200 A.D. 503 | N.Y. App. Div. | 1922
This action is brought by a creditor for judgment against certain persons who were directors of a corporation before voluntary dissolution, and after voluntary dissolution were liquidators under the statute. The plaintiff was the lessor of certain premises to the Waubun Company, the corporation in question, of which the defendants in this action were the directors and later trustees in dissolution; the lease which created the liability was made on August 19, 1907, for the term of ten years, begining on May 1, 1908; and until October 1, 1915, the Waubun Company and the trustees in dissolution regularly paid the rent for said premises, notwithstanding the dissolution of said Waubun Company under section 221 of the General Corporation Law on July 27, 1910. In August, 1917, petitioner recovered a judgment in this State against the Waubun Company for rent due it at that time from October 1,1915, on which date default was made, until April 3,1917, and, as damages, the amount of the stipulated rent from the 3d day of April, 1917, the date on which summary proceedings to dispossess were instituted, until the date of commencement of the action. This judgment was for $43,515.66. The amount of rent paid after dissolution and tup to October 1, 1915, was $109,374.94. Execution upon the judgment of August, 1917, was returned unsatisfied. The
The first question that arises is as to the right of the plaintiff to bring this action. The action was dismissed by the trial court on the ground that the plaintiff was not such a creditor as entitled it to question the acts of the directors of the corporation, or of the liquidators. Section 221 of the General Corporation Law, providing for the voluntary dissolution and liquidation of stock corporations other than moneyed or railroad corporations, prescribes in subdivision 3 that: “ Said corporation shall nevertheless continue in existence for the purpose of paying, satisfying and discharging any existing debts or obligations, collecting and distributing its assets and doing all other acts required in order to adjust and wind up its business and affairs, and may sue and be sued for the purpose of enforcing such debts or obligations, until its business and affairs are fully adjusted and wound up.” Under subdivision 4 it is provided: “After paying or adequately providing for the debts and obligations of the corporation the directors may, with the written consent of the holders of two-thirds in amount of the capital stock, sell the remaining assets or any part thereof to a corporation organized under the laws of this or any other State, and engaged in a business of the same general character,” etc.
In People v. Metropolitan Surety Co. (205 N. Y. 135) Judge Vann wrote an opinion as to the winding up of a surety company under the statute. In that case there was a continued liability which accrued after the dissolution of the corporation for insolvency, but before distribution. It was held that the distribution of actual assets must be made to accrued debts at the time of the petition for insolvency. In that case there are cited several bankruptcy decisions under the United States statutes providing for the payment by the bankrupt of all debts and liabilities. The fixing of the date of the presentation of the petition for dissolution as of the time when the accrued debts are to be ascertained, which are to be paid from the assets, was effected as a matter of public necessity, because it was necessary that the assets be promptly distributed, and if the assets must be held until after the determination of all debts and liabilities which had not accrued, the delay in the distribution of the assets of the insolvent corporation would be indefinitely prolonged. The bankruptcy cases referred to in that opinion hold that a lessor of premises under a contract of lease, where the rent had not become due and where the lessor had
Upon the accounting several questions will arise which have been discussed and practically determined by the Special Term, upon which it is proper that we should express an opinion for the guidance of the Special Term upon a new accounting which must be ordered. First, the plaintiff seeks to- question the distribution of the dividend which was declared, as it is claimed by the plaintiff, from capital and not from profits of the corporation. This dividend was declared by the directors before dissolution, on April 21, 1910. At that time, however, this lease was in existence, so that all liabilities upon the lease, whether absolute or contingent, existed.
Again, one Miss Lina Ettlinger let the corporation have some $8,000. She took a receipt from the corporation, saying that this money was a loan. She also took $8,000 of the stock of the corporation, which was mentioned upon the receipt as being collateral to this loan. Thereafter, just before the dissolution, they paid back to Miss Ettlinger the $8,000 and took back the stock. The Special Term has found that this was in fact a loan and was properly paid by the directors. It is claimed that as to creditors this could not be regarded as a loan, because of a report of the corporation that there was an amount of stock outstanding, which amount included this $8,000 of stock, which had been issued as collateral to this loan. They had a right to pay this loan if it was actually a loan, and I am not able to find in the mere act of the publication of this report sufficient to estop a corporation as against this creditor from claiming that it was a loan.
This corporation was engaged in the retail liquor business. They also held leases upon ten different cafes and restaurants in the city, one of which was upon the premises which the plaintiff had leased. Five of these cafes were run by two of the directors and liquidators, Gerken and O’Donnell. It is claimed that these two directors were not authorized to run these cafes for their private benefit, which were held by lease by the corporation, but must account to the corporation and to the plaintiff as its only creditor for the profit that they made. The circumstances as to these five cafes differ somewhat. In one of them, for instance, the corporation controlled by Gerken and O’Donnell made default in the payment of its lease, and a new lease was afterwards taken individually to Gerken or O’Donnell. In another it is claimed that they refused to renew a lease, which had expired, to the Waubun Company, and that Gerken took it individually in his own name; and other circumstances similar or somewhat similar exist in regard to the other three leases. Just what those facts are is not very clearly brought out, and this matter will have to be examined upon the accounting under the rule that the court will look jealously at the transactions between a corporation and its own officers, especially where it involves the transfer of leases either directly or indirectly; and if it holds that the officers caused such transfers to be made as against the interests of the corporation for private gain, then those officers will be held to have acted as trustees for the corporation and
Finally there was a payment of $14,000 by the liquidators to settle claims amounting to about $350,000 under other leases held by the corporation. This payment was of a small sum to release a large liability. If the liquidators had made application to the court, the court clearly, in my judgment, would have approved of the settlements, and I do not think that this plaintiff has the right to make complaint here of these settlements, in view of the fact that there were other assets in the hands of the liquidators which might be applied to an extent to the payment of remaining claims. The case of City of New York v. N. Y. & S. B. Ferry & S. T. Co. (231 N. Y. 18) holds no different rule.
The judgment should, therefore, be reversed and the matter remitted to the Special Term for an accounting in accordance with the rules of law here declared.
Clarke, P. J., Laughlin and Merrell, JJ., concur; Greenbatjm, J., concurs in result.
Judgment reversed and the matter remitted to the Special Term for an accounting in accordance with opinion.