Pizh v. Butler — 70 N.Y. St. Rep. 501

Majority

p. 501

Joshua Samuel Pizh, Resp’t, v. Elliott L. Butler, Individual and as Treasurer and Member, etc., Impleaded, etc., App’lt.

(Supreme Court, General Term, First Department,

Filed November 15, 1895.)

Headnote

Corporations—Injunctions—Director. •

A temporary injunction will be granted and a receiver appointed, in an action to compel á director to account for his official acts, where the moving papers state facts showing that the plaintiff will be entitled to some portion at least of the relief demanded in the complaint, and*it is necessary to preserve the existing status in order to makethe judgment effectual.

Appeal from an order granting an injunction and appointing a receiver.

Louis V. Booraem, for app’lt; Lorenzo Tillo, for resp’t.

The plaintiff, who is one of the three directors and the president of the Hew York Fur Cutting Company, brought this action under and in pursuance of the provisions of subdivisions 1, 2, 5, and 6 of section 1781 of the Code; his authority to bring it being affirmed by section 1782 of the Code. Gildersleeve v. Lester, 68 Hun, 532 ; 52 St. Rep. 559 . The relief demanded in the complaint is: !

(1) That the defendant Elliott L. Butler, as treasurer and director of a corporation, be compelled to account for his official conduct in the mangement and disposition of the funds and property „of the corporation.

(2) That he be compelled to pay the corporation, or the holders of the notes signed by the manager, all the moneys which, in violation of his trust, the defendant Butler caused to be made payable by the corporation.

(3) That the alienation of the property of the corporation made by the defendant Butler by pledging the same for his own use and benefit be set aside, and that he be compelled to return it, and to pay all, damages by reason of such alienation.

(4) That he be restrained from collecting any part of the insurance moneys had by reason of the burning of the property of the

p. 502

corporation, or from paying out or parting with any of its property, securities, or assets of the corporation, or from in any way interfering with them for the purpose of paying to himself or to his firm, Belt, Butler & Co., the amounts claimed to be owing to them by the corporation.

(5) That a receiver be appointed.

The New York Fur Cutting Company is a domestic corporation, organized in May. 1894, succeeded to the business of a similar company having the same name, organized under the laws of New Jersey. Its three directors were the plaintiff, the defendant Butler, and Staats M. Sackett. The plaintiff was the president, Butler the treasurer, and Sackett the general manager. Of the capital stock of $100,000 plaintiff held 360 shares, Belt, Butler & Co. 370, the defendant 170, Sackett 70, and Thomas J. Hand 30. , The-treasurer Butler, was also a member of the firm of Belt, Butler & Co. On the reorganization of the company its capital stock was entirely invested in its plant, and in contemplation of the fact an agreement was entered into by which the firm of Belt, Butler 3c Co. undertook to furnish, by loan in account current, during two years succeeding the 19th of February, 1894, all the necessary moneys needed for the management of the defendant corporation, in an amount not less than $100,000. This agreement also provided that the defendant Butler should have the general supervision of the corporation. In, December, 1894, the plaintiff requested an account from Butler, together with an inventory of the assets of the6corporation and the stock on hand. In response to this request he made a statement, but it did not prove satisfactory to the plaintiff. During the following month the factory of the company burned, together with all of its contents; the insurance policies thereon aggregating $167^000. Prior thereto the defendant Butler negotiated certain notes which he had procured the manager of the factory of the corporation to sign. They were indorsed by the firm of Belt, Butler & Co., and discounted. He also pledged certain property consisting of furs of the value of about $45,000. No authority was given for this action by any vote or special sanction of the board of directors, and it appears from the affidavits of the plaintiff and his codirector Sackett that they were not informed of such facts until shortly prior to the commencement of this action. Butler also pledged the claims of the corporation to various creditors, under its policies of insurance, which covered its plant and contents, which were destroyed by fire; and these facts, it appears from the affidavits of the plaintiff and Sackett, were not made known to them until after the commencement of this action. Complaint is also made that Butler omitted to sell the furs so pledged, when he had opportunities to do so, at advantageous prices, although urged so to do by his codirectors, and that they were pledged and alienated as security for loans.

On the motion for an appointment of a receiver, the defendant Butler contended that what he did as treasurer was justified by the agreement entered into between himself, Sackett, and Belt, Butler & Co. If what has been done is correctly described in the affidavits presented on the part of the plaintiff, on this motion, we

p. 503

are not able to agree with the contention that every act is fully justified by its provisions. But in some important respects the affidavits are in conflict, and it is quite apparent from their reading that the result of a trial will be a harmonious and connected account of all the transactions, and unaffected by0 the shading which the interest of the parties seem to have given to the affidavits, on the one or both sides. Because of that fact it is not our purpose to give expression to any views which may possibly affect the disposition to be made of the case when it comes on for trial on the merits. But, if the facts be substantially as stated by the plaintiff and his có-director Sackett, is is apparent that the plaintiff will be entitled to some portion of the relief, at least, which he demands in the complaint. And to make the judgment effectual it is apparently •desirable, if not absolutely necessary, to preserve the present status, and to that end the granting of the injunction appears to have been a proper exercise of the discretion vested in the special term. We are also of the opinion that so much of the order as .appoints a temporary receiver should not be interfered with. The power of the court to make the appointment cannot be doubted, and under its direction he will doubtless so act as to protect- and preserve the interests of all the parties pending the final determination of the qtiestions involved by a proper judgment.

The order should be affirmed, with $10 costs and printing disbursements.

All concur.