103 N.Y.S. 1095 | N.Y. Sup. Ct. | 1907
This action was brought to recover damages sustained by the plaintiff in the purchase by him of stock of the American Grass Twine Company, which purchase was induced by certain false representations alleged to have been made by the defendants. An order made for the examination before trial of two of the defendants, former directors of the company, is now sought to be vacated on many grounds. The alleged false representations were: 1. That the entire capital stock of $15,000,000 was issued as fully paid, when in reality it was issued for property worth less than $250,000. 2. The announcement that four quarterly dividends during the year 1902 were paid out of profits, when as a fact they were paid out of capital. 3. Issuing to stockholders and causing to be published statements to the effect that the company had earned and was’ earning net profits exceeding the amount of those dividends. 4. Inflating on the books of the company the valuation of its plants and assets for the purpose of' creating an apparent surplus. After detailing the facts required by section 872 of the Code, the plaintiff, in his affidavit, in compliance with Rule 82 of the General Rules of Practice, states that the examination is material and necessary in that he expects thereby to prove: (1) The fact that the defendants issued to themselves as fully paid the $15,000,000 of stock for property which they knew to be worth less than $250,000; (2) the discussions had at meetings of the board of directors in January, 1902, at which the valuation of the plants and other assets was increased so as to show the apparent surplus ; (3) the proceedings and discussions which led to the declaration of the four quarterly dividends; (4) the statements made under the direction of the defendants to the Stock Exchange in order to obtain the listing of the stock; and (5) facts affecting the value of the stock within the knowledge of the defendants when they declared the dividends. The contention first raised as - a ground for vacating the order, that the defendants are residents of this county, are amenable to service of process and intend to be present at the trial, is untenable. The right given by the Code is absolute and may be exercised at any time before or during
Motions denied, with ten dollars costs to plaintiff on each motion.