Hoyt v. Malone — 31 N.Y. St. Rep. 739

Majority

p. 739

Ezra A. Hoyt, Resp’t, v. Bernard J. Malone et al., Impl’d, App’lts.

(Supreme Court, General Term, Second Department,

Filed May 12, 1890.)

Headnote

Corporations—Action against directors for misconduct—Injunction.

The complaint in an action against directors of a corporation alleged that plaintiff was a creditor and stockholder of the company; that the president had appropriated property of the company, and designs to remove all its property from the county where it did business; that he is insolvent; that the company has ceased to do business and its assets will not pay its debts. The answer specifically denied these charges and averred that plaintiff was not a creditor or stockholder; that the company and the president were solvent. Seld, that under such an irreconcilable issue an injunction pendente lite was proper.

p. 740

Appeal from an order continuing a temporary injunction restraining the Putnam Corset Company and its president and their agents from appropriating, removing or interfering with the assets, etc., of the company until the trial of the action.

Eugene Gr. Fremer, for app’lts; Frederic S. Farnum. for resp’t.

The plaintiff has a right to bring an action against the officers of a corporation to compel an accounting for official misconduct and the payment for property of the corporation which the officers have acquired or have transferred to others. Code, § 1781.

The plaintiff is a stockholder and creditor of the defendant Corset Company, and as such has a standing as plaintiff. Code, § 1782. The complaint sets forth a good cause of action under these sections. The Putnam Corset Company is a manufacturing company. The place of manufacture is in Putnam county. The defendants Bernard J. Malone and Joseph Malone are directors,in said company.

The plaintiff is a creditor and stockholder. The complaint states that Bernard J. Malone, who is also the president of the company, has in his possession property which belongs to the company which he has appropriated to his own use. That the president of the company shipped to New York property of the company and that the shipment was not entered on the books of the company, and the goods were taken possession of by the president after they arrived at New York. That the president took a portion of the machinery of the company and sent it to Brooklyn where he received it at his private place of business. That the president designs to remove all the property of the company from Putnam county. That the company has ceased to do business; its president is insolvent and he is appropriating the property of the company to his individual uses. That the entire assets of the company will not pay its debts. The answer contains a specific •denial of all the charges in the complaint It avers that plaintiff is neither stockholder or creditor and that the company is solvent and that the president is an honorable man perfectly solvent, and that the interest of the company would be best subserved by letting him manage the affairs of the company. There is a great mistake somewhere. The issue is wholly irreconcilable. Under such a state of facts it is best that the present condition remain until a trial shall develop the truth. Upon the issue as to the plaintiff being a stockholder the case does not return the contracts apparently annexed to the complaint whereby he avers that he became such stockholder.

The rights of the plaintiff are such as to make an injunction a proper remedy. If he. shall be adjudged to be a creditor he has the right to claim that the partnership property be applied to pay the debt and that the remainder, if any, after payment of debts be justly distributed.

Order affirmed, with costs and disbursements.

Pratt, J., concurs.