207 A.D. 573 | N.Y. App. Div. | 1923
The action is brought by the plaintiff, a member of the defendant association, to restrain the sale of its real property to a corporation to be formed, on the ground of illegality.
The answer in substance, while admitting the defendant’s purpose to sell its real property, denies the illegality thereof. The facts are undisputed.
The defendant is a membership corporation and was organized in 1899 to provide for the welfare of its members and of property
In 1922 the board of directors of defendant recommended to the association a plan to sell to a corporation to be formed, with a capital of $175,000 consisting of 175,000 shares of $1 each par value, all its real estate, assessed for $151,250, except its rights and easements in the streets and sewers, for $149,380, to be paid for by stock in the new corporation amounting to that sum in par value, the unsold stock to be disposed of by the new corporation to pay taxes and other expenses. The defendant was then to distribute the stock received by it for the real estate sold to the new corporation, amongst its members in the ratio of thirty-five $1 shares to every $1,000 in real estate owned by a member, according to the 1922 assessment. This plan was submitted to the members of the defendant at a meeting on August 1, 1922, and was adopted by a vote of 6,643 in favor and 2,604 opposed.
The learned trial court in its decision found, among other things, that the proposed transfer by the defendant of the real estate in question would strip it of aU its property; that member
It is claimed by the appellant that the proposed action of the defendant is a valid exercise of its corporate powers; that it has the right to make the transfer with the approval of the court, take the stock of the new corporation and distribute it among its members. It is also urged in substance that the application by the defendant to the court for leave to make the sale or transfer in question cannot or at least ought not to be enjoined, because the illegality, ' justice and wisdom of the sale may be determined in the proceeding taken to obtain the court’s approval. The latter contention in my opinion has no merit. I think the plaintiff clearly has the right to invoke the aid of a court of equity to restrain an attempted illegal act on the part of the defendant. She is not obliged to await the application to the court to approve the sale and intervene in that proceeding. Such approval might be and usually is obtained without notice (Gen. Corp. Law, § 72), and indeed the sale and transfer might be c.onsummated without previous approval by the court and thereafter application be made to confirm the same. (Memb. Corp. Law, § 13, as amd. by Laws of 1915, chap. 154.) Manifestly, the remedy afforded to plaintiff by such procedure is inadequate.
Respondent urges that the proposed plan is not a sale within the meaning of the statute, but a mere attempt to divide the property of the defendant among its members. Whether or not it is, strictly speaking, a sale, does not seem to me of any importance. Assuming it to be a sale, as contended by appellant, it is clearly a sale of practically all of defendant’s property. In this property every member of the corporation has valuable rights and interests
Again, this proposed sale divests the defendant of all its property and brings nothing in return to the defendant itself. The distribution among its members of the stock of the new corporation gives nothing to the defendant. No benefit or advantage, pecuniary or otherwise, results to the defendant. On the contrary, it divests itself of all its property now being managed and controlled in the interest of all its. members for its corporate purposes, entirely without consideration. The distribution of stock in the new corporation among defendant’s members may be advantageous to them; it is of no advantage or value to the defendant as a membership corporation. It receives nothing from the proposed grantee which can be applied to its corporate purposes. Clearly, then, its application to the court to make this proposed sale or transfer could not show, nor could the court properly find, that the interests of the defendant would be promoted thereby. This the statute clearly requires. (Gen. Corp. Law, §§ 71, 73.) In my opinion, therefore, the learned trial court was right in directing judgment in plaintiff’s favor, restraining the execution of this plan.
The judgment should be affirmed, with costs.
Present — Kelly, P. J., Rich, Kelby, Young and Kapper, JJ.
Judgment unanimously affirmed, with costs.