It seems that Rogers & Co., who were creditors of the Wendler Machine Company, made themselves parties to the proceeding, and after becoming such parties to the proceeding, they were entitled to notice of any application subsequently made therein. (Code Civ. Proc. §§ 799, 2428.) *
It seems by the affidavits that the receiver was interested, as he held some $9,000 of the bonds secured by a mortgage. Although it is stated in the terms of sale, issued by the receiver^ that the sale would be made subject to the approval of the court, there is nothing in the terms prescribed by the receiver requiring the purchaser to pay the antecedent liens upon the property, nor does the record before us show any undertaking on the part of the purchaser to pay the antecedent liens. Good faith was due from the receiver to all parties interested in the corporation and he ought not to be allowed in any way, by statements or by his conduct, to mislead interested ' parties to further his own private interests. He had, undoubtedly, power to contest the bonds and the mortgage. ( Vail v. Hamilton, 85 N. Y. 453; Pittsburg Carbon Co. v. McMillin, 119 id. 46.) However, it is not necessary at this time to determine that the receiver acted in bad faith and in collusion with parties in interest. *20It seems to be well settled that the appellate court has power to vacate or reverse an order made to confirm a sale. (Syracuse Savings Bank v. Syracuse, C. & N. Y. R. R. Co., 88 N. Y. 110.) Arid that an appeal is allowable by creditors who have an interest in the assets affected by the order confirming the sale;
The learned counsel for the respondent, in his points, states that prior to the execution of the mortgage “ a consent to mortgage was. properly executed and acknowledged by the owners of all but twenty of the fifteen hundred shares of the capital stock. The consent was. not filed, however, till after the property of said company was sold by its receiver in August, 1895. The mortgage was recorded immediately after its. execution and before the indebtedness of the company to appellants was incurred.” - We find in the appeal book no proof of this .statement. We, therefore, have before us an order which confirms a sale presumptively made subject to the mortgage, without-any evidence before the Special Term that the mortgage for $50,000 was valid. While it does-not clearly appear under what statute the corporation was organized, it is infer-' able from the appeal papers that it was organized under the statutes relating to manufacturing corporations. Therefore, in order to have the mortgage valid, it was essential that the stockholders 'owning two-thirds of the stock of the corporation should have given their, consent tó the mortgage and that such consent should be filed in the proper clerk’s office. ( Vail v. Hamilton, 85 N. Y. 456;. Rochester Savings Bank v. Aver ell, 96 id. 467; Martin v. N. F. P. Mfg. Co., 122 id. 165. See Rochester Savings Bank v. Averell, 26 Hun, 643.) Manifestly the object of the Legislature in requiring such an assent was the protection of stockholders against improvident, collusive and unwise acts of trustees in incumbering the corporate property. (Greenpoint Sugar Co. v. Whitin, 69 N. Y. 333.) Although it has been intimated in Paulding v. Chrome S. Co. (94 N. Y. 334) that none but stockholders can complain that the statutory consent was not given, yet in the proceedings now brought in review it appears, the creditors .‘appeared in opposition to the motion to confirm* and before their objection to the confirmation was overruled it was incumbent upon the receiver, who petitioned for confirmation, to furnish evidence that the mortgage lien, was valid, as it manifestly would affect the bidders at the sale. While the order in some sense *21was addressed to the discretion of the court'( White v. Coulter, 1 Hun, 357; Kellogg v. Howell, 62 Barb. 280), we think upon the papers presented in the appeal book the learned Special Term judge fell into an error in confirming the sale, and that the order made at Special Term' should be reversed, without prejudice, however, to a new application, if the petitioners shall be so advised upon additional proofs.
All concurred, except Ward, J., not sitting.
Order reversed. with ten dollars costs and disbursements, payable Out of the fund, without prejudice to a new application.