5 N.Y.S. 136 | N.Y. Sup. Ct. | 1889
(after stating the facts.) The attorney general instituted this action for the purpose of procuring, by the judgment of this court, a dissolution of the defendant corporation. The complaint alleges as grounds for the judgment demanded that the company did, in June, 1882, sell and dispose -of all its land and real estate, and has since that time ceased to exercise its -corporate privileges, and suspended its ordinary and lawful business. It is not alleged in the complaint that the corporation was insolvent, nor is it so -determined by the 'judgment. The facts averred, if true, worked a forfeiture of the defendant’s franchise, and the state had a right to'demand its surrender. The attorney general could not prosecute an action or institute other proceedings for the purpose of extinguishing the corporate life of the ■defendant" without the sanction and authority of the legislature. Such authorization was given him by the provisions of article 3, tit. 2, c. 15, Code Civil Proc. By section 1785, an action to procure the dissolution of a corporation and a forfeiture of its corporate rights, privileges," and franchises may ■be maintained whenever it has suspended its ordinary and lawful business for at least one year. The attorney general proceeds upon this one ground alone. The defendant appeared in the action, and by its answer pleaded in bar of a further prosecution of this action the pendency of other proceedings instituted prior to the commencement of this action by the directors of the corporation for the purpose of procuring a dissolution of the corporation as provided in title 11, art. 4, c. 17, Code Civil Proc. For the purposes of this appeal the answer will be construed as containing the following averments: That prior to the commencement of this action the board of directors presented a petition to this court at special term, in the proper county, praying for a dissolution of the defendant corporation, and for the appointment of a receiver of its property, and that the said company should be dissolved, setting forth in such petition the reasons why. the directors deemed it beneficial to the interests of the stockholders that the said corporation should be dissolved, and that the facts alleged made a case for a dissolution within the provisions of section 2419; that the form of the petition was in full compli.ance with the statute on that subject and the rules and practice of the court; and that there was attached to such petition, which was made a part thereof, .the schedule provided by section 2421. The petition was duly verified, and
Although the proceedings instituted by the directors were regular up to the-time of the presentation of the petition to the court, which was prior in point of time to the commencement of this action, they do not constitute a bar to the prosecution of the same by the attorney general in the name of the people. The facts alleged in the plaintiff’s complaint are not the same as those set forth in the. directors’ petition as grounds for the dissolution of the corporation, and the aims and purposes of the action are in some respects different from those which might be accomplished in the proceedings instituted by the board of directors. The people prosecute their action because of the default of the corporation to perform and accomplish the end and object for which it was created. It is a tacit condition of a grant of a corporation that, it shall accomplish the purposes for which it was created. Proceedings for the voluntary dissolution of a corporation may be instituted by the board off directors on the ground of its insolvency. Section 2419. The powers of the-court in an action prosecuted by the people are greater than those conferred upon the court in proceedings founded on the petition of the board of directors. In the former the court has the power, upon proof of the facts authorizing the action to be maintained, to grant an injunction order restraining the corporation and its trustees from collecting or receiving any debt or demand, or from paying out or in any way transferring or delivering to any person any money, property, or effects of the corporation during the pendency of the action, without the express permission of the court. And where the-action is brought to procure the dissolution of the corporation, the'injunetion may also restrain it,- and its trustees, directors, and managers, from exercising any of its corporate rights, privileges, or franchises pending the action. The court may also at any stage of the proceedings appoint a temporary receiver, to act until final judgment is awarded. Sections 1787, 1788. In such action, where the stockholders, directors, trustees, or other officers off the corporation are made liable in any event or contingency for the payment of a debt, they may be made parties to the action, and their liability may be declared and enforced by the judgment in the action. Sections 1791, 1792. In. voluntary proceedings no receiver of the property and effects of the corporation can be appointed until the final order is granted decreeing its dissolution, nor is any provision made in the statute restraining the officers of the corporation from exercising many of their ordinary functions and powers, prior to making the final order of dissolution. We think it obvious that it was not intended by the legislature that the voluntary proceedings for the dissolution of the corporation should preclude the péople, by the attorney general, from commencing an action to procure a dissolution of a corporation for any of the grounds stated in section 1785. As a general rule a cause of forfeiture cannot be taken advantage of and enforced against a corporation except by the government creating the corporation, which alone can institute such a proceeding, as it may waive a broken condition, express or implied, in the act of incorporation. The sole ground for demanding a dissolution of the corporation in this action is non-user. For that reason it may be dissolved.
We think it also appears by the defendant’s answer that at the time this action was commenced the court had not acquired complete jurisdiction over the proceedings sought to be instituted by the board of directors, and for that reason the answer was properly held to be frivolous. On presentation of the petition the statute directs that the court may make an order requiring all persons interested in the corporation to show cause before it, or before a referee designated in the order, at a time and place to be therein specified, why the corporation should not be dissolved. Section 2423. The answer sets forth an order which was granted on the presentation of the petition, but it does not contain a provision requiring the parties interested to show cause why the corporation should not be dissolved, but the provision inserted is that they should show cause why the prayer of the petition should not be granted. The order, as granted, is to be published, and a copy served on the creditors and other parties. There is no provision that a copy of the petition shall be served therewith. By a perusal of the order neither the creditors nor the stockholders would be informed that a dissolution of the corporation was demanded or contemplated by the proceedings. In Re Manganese Co., 29 Hun, 430, the order was in the same form as the one granted in a voluntary proceeding, and it was there held that such an order failed to comply with-the statute, and for that reason the proceedings were not legally commenced; that the order was in the nature of a process for bringing persons interested before the court; and, unless its provisions were in strict compliance with the statute, it was void.
We also think that the court failed to acquire complete jurisdiction over the subject-matter, and that the order was void for the reason that the requirements of section 8, c. 378, Laws 1883, were not observed. The act is entitled “An act in relation to receivers of corporations.” The eighth section requires that a copy of all motions and all motion papers, and a copy of any other application to the court, together with a copy of the order or judgment to be proposed thereon to the court, in every action for the dissolution of a corporation, shall in all eases be served on the attorney general, in the same manner as provided by law for the service of papers on attorneys who have appeared in actions, whether the application be ex parte or upon notice; and any order or judgment granted in any such action or proceeding without service of the papers on the attorney general shall be void. It is plain that this requirement applies to proceedings for the voluntary dissolution of corporations, and the purpose of the statute is to require notice to be given to the attorney general of the time and place when the petition will be presented to the court, that he may be present and be heard upon the initiatory application as well as all the other proceedings to be had in the matter; and, unless served, such notice is waived, and the court has no jurisdiction to entertain the proceeding, and, as the statute has declared, the order is void. For these reasons we think the answer upon its face appeared to be frivolous, and was properly stricken out, and judgment awarded in the plaintiff’s favor for the relief demanded. The judgment and order are both affirmed, with costs. All concur.