Maine Products Co. v. Alexander — 115 A.D. 112

Majority

p. 112

Maine Products Company, Respondent, v. Alexander Alexander, Appellant.

(No. 2.)

First Department,

October 19, 1906.

Headnote

' Injunction restraining sale of stock — stockholder not enjoined from voting thereon.

When a corporation sues a stockholder to rescind a sale of stock made to him because induced by fraud, the court may enjoin the defendant from assigning or transferring the stock pendente lite, but should not enjoin him from voting thereon or exercising other rights incident to ownership.

Appeal by the defendant^ Alexander Alexander, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 25th day of- May, 1906, as resettled by an order entered in said' clerk’s office on the 6th day of June, 1906.

p. 113

Edward A. Alexander, for the appellant.

Lewis H. Freedman, for the respondent.

The order appealed from enjoins the defendant during the pendency of the action “ from assigning, transferring, hypothecating or in any manner disposing of or voting upon the nine hundred shares of the common stock of the plaintiff now standing in his name on the books of the plaintiff, and from making any transfer thereof on the books of the plaintiff, or otherwise/except to the plaintiff, and from exercising any rights arising from or incident to the ownership by him of the said nine hundred shares. of the common stock of the plaintiff.”

I think the court below was justified in enjoining the defendant from transferring or disposing of the stock pending determination of the action, and to that extent the order appealed from should be affirmed. I cannot see, however, any justification for the provision which requires this defendant to abstain from voting upon, or from exercising any rights arising from or incident to the ownership by him of the said shares of stock. The action being brought to set aside the transfer of stock and to secure a retransfer of it to the plaintiff, the court was justified in restraining any act which would render a judgment for the plaintiff ineffectual. But to enjoin the defendant from exercising any act of ownership of the stock was not at all necessary for the protection of the plaintiff, as all that it could require was that the stock be retained in such position' that it could be delivered up if the court so directed. Upon the record the defendant is the owner of the stock, the plaintiff having transferred it to him in pursuance of a contract. The plaintiff claims that the contract was void, because induced by fraud; but this fraud is specifically denied by the defendant, and certainly until it is determined that the defendant was guilty of fraud, tlie.plaintiff was only entitled to such relief as will prevent the defendant from doing anything with the stock that would make the judgment ineffectual.

The order appealed from should, therefore, be modified by striking out the provision by which the defendant is restrained from

p. 114

voting on or exercising any rights arising from or incident to the ownership of the stock, and as so modified affirmed, without costs.

O’Brien, P. J., Houghton and Clarke, JJ., concurred.

Order ’modified as directed in. opinion, and as modified affirmed, without costs.