47 N.Y.S. 412 | N.Y. App. Div. | 1897
The plaintiff brought this action as a trustee and the vice-president of the Mutual Brewing Company to enforce the remedies for the mismanagement of a corporation, which are provided for by sections 1781 and 178,2 of the Code of Civil Procedure. (See Gildersleeve v. Lester, 68 Hun, 532 ; Skinner v. Smith, 134 N. Y. 240.) The only ground on which his right to sue is questioned is that he had ceased to be á trustee and officer at the time the. action was commenced; but we think the court below properly decided against the appellants on this point. There was no doubt that he had been lawfully chosen trustee and vice-president; and the proceedings of the other trustees, whereby they assumed to' declare his office vacant, were, without warrant under the by-laws of the corporation, and were ineffectual for the purpose. He became a trustee and the vice-president of the corporation on February 10,1892, at the only meeting of the trustees which he ever attended, and was re-elected to both offices On January 13, 1893. At the request of the appellants the learned trial judge has found that the plaintiff in no ■ manner signified' his acceptance of such election as director or vice-president of the said defendant company for the year 1893, and never ■attended any of tie meetings of the said company during that year. On the 13th day of April, 1893, at an adjourned meeting of the trustees, a resolution was passed declaring vacant the office of trustee and vice-president held by the plaintiff. While the by-laws of the Mutual Brewing Company provided for the removal of a trustee, on due cause shown, by a majority vote of all the other trustees, this was authorized only when a written notice of such proposed removal had been given, and there had been no notice of an intention to remove the plaintiff. The appellants insist that the trustees did not attempt or assume to remove Mr. Halpin, but merely declared his office vacant, which was a very different thing, and a thing which they contend that the trustees had a right to do. The vpry authority which they cite on this point, how
The litigation relates chiefly to the alleged mismanagement of the business and affairs of the Mutual Brewing Company by three of its directors, Matthew Coleman, Michael T. Coleman and Frederick Eder. Matthew Coleman, on account of his misappropriation and misapplication of moneys of the corporation, is directed by the judgment to pay $56,986.56 to the receiver of the Mutual Brewing Company, and by reason of their action in permitting such misappropriation and misapplication on the part of Matthew Coleman, his fellow trustees, Michael T. Coleman and Frederick Eder, have been adjudged to pay to the receiver- the sum of $23,949.27 each. The judgment also sets aside a chattel and real estate mortgage, known as the Dobbler mortgage, to the extent of $27,000, which would have been payable to' Michael T. Coleman, as the assignee thereof, if its validity had been wholly maintained. The decree furthermore vacates two judgments obtained by Denis Coleman against the Mutual Brewing Company upon notes for $19,300 and $6,000 respectively, and adjudges the notes to be void as well as an agreement under which the larger note was given.
The record is a long one, and presents a case so complicated in its facts and figures that the reargument which we felt obliged to order was essential to a satisfactory disposition of the appeal, especially as we have not had the benefit of an opinion at Special Term, which would have been peculiarly valuable and helpful in a litigation of this character.
