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and such action is in the interest or for the benefit of any director, and the corporation has by its connivance made default in such action, or consented to the validity of such claim or obligation, any member of the corporation may apply to the supreme court, upon affidavit, setting forth the facts, for a stay of proceedings in such action, and on proof of the facts in such further manner and upon such notice as the court may direct, it may stay such proceedings or set aside and vacate the same, or grant such other relief as may seem proper, and which will not injuriously affect an innocent party, who, without notice of such wrongdoing and for a valuable consideration, has acquired rights under such proceedings.
Former section 16 amended.
See section 4, chap. 151 of 1870, now repealed.
Stockholders may assert and maintain rights of company, when it is in no position to assert its rights, and such rights are suffered to remain unenforced. Barr v. N. Y. L. E. & W. R. R. Co., 125 N. Y., 263.
When one trustee may bring suit for accounting on behalf of the corporation. Recamier Mfg. Co. v. Seymour, 15 Daly, 245.
Action may be maintained, where proper case shall be disclosed, by stockholders, or others interested in property of corporation, to vindicate and sustain rights of company alone, against alleged misconduct of its directors. Rogers v. Phelps, 31 N. Y. St. Rep., 872.
But such action can not be maintained, where there is no diversion authorized, which will, in any manner, diminish or impair rights or interests of stockholders themselves in assets or property of company. Id.
Action against corporation to influence corporate action, can not be maintained. Thomas v. M. M. P. Union, 121 N. Y., 45.
Equity interferes only in case of irreparable injury or inadequate remedy at law. Id.
Action will not lie to declare certain by-laws void, and prevent enforcement. Id. Stockholder's action lies without previous application to officers to sue, where object is relief from their own misconduct. Mayers v. Scott, 20 N. Y. St. Rep., 35. So, such application is unnecessary, where action is to protect rights of individual shareholders suing, as distinguished from those of corporation. Id.
Mere creditor of stockholder and of corporation can not maintain action to avoid transfer by company. Berford v. New York I. Mine, 56 Super., 236.
Complaint held to state facts constituting cause of action against directors of corporation, for alienation or threatened alienation of corporate property. Phoenix Nat. Bk. v. Clev. Co., 34 N. Y. St. Rep., 498.
Complaint, in action by stockholders, held sufficient to entitle them to equitable relief against fraudulent conduct of officers of corporation. Meyers v. Scott, 20 N. Y. St. Rep., 35.
When action by creditor and shareholder against directors for misconduct, injunction pendente lite, proper. Hoyt v. Malone, 31 N. Y. St. Rep., 739.
Where necessity for injunction exists, courts of this state may enjoin corporation, formed under its laws, from proceeding in action pending in another state. Gibson v. A. L. & T. Co., 58 Hun, 443.
Facts held sufficient to justify continuing injunction to restrain collection of judgments against insolvent companies. Pierce v. Mayer, 36 N. Y. St. Rep., 829. Right of resident stockholder, to maintain action for injunction against foreign corporation. Ives v. Smith, 28 N. Y. St. Rep., 917.
When injunction pendente lite will be continued. Id.
Action may be maintained against receiver of corporation, for tort committed before his appointment. Decker v. Gardner, 33 N. Y. St. Rep., 541.
Summons cannot be served upon assistant treasurer of domestic corporation. Winslow v. Staten I. P. T. Co., 51 Hun, 298.
Person, who receives and handles all money received by foreign corporation in this state, is cashier within meaning of section 433 of Code. McCulloh v. P. N. W. Co., 38 N. Y. St. Rep., 406.
When resident agent of foreign corporation is "managing agent," for purpose of service of summons. Tuchband v. C. & A. R. R. Co., 24 N. Y. St. Rep., 236.
Term "managing agent," in section 432 of Code, defined. Tuchband v. C. & A. R. R. Co., 115 N. Y., 437.
Service of summons upon general superintendent of telephone company is good. Barrett v. Amer. T. & T. Co., 56 Hun, 430.
When service of summons on director of corporation sufficient. McElroy v. C. R Co., 25 N. Y. St. Rep., 834.
Person, on whom service is made, must be either officer or managing agent of corporation. Sturges v. C. J. Mfg. Co., 32 N. Y. St. Rep., 848; aff'd 33 id., 1028. Fact that he resigned on purpose to avoid does not prevent service.
Id. Where no legal resignation of, directors of business corporation has been made they remain such officers within the meaning of section 431 of Code. Carnaghan v. E. & P. O. Co., 32 N. Y. St. Rep., 1117.
