for one dollar and other valuable considerations) of the properties here involved. On February 24, 1915, Schlueter recovered a judgment against Huth for $1,230 in his action for damages. On August 27, 1915, Huth filed a petition in bankruptcy, in which proceedings the plaintiff was appointed trustee in bankruptcy, and duly qualified as such. This suit in equity was upon the ground that such conveyances were executed to defraud creditors, and in particular to defraud said Schlueter as such administrator. The complaint also charged that said Huth was insolvent when said. conveyances were made. But there was no proof of insolvency. The case was submitted upon such documentary evidence alone. At the close of the case plaintiff was nonsuited. Edward A. Kenney [Charles E. Casey with him on the brief], for the appellant. Ralph G. Barclay [Robert Stewart and Robert M. Johnston with him on the brief], for the respondents. PUTNAM, J.: Second Department, March, 1920. [Vol. 191. Although the appellant did not file a formal exception to the nonsuit (Code Civ. Proc. § 994) this was not jurisdictional, but simply a matter of procedure (People v. Journal Co., 213 N. Y. 1), so that this court can permit an exception to be filed. Therefore, we treat the appeal on the merits. The determination of the burden of proof must be decisive. Could the trustee prevail here merely on producing these conveyances, apparently not founded on a valuable consideration? The Real Property Law, section 265, declares: "A conveyance or charge shall not be adjudged fraudulent as against creditors, purchasers or incumbrancers, solely on the ground that it was not founded on a valuable consideration." To raise any presumption of fraud there must be existing creditors at the time of the conveyance. (Kerker v. Levy, 206 N. Y. 109.) A trustee in bankruptcy, suing as such, cannot prevail in such a suit merely because a solvent person made voluntary conveyances, when the nearest approach to a creditor is the showing that a plaintiff had begun, or was about to bring, an action of tort. (Beers v. Hanlin, 99 Fed. Rep. 695.) This is the only circumstance relied on here, namely, that an action for negligence had been begun about two months before the first of these conveyances, and over two years before this adjudication in bankruptcy. (See Smith v. Reid, 134 N. Y. 568.) There is a different rule in actions of contract, since such a plaintiff may be a "creditor," under the bankruptcy statute. (Matter of Berkeley, 203 Fed. Rep. 7, 10; 30 U. S. Stat. at Large, 544, chap. 541, as amd.) As there was no proof of insolvency, and no evidence to support any inference of fraud towards any existing creditor, the court rightly dismissed the complaint. Hence the judgment should be affirmed, with costs. Present-RICH, PUTNAM, BLACKMAR, KELLY and JAYCOX, JJ. Judgment unanimously affirmed, with costs. App. Div.] Second Department, March, 1920. FRANCES MILLSPAUGH, Temporary Administratrix, etc., of THOMAS H. MILLSPAUGH, Deceased, and Others, Respondents, v. WILLIAM F. CASSEDY, as Trustee, and Others, Appellants, Impleaded with WILLIAM B. SANXAY, as Administrator, etc., of EDMUND SANXAY, Deceased, and THE HIGGINSON MANUFACTURING COMPANY, Defendants. Second Department, March 12, 1920. Corporation - jurisdiction of court of equity to reform certificate incorporating business corporation — failure of certificate to embody by-law denying right of preferred stockholders to vote – holders of common stock and representatives of such holders may maintain suit - evidence not establishing laches. A court of equity has jurisdiction to reform the articles incorporating a business corporation so as to deny to the holders of preferred stock the right to vote at elections of directors, it appearing that such was the agreement of the incorporators and that upon the incorporation of the company and before stock was actually issued a by-law was adopted which provided that holders of preferred stock should not be entitled to vote, and where although such provision was not inserted in the certificate of incorporation by the attorney who drew the same, the holders of such preferred stock had never voted or asserted any right to vote thereon. Since the amendment to section 20 of the former General Corporation Law made in 1901 and now embodied in section 23 of the General Corporation Law, a corporation may deny the preferred stockholders the right to vote. The old rule that a court of equity cannot give relief from a mistake as to the law has been to some extent modified, and relief may be given by equity from errors made by lawyers in drafting legal papers, which result in a mutual mistake as to the intent of the parties. The plaintiffs being holders and representatives of deceased holders of common stock have a standing to maintain the suit aforesaid as they are not mere volunteers but seek to enforce vested established interests. Neither can the plaintiffs be charged with laches when there was no objection to the exclusive right of the holders of