In re Hassam Paving Co.

[1,2] The order of the Special Term denying the application to vacate the order to show cause why the corporation should not be dissolved should be affirmed. The petition upon which the dissolution proceedings were instituted was made by Alfred Thomas, who therein and in the schedule attached thereto alleged that he was the sole remaining director, of the corporation, and hence authorized to make the petition, that the corporation was insolvent, and that its stock was equally divided into not more than two independent ownerships. The appellant, Powers, rather than await the hearing provided by the order to show cause and then contest the proceedings upon the merits, has sought by motion to have the order vacated upon the ground that the above-stated allegations of the petition are false. Thereby he has assumed the burden of establishing such falsity, which I think he has not sustained, and hence that his motion was properly denied. As to the allegation that Thomas was the sole director, and that the stock was equally divided into-not more than two independent ownerships, it appears that in 1908 one-half of the capital stock, or 125 shares, was issued to the Hassam Paving Company of Massachusetts and since represented by Thomas, as the consideration for the grant to the Hassam Paving Company of New York of the New Jersey license, and that the remaining one-half of the capital stock was sold to Powers and Thompson, and that by mutual agreement one share of the stock owned by the Massachusetts corporation, and one share of the stock owned by Powers and Thompson, were placed in the name of James H. Caldwell as voting trustee, who was to act as an arbitrator and doubtless to vote upon the stock in case of any dispute over the management or control of the corporation, the beneficial ownership of the stock apparently remaining in the original owners. In January, 1911, Thomas, Powers, and Thompson were duly elected directors of the corporation, since which time no election has been had. Neither the certificate of incorporation nor the by-laws contain any provision that a director need not be a stockholder.

[3] It appears that Thompson made loans from Powers, pledging his interest in stock in the Paving Company as collateral. These loans were not paid, and Powers brought an action for the foreclosure of the pledge in which in September, 1911, a decree was entered, and on October 2, 1911, said stock, including the interest of both Powers and Thompson therein was sold at public auction and was bid off by one Gleason. Whether the sale at auction included the beneficial interest of Powers and Thompson in their one share of stock in the hands of Caldwell as voting trustee does not appear. If it did, then both Powers and Thompson ceased to be stockholders and necessarily to be directors, and Thomas became the sole

[4] Powers’ title to the office of director cannot be predicated upon the alleged purchase of the stock by Gleason in the interest or as the representative of Powers. Powers himself makes no such claim in any of the papers submitted by him to the Special Term. Upon the other hand, he states in his affidavit of February 28, 1912:

“Said John H. Gleason did purchase said stock on the 2d day of Obto ber, 1911, * * * and deponent soon after said sale repurchased said stock from said John H. Gleason, and has ever since been and now is the owner and holder thereof.”

There is no allegation that Gleason did not buy the stock for himself, and the natural inference from the papers submitted upon the motion and from the transaction itself is that such was the case.

The denial of appellant’s motion without costs and with the clause in the order, “ordered that all questions raised upon this motion be and they hereby are reserved without prejudice to the moving party until application for the final order herein,” was most favorable to the appellant. As the learned justice at Special Term stated in his memorandum:

“This provision will enable the moving party, if he so desires, to raise at that time the question that the proceeding has not been instituted by a majority of the directors, and all other questions which he now raises.”

I have not entered into any discussion of the question of the alleged insolvency of the corporation. Under the allegations of the petition and of the answering affidavits, this is plainly an issue of fact. Concededly the only asset is the New Jersey license. This is claimed by respondent to be valueless, and by appellant to be worth fully the face amount of the capital stock of the corporation.

The order appealed from should be affirmed, with costs and disbursements of the appeal to respondent. All concur, except SMITH, P. J-, and HOUGHTON, J., who dissent.