Section 9, chap. 195 of 1846, does not authorize service upon director of defendant of summons of kind prescribed by Code. Quade v. N. Y., N. H. & H. R. R. Co., 39 N. Y. St. Rep., 157.
Authority of cashier or other officer of bank terminates at end of its corporate existence. Hayden v. Bank of Syracuse, 36 N. Y. St. Rep., 899.
After such event, service of summons, etc., upon former cashier does not constitute service upon corporation. Id.
Defunct bank can not be sued. Id.
Service of summons on former director, after he has sold his stock and new set of directors been selected, is nullity. Beardsley v. Johnson, 121 N. Y., 324.
Service of summous on attorney of corporation, whose appointment for such purpose never became operative to knowledge of plaintiff, will be set aside. Richardson v. W. H. Ins. Co., 29 N. Y. St. Rep., 820.
Individual name of superintendent of insurance need not be inserted in his appointment as attorney under chap. 346 of 1884. Lafflin v. T. Ins. Co., 31 N. Y. St. Rep., 900; rev'g 30 id., 1021.
Phrase "or his successor in office" may be added to his title. Id.
Appointment need not be authenticated in any particular manner, or so as to entitle it to be read in evidence. Id.
What proof necessary to support action by tax payer to restrain supervisor from paying highway commissioner's bills. Warrin v. Van Nostrand, 21 N. Y. St. Rep., 960.
Tax payer's action will be dismissed when brought actually in interest of private claimant and not for relief of tax payers. Kimball v. Hewitt, 15 Daly, 124. When tax payer's suit can be maintained to prevent signing of contract by municipal authorities. Armstrong v. Grant, 56 Hun, 226.
Action by tax payer to restrain city, under chap. 531 of 1881, can not be maintained, where bid was lowest and made in good faith. Boyle v. Grant, 36 N. Y. St. Rep., 207.
Untrue statement in bid not made with intent to deceive or mislead city authorities, and known before acceptance, furnishes no ground for judicial interference. Id.
Action by tax payer to restrain action of common council, within its power and discretion, can not be maintained, without charge of fraud, collusion, corruption or bad faith. Talcott v. Buffalo, 125 N. Y., 280.
That officer has not passed civil service examination is not ground for tax payer's suit. Peck v. Belknap, 55 Hun, 91.
Appreciable wrong or substantial injury must be shown. Id.
Lamp superintendent is not subordinate officer, etc., within meaning of civil service act. Id.
Ziegler v. Hoagland, 52 Hun, 385; Butts v. Wood, 37 N. Y., 317; Ogden v. Murray, 39 id., 202; Beveridge v. N. Y. E. R. R. Co., 112 id., 1, 28; Meyers v. Scott, 20 N. Y. St. Rep., 35; Stromeyer v. Combes, 18 id., 154; Allen v. Railroad Co., 49 How., 14; Smith v. Rathbun, 66 Barb., 402; Dinsmore v. Railroad Co., 46 How., 193; Greaves v. Gonge, 54 id., 272; Meyer v. Scott, 20 N. Y. St. Rep, 35; Smith v. Rathbun, 22 Hun, 150; Brinckerhoff v. Bostwick, 88 N. Y. 52; Currier v. Railroad Co., 35 Hun, 355; Barr v. Same, 96 N. Y., 444.
§ 29. Quorum of directors and powers of majority. The affairs of every co.poration shall be managed by its board of directors,
at least two of whom shall be residents of this state.
Unless otherwise provided by law a majority of the board of directors of a corporation at a meeting duly assembled shall be necessary to constitute a quorum for the transaction of business, and the act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. Subject to the by-laws, if any, adopted by the members of a corporation, the directors may make necessary by-laws of the corporation.
Former section 17 amended.
See section 6, title 3, chap. 18, part 1, R. S.; and section 10, chap. 611 of 1875, now repealed.
Where a statute authorizes a select body of men to make by-laws, rules and regulations, a majority of that body at least is necessary to constitute a quorum. Ex parte Wilcock, 7 Cow., 402. Words in such a statute, directing that a majority of those present at a regular meeting shall be competent to do business, can not be construed as authorizing a minority of such body to act. Id.
Where a member of a board of directors presents to such board a bill for extra compensation as secretary, he is disqualified from acting upon the auditing of such bill. Butts v. Wood, 37 Ñ. Y., 317. And if he must be included to constitute a quorum, the board so constituted is not qualified to act upon such bill so as to bind the corporation. Id.
Shareholder has legal right, at meeting, to vote upon measure, even though he has personal interest therein separate from other shareholders. Gamble v. Queens Co. W. Co., 123 N. Y., 91.