. In behalf of the appellant Michael T. Coleman, it is said the evidence shows that all the acts committed by him were done with the consent and acquiescence or subsequent ratification of all the stock
The proof is ample to support .the conclusion, of the learned trial judge that Matthew Qoleman had unlawfully acquired property of the Mutual Brewing ¡Company to the amount of $56,986.56. It would follow that the judgment was correct in requiring him to pay
There is another item of credit to which he claims to be entitled, in respect to which the facts are not so clear. This is a charge of $10,800, included in the money judgment against him, found by the court to be the amount of certain fictitious notes (». e., notes signed by irresponsible persons who owed the brewing company nothing), indorsed by Matthew Coleman and discounted by the West Side Bank, upon which the bank has since recovered judgments against the Mutual Brewing Company. In the brief for the appellants submitted upon the reargument, it is insisted that the corporation received full value for this paper, which' was regularly discounted, and that the money went to pay other notes upon which the Mutual Brewing Company was liable, so that its indebtedness to the bank was not increased by. the transaction. By procuring the bank to discount the fictitious notes, as they are called, the brewing company simply obtained a loan which it became obligated to pay, and Matthew Coleman, • who conducted the transaction, inflicted no injury upon the brewing company, provided he applied the proceeds of that loan to the payment of honest obligations of the corporation. What he did, as we understand the findings, was this: The brewing company had procured other notes of its customers to be discounted
There is no proof as to what was done with the balance of the proceeds of the fictitious notes over and above the $6,741.66, applied for the purpose of taking up the customers’ notes on discount in the' West Side Bank. We cannot assume that it was improperly used, in the absence of evidence to that effect. The only theory upon which it can be held -that the Mutual Brewing Company was damnified by the transaction, so far as it is disclosed by the record, is that the renewal notes transferred to Denis Coleman are obligations upon which the company remains liable by reason of having indorsed them over to the present holder as collateral security for a debt. But this liability is guarded against by the adjudication that Denis Coleman is not entitled to them as security or otherwise, and by the direction in the judgáient that they be delivered up. It seems to us, as to this branch of the case, that the Mutual Brewing Company is not shown to have suffered by what Matthew Coleman did with respect to the so-called fictitious notes, and that the money judgment against him is too large by the sum of $10,800, which they represent..
Deducting from $5:6,986.56 the two items of $40,000 and $10,800, which have been discussed, and we have $6,186.56 as the amount to which the money judgment against Matthew Coleman must, be reduced.
As has already been stated, the defendants Michael T. Coleman and Frederick Eder have been held liable for permitting Matthew Coleman to misapply and misappropriate the property of the Mutual
Both these judgments, however, must be still further reduced in proportion to the reduction of the money judgment against Matthew Coleman from $56,986.56 to $6,186.56; that is, to about one-ninth of the amount in each instance.
But we see no reason to doubt the .correctness of that part of the decree which declares the notes given to the defendant Eder were invalid. Whatever claim he may have had against the Mutual Brewing Company, the trial court was amply justified in holding that these notes were not enforcible against the corporation, in view of the manifest purpose for which they were given and the use to which they were put. It was the case of an officer of a corporation, either already insolvent or on the verge of insolvency, seeking to
The appeal of Denis Coleman remains to be considered.
On March 25, 1893, an agreement was made between Denis Coleman and Matthew;Coleman, as president of the Mutual Brewing Company, for the sale and transfer by the former to the corporation of certain hogsheads, trucks and harness for the sum of $19,300. The projrerty which the brewing company received under this contract was not reasonably worth more than $5,175. The trial court, upon sufficient evidence, lias adjudged the contract void, as constituting part of a fraudulent scheme by Matthew Coleman, Michael T. Coleman and Frederick Eder to appropriate the property of the company to their own use. It has also adjudged void the note given in pursuance of the contract, and has directed the cancellation of the judgment thereon. The point is' made that the validity of the agreement could not be denied upon the trial of this action, or, at all events, that the judgment goes too . far, inasmuch as the Mutual Brewing Company has retained a considerable part of the property, and has neither offered to restore it nor been directed to do so by the decree. The proper course in equity, in cases where the plaintiff seeks the rescission of a contract under which he has received property, is to offer in the complaint to restore it to the defendant; but such, an offer is not indispensable. The court, in its decree, may provide for. restitution as a condition of granting the desired relief. (See Kley v. Healy, 149 N. Y. 346, 352.) The decree herein should have directed the Mutual Brewing Company to return to Denis Coleman the hogsheads, harness and trucks received from him under the contract of March 25, 1893, or should have permitted Iris' note and the judgment thereon to stand for .$5,175, the maximum value of said property, as found by the trial court.
The judgment appealed from'should be modified in accordance with the views expressed in this opinion, and as so modified should be affirmed, without costs of the appeal.
All concurred.
Judgment modified jin accordance with the opinion of Bartlett,. J., and as so modified affirmed, without costs of the appeal to any party.