common stock to control elections until the election of directors in 1918, twenty years after the incorporation. APPEAL by the defendants, William F. Cassedy, as trustee, and others, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Rockland on the 24th day of October, 1918, upon the decision of the court rendered after a trial at the Rockland County Special Term. The judgment appealed from decreed that the certificate of Second Department, March, 1920. [Vol. 191. incorporation of the defendant corporation be so amended as to provide that the preferred stock shall not be entitled to any vote at stockholders' meetings, and directing that a meeting of all the stockholders be held at which they shall vote for the amendment as decreed, and that proper certificates shall be executed and filed accordingly. Charles T. Payne [Walter P. Pfeiffer and Edgar G. Wandless with him on the brief], for the appellants. R. H. Barnett, for the respondents. KELLY, J.: This suit was commenced in March, 1918, and was in equity to reform the articles of incorporation of the Higginson Manufacturing Company, a business corporation organized in November, 1898. There is no material dispute as to the facts, the appellants contending that the court was without power to decree reformation at the suit of the plaintiffs; that if a mistake was made in omitting the limitations upon the voting power of the preferred stock, which, however, the appellants do not concede, it was a mistake of law from the effects of which equity will not relieve; that the holders of the preferred stock cannot be deprived of their right to vote, and that the plaintiffs are barred from any relief by laches and the Statute of Limitations. Upon the incorporation of the defendant company in 1898, and before any certificate of stock was actually issued, a by-law was adopted in the following words: "Preferred Stock: The preferred stock shall not be entitled to any vote at annual meetings or special meetings of the stockholders." This limitation was not in the certificate of incorporation, but for twenty years from 1898 until immediately preceding the commencement of this action it was recognized by the stockholders, and no holder of preferred stock voted or offered to vote thereon. The capital stock of the company was $250,000, divided into 2,500 shares, of which 500 represented preferred stock and 2,000 common stock. The learned trial judge has found as matter of fact upon evidence concerning which there is no substantial controversy, that it was the intention and purpose of the incorporators that the preferred App. Div.] Second Department, March, 1920. stock should have no voting power, that the sole voting power should be vested in the common stock of the company, and that the attorney who prepared the certificate of incorporation was advised of the intention of the incorporators and was directed to prepare the papers to effectuate such intention. He also finds that the attorney in attempting to carry out the direction of the incorporators prepared the by-law above set forth, but that he failed to insert the provision in the certificate of incorporation. The by-laws were unanimously adopted at the first meeting of the incorporators on January 16, 1899, held under the supervision of the attorney, and the trial judge finds that it was the intention of the attorney and the stockholders present at the meeting, representing all of the capital stock of the company, that the preferred stock should have no voting power. As matter of fact, found by the trial judge, the 500 shares of preferred stock as well as 850 shares of common stock were thereafter transferred to the attorney as trustee and stood in his name upon the books of the corporation for many years, during which he voted the common stock at corporate meetings but never attempted to vote the preferred stock prior to the annual meeting in January, 1918. At that meeting he, for the first time, claimed a right to vote the 500 shares of preferred stock, but the inspectors of election refused to receive the vote offered upon the preferred shares. He thereupon instituted proceedings under the General Corporation Law (§ 32) to set aside the election of directors and officers, whereupon the Millspaugh interests, owning 1,099 shares of common stock, practically all of the common stock aside from the 850 shares owned or controlled by the attorney trustee, began this action and obtained a preliminary injunction restraining the proceedings until the final determination of the action. During the twenty years preceding 1918 the active management of the corporation had been with Thomas H. Millspaugh, who had been an employee of and afterwards associated with Mr. Higginson, the founder of the corporation. Mr. Higginson, who owned or controlled all of the stock, died in 1909, leaving a will in which he bequeathed all of the capital stock in the corporation, preferred and common, to Millspaugh, who was appointed executor of his will. The stock, preferred and common, held by the attorney |