What conduct of majority necessary to warrant interference of court in favor of minority. Id.
§ 30. Directors as trustees in case of dissolution.-Upon the dissolution of any corporation, its directors, unless other persons shall be appointed by the legislature, or by some court of competent jurisdiction, shall be the trustees of its creditors, stockholders or members, and shall have full power to settle its affairs, collect and pay outstanding debts, and divide among the persons entitled thereto the money and other property remaining after payment of debts and necessary expenses.
Such trustees shall have authority to sue for and recover the debts and property of the corporation, by their name as such trustees, and shall jointly and severally be personally liable to its creditors, stockholders or members, to the extent of its property and effects that shall come into their hands.
Former sections 19 and 20 consolidated.
See section 9, title 3, chap. 18, part 1, R. S., now repealed.
See section 10, title 3, chap. 18, part 1, R. S., section 3, chap. 67 of 1811, and section 3, chap. 40 of 1848, now repealed
The provision now in force, declaring that, onth e dissolution of a corporation,. the directors, unless some other person shall be designated, shall be trustees of its creditors, stockholders or members, was originally copied from section 1, 1 R. L.,
This section does not in terms create a lien of any kind on the corporate property. Tinkham v. Borst. 31 Barb., 407. It recognizes very distinctly the right of creditors and stockholders to the assets, and constitutes the directors the trustees to take charge of them for the parties entitled. Id. The creditors of dissolved corporations have a lien on the assets for the payment of their debts. Id. Where
a fund exists in this state which our own citizens are entitled to have applied to the payment of their debts, the courts will detain and appropriate the fund, but will not disregard the rights of other parties. Id.
Upon the dissolution of a corporation, its remaining trustees become vested with the title of its property, and responsible to its creditors and stockholders for the value thereof. People v. O'Brien, 111 N. Y., 1; Dash v. Van Kleick, 7 Johns., 477. The trustees succeed to all the rights and privileges of directors and to the same means of defense. Kain v. Bloodgood, 7 Johns. Ch., 90, 128. All the property and rights of the corporation become vested in the directors then in office, unless the repealing act provides for the appointment of other persons than its officers as trustees. McLaren v. Pennington, 1 Paige, 102.
The directors or managers, upon the dissolution of a corporation, become trustees of its property, unless some other custodian is appointed, for the purpose of paying its debts and dividing its property among its stockholders. Heath v. Barmore, 50 N. Y., 305; Towar v. Hale, 46 Barb., 361.
The above section applies as well to the real estate as to the personal property of corporations. Id. The legal title vests in the body corporate during its life, and, upon its dissolution, in the trustees in office at the time, in trust for the creditors and stockholders. Central City Sav. Bk. v. Walker, 66 N. Y., 42S.
There is nothing in this section to restrict its provisions to personality. Owen v. Smith, 31 Barb., 641. The equity of the creditors and stockholders is the same in respect to all species of property. Id. Upon the dissolution of a corporation, the title to real property held by it does not revert to the original proprietors and grantors, or their heirs, but vests in the receiver of the corporation. Id. The property, real and personal, is to be administered by him for the benefit of creditors and stockholders. Id.
Upon the dissolution of a corporation, at common law, all its real estate unsold reverted back to the original grantor or his heirs; the debts to and from the corporation were extinguished, and all the personal estate of the corporation vested in the people. Huntley v. Beecher, 30 Barb., 580. But, in this state, these consequences are guarded against by statute. Id.
The rule at common law does not prevail here. Where lands are conveyed absolutely to a corporation having stockholders, no reversion or possibility of a reverter remains in the grantor. Heath v. Barmore, 50 N. Y., 302.
The charter of a dissolved corporation may be extended by a legislative act. Huntley v. Beecher, 30 Barb., 580. In such case, it retains its property, and remains liable upon its obligations. Id.
The provisions of this section apply to all corporations created or to be created. Towar v. Hale, 46 Barb., 361. They preclude the idea of land reverting to the original grantor, until at least all the debts owing by the corporation are paid. Id. This section expressly limits the liability of the directors as trustees, upon the dissolution of the corporation, to the extent of the property and effects that shall come into their hands. Hoffman v. Van Nostrand, 42 Barb., 174. They are not liable for the value of stock to one who had deposited it as collateral security with the corporation, which had been sold by it previous to its dissolution. Id.
Upon the dissolution of a corporation, the directors then in office become trustees to settle up its affairs, and suits must then be commenced in the names of such trustees. Lond. I. F. Co. v. Terbell, 48 N. Y., 427.
