Giles Dyeing Machine Co. v. Klauder-Weldon Dyeing Machine Co.

Headnote

Corporations — directors ■— action to compel directors to pay value of corporate property alleged to have been lost through their neglect or violation of duties.

Giles Dyeing Machine Co. v. Klauder-Weldon D. M. Co., 212 App. Div. 771 , affirmed.

Appeal from a judgment, entered May 25, 1925, upon an order of the Appellate Division of the Supreme Court in the third judicial department, reversing a judgment in favor of plaintiff entered upon a verdict and directing a dismissal of the complaint. The action was brought under sections 90 and 91 of the General Corporation Law to compel the directors of defendant corporation to pay the value of corporate property alleged to have been lost or wasted through neglect or violation of their duties. The gist of the plaintiff’s claim was that the individual directors of defendant corporation, while it was a solvent and going concern and able to pay all its indebtedness, transferred all its property and assets to a Pennsylvania corporation which they caused to be brought into existence and despoiled the corporation of its property and assets in violation of their duties; that they acquired for themselves and transferred to others the assets and property of defendant corporation and the proceeds of said sale and transfer and reserved nothing for the payment of the corporate creditors. The main defenses were, that

the transfer was made with the knowledge and consent of the plaintiff; that the individual directors had not acquired for themselves, distributed to others or lost or wasted the assets of the defendant corporation; that the Pennsylvania corporation was solvent and assumed the debts of the New York corporation as consideration for the transfer; that there was no conspiracy or fraud and that the transfer was made pursuant to section 16 of the Stock Corporation Law.

Judgment affirmed, with costs;