7 Misc. 2d 291 | N.Y. Sup. Ct. | 1957
This is a proceeding to permit petitioner to inspect and copy the stock book of respondent corporation and to enjoin the holding of any stockholders’ meeting
It is also averred that a demand made upon the corporation for the desired inspection has been ignored. In addition to these allegations, each petition sets forth in some detail the reasons why the inspection is sought. Petitioner alleges, for example, that according to newspaper articles an asset of the corporation, worth more than $14,000,000, and the corporation’s “ major, if not most important asset ”, has been transferred to another company for 700,000 shares of the latter’s stock, and that this was done without notice to petitioner or other stockholders.
Petitioner also avers that the corporation increased its outstanding common stock from 2,104,764 shares to 2,804,764 shares by issuing 700,000 shares to a company known as County Equities, Inc., about which petitoner has been able to learn very little. The publicity which has leaked out has resulted in a 50% drop in the market price of respondent corporation’s stock. Efforts to obtain information from the corporation have proved unsuccessful.
Petitioner claims that he has accordingly brought the discovery and inspection proceedings for the protection of his substantial investment in the corporation. He states that “ the purpose of the inspection is to obtain for discussion with other stockholders information relating to transactions which have been carried on by the management and of considering with the stockholders what measure should be taken for the protection of the stockholders and what steps should be taken at the next
Instead of submitting the answer and answering affidavits required by section 1291 of the Civil Practice Act, respondent corporation has made a preliminary motion (1) to strike out each petition on the ground that it does not contain a plain and concise statement of the material facts or, in the alternative, to dismiss so much of each petition as seeks to enjoin a stockholders’ meeting. In addition, respondent corporation seeks, in-the alternative, to strike out most of the allegations of the petition in the instant proceeding as ‘ ‘ redundant, irrelevant, scandalous and immaterial ’ ’.
If the only relief sought in each proceeding were an inspection of the corporate books and records, it might perhaps be that many of the allegations of each petition would be subject to criticism as unnecessary and evidentiary as well as premature, prior to any attack upon petitioner’s good faith in respondents’ answering papers. It is unnecessary, however, to consider this question in view of the fact that the allegations of each petition are material and necessary — in connection with the prayer of each petition for a stay of any meeting of stockholders until 30 days after the completion of the inspection. In order to justify the granting of this drastic relief, petitioner is obliged to show, as he has done, that there is reasonable basis for suspecting or believing that the present management has been engaged in questionable transactions which might be extremely injurious to its stockholders.
The contention of respondent corporation that injunctive relief may not be granted in a proceeding under article 78 of the Civil Practice Act is sufficiently answered by referring to the recent opinion of the Appellate Division of this department in Matter of Ohrbach v. Kirkeby, (3 A D 2d 269) decided March 12, 1957, where Mr. Justice Breitel, writing for the court, said (p. 272): “ Viewing the proceeding as one brought under article 78, there is statutory power, under section 1299, to grant a stay, pending the final order of the court. (Cf. Matter of Dietz, 138 App. Div. 283, 286.) ” The court added (p. 273): “ From still another aspect, there is authority for the view, that, generally, in ordering the maintenance of the status quo ante pending its determination, a court, is exercising an inherent power, not dependent upon statutory provisions governing the issuance of injunction pendente lite [citing cases]”. In that case, in a proceeding under section 25 of the General Corporation Law, a
The applications addressed to each petition are denied, with leave to answer within 10 days from the service of a copy of each order to be entered with notice of entry. The prayer of each petition for a stay is granted to the extent of staying the holding of a stockholders’ meeting pending the further order of the court to be made after the submission of respondents’ answering papers. The prayer of the petition for an inspection will be held in abeyance pending the submission of respondents’ answering papers.
Settle order.