Where the charter of a corporation expires by its own limitation, while an action for a tort is pending against it, the court has power to continue the action against the statutory trustees under this section. Hepworth v. Union Ferry Co., 62 Hun, 257. The statute creditor embraces those persons whose claims are based upon torts. Id.
It is a general principle that a cause of forfeiture cannot be taken advantage of, or enforced, against a corporation collaterally, or incidentally, or in any other mode than by a direct proceeding for that purpose against the corporation, so that it may have an opportunity to answer. Towar . Hale, 46 Barb., 361.
Where the state seeks by action to destroy the life of a corporation, it must, it seems, show some grave misconduct, on the part of the latter, which has produced, or tends to produce, injury to the public. People v. North R. S. R. Co., 121 N. Y., 582. When such transgression affects the welfare of the people, they may by action summon the offending corporation to answer for the abuse of its franchise, and ask to have its charter forfeited, and itself dissolved. People v. North R. S. R. Co, 121 N. Y., 582.
Sufficient order to show cause, under section 2423 of Code, in proceedings for voluntary dissolution of corporation. Matter of Christian J. Co., 40 N. Y. St. Rep., 621.
If such order is defective for not complying with section 2424 of Code, it does not render appointment of receiver nullity. Id.
It must be taken advantage of by motion. Id.
It can be amended nunc pro tunc. Id.
Court may prevent any subsequent interference with its property under writ of replevin or attachment. Id.
After receiver files his bond, his title relates back to date of appointment. Id. Omission in petition for voluntary dissolution, which does not show lack of good faith nor fraudulent purpose, may be obviated by evidence. Matter of Santa E. S. M. Co., 21 N. Y. St. Rep., 89.
Order to show cause, in voluntary proceedings for dissolution of corporation, held, in this case, to be substantial compliance with section 2423 of Code. Matter of Christian J. Co., 39 N. Y. St. Rep., 379.
People can not maintain action, under sections 1781, 1782 of Code, to redress strictly private wrong. People v. Ballard, 56 Hun, 125.
Causes of action for sequestration of property of corporation, and to charge stockholders with individual liability, are properly united. Woodard v. Holland M. Co., 39 N. Y. St. Rep., 411.
Sufficiency of allegation of complaint as to non-payment of capital stock. Id. Que creditor may bring such action.
In such action it is not necessary to state in complaint facts upon which judgment against corporation was obtained. Id.
Order of dissolution, under section 2429 of Code, should be granted, where no benefit can result by continuing its existence. Matter of I. & G. Exchange, 15 Daly, 413.
When receiver may be appointed to enforce judgment against corporation. King v. Barnes, 51 Hun, 550.
Court may, under certain circumstances, authorize receiver to advance money to corporation, taking security therefor, to enable it to continue its business. Kalbfleisch v. Kalbfleisch, 37 N. Y. St. Rep., 183.
Court may authorize receiver to issue certificates and borrow money thereon, to pay necessary running expenses and for necessary rolling stock. Central T. Co. v. Tappen, 25 N. Y. St. Rep., 635.
Facts warranting exercise of court's discretion. Id.
Such certificates are paramount liens. Id.
Amount paid, under order subsequently reversed, can be recovered, or deducted, by receiver from subsequent dividend due claimant in excess of percentage payable to general creditors. People v. Remington & Sons; Whitfield v. Russell, 60 Hun, 42.
Receiver of corporation can not enforce agreement by president with creditor to mutually postpone enforcement of claims against it for indefinite period. Snow v. R. C. F. Co., 58 Hun, 134.
All directors, shareholders and creditors in corporation, have right to transfer to themselves patent rights held by corporation and substitute their notes therefor. Skinner v. Smith, 56 Hun, 437.
The business of ordinary trading or manufacturing corporation may be wound up whenever majority of its stockholders deem it expedient. Id.
Receiver of corporation will not be compelled to account, where it appears that no property of corporation has come into his hands. Lyons v. A. H. G. M. & M. Co., 38 N. Y. St. Rep., 892.
Application by receiver of dissolved corporation for warrant of arrest must be made on notice to Attorney-General. Matter of Vanamee, 29 N. Y. St. Rep., 198. What proof must be made for such purpose. Id.
Receiver of insolvent corporation, legally appointed, may institute proceedings to examine officer as to concealed assets. Matter of Stonebridge, 37 N. Y. St. Rep., 617.
Statement of what facts in affidavit sufficient to sustain warrant. Id.
Warrant against one having property of corporation must be applied for on notice to Attorney-General. Matter of Stonebridge (Sup. Ct. 1890), 32, 1070; 57 Hun,