corporation; that commissions of $2,860 shown on the books to have been paid on a second sale of property were never authorized or paid and that this item covered another steal by the officers of the corporation; that the sum of $1,200 shown on the books have been paid to the Board of Directors as compensation for services was paid without authority; that a certain payment of $540, shown on the books to have been paid by the corporation to W. Prighozy for services rendered in connection with a sale was never really made and that no such services were rendered and that the money was received by the officers and directors and divided with said Prighozy; and that certain payments aggregating $900, shown by the books to have been made to one Seidman for legal services were improperly made and that the amounts so paid were not for services rendered to the corporation. All the material allegations set forth in the petition are controverted in the two answering affidavits verified respectively by all of the directors, and by the president of the company. The respondents allege among other things, that in December, 1904, the corporation purchased a plot of land consisting of thirty acres or more, situate in the county of Queens from Edwin Brown and Frank Lambert, for which it agreed to pay the sum of $53,826, part of said purchase price to be paid in bonds and mortgages and the balance in cash, said price being the actual value of the land; that shortly thereafter the company accepted an offer to sell said property for $60,000 and paid a commission of 5 per cent. or $3,000 to one J. W. Harcow who had negotiated said sale; that thereafter this contract of sale was canceled and the property was then sold to the New Windsor Realty Company for the sum of $68,200, and that the sum of $2,860 above referred to, was allowed and paid by the Mutual Alliance Realty and Trading Company as commissions on such sale; that the purchase of said lands, the sales to J. W. Harcow and the New Windsor Realty Company, and the several payments above referred to were either authorized and directed by the stockholders of the corporation or subsequently ratified, approved and confirmed by them. The answering affidavits further allege that the payments made to the board of directors as compensation for their services, to W. Prighozy, and to Seidman, referred to in the petition, were all made with the consent or like approval of the stockholders. The certificate of incorporation of the New Alliance Realty and Trading Company provides among other things, that the board of directors shall have no power to compensate for services any officer and shall not allow salaries to any officers unless the same are allowed and fixed by the vote and consent of the owners of at least 75 per cent. of the outstanding capital of the company; and that the directors shall have no power to purchase or sell any real or personal property unless the contract for such purchase or sale shall have been submitted to and approved by the owners of at least 60 per cent. of the outstanding capital stock of the corporation. The minute books were not produced at the hearing, the secretary stating that the same had been stolen from him on or about March 17, 1906, but there have been filed with the Attorney-General the affidavits of 78 stockholders claiming to represent in the aggregate 233 shares of stock. Each of these 78 affidavits is to the effect that the deponent has read the affidavit made by the directors and that the same is true of his own knowledge in all respects; that he was present and voted on all the propositions therein stated and in the way as stated in such affidavit, and that the payment of the items mentioned in said affidavit and in the report annexed to the petition had been authorized by a vote taken by the stockholders of the Mutual Alliance Realty and Trading Company. It appears to be conceded by all parties that after the sale to the New Windsor Realty Company an auditing committee was appointed by the stockholders to go over the books and accounts of the corporation and that such committee, together with an expert accountant, made a careful investigation of said books and accounts up to August 1, 1905, and thereafter submitted their report to a meeting of the stockholders of the corporation. Said report, which was printed and a copy of which is annexed to the petition and made a part thereof, was approved by the stockholders at such meeting and the disbursements allowed in each particular. The petitioner submitted no testimony or documentary evidence at the hearing before me in support of the allegations and charges contained in his petition; many of these are very general in form and mere conclusions, and others are only statements of the petitioner's conviction and belief. Petitioner also filed the affidavits of himself and four other persons in reply to the answering affidavits, denying that the transactions in question were authorized by vote of the stockholders. Several of these affidavits are made by persons who sold their shares prior to the filing of this application and are no longer stockholders of the corporation. The uncontradicted statements show that at a meeting of the directors held March 8th, 1906, a resolution was adopted recommending that the corporation be forthwith dissolved, and that at a subsequent meeting of the stockholders held March 22, 1906, the holders of 220 shares out of 294 outstanding shares, gave their consent to such dissolution. The papers required by section 57 of the Stock Corporation Law were filed in the office of the Secretary of State on May 7, 1906. It will be seen, therefore, that the petition in this matter was not filed with the Attorney-General until the day before the stockholders meeting, to wit: on March 21, 1906. The matter was not finally submitted to the AttorneyGeneral until March 30, 1906, or eight days after more than twothirds of the stockholders had voted and consented that the corporation be dissolved. There is no allegation of insolvency contained in the petition; on the contrary, it is practically conceded by the petitioner that the corporation has been transacting business during the past year and that it is solvent, and the figures submitted at the hearing show that there is a substantial surplus on hand. There is no ground, therefore, upon which the Attorney-General could base an action to dissolve the corporation under section 1785 of the Code of Civil Procedure. The petitioner, herein, seems to have claimed certain commissions from the company which claim was not allowed and he thereupon commenced an action in the Supreme Court of Kings county against the corporation for such commissions and for services rendered, and he appears to have also commenced another action against two of the directors. It is evident from the papers before me and the statements made at the hearing that the petitioner is a dissatisfied minority stockholder and that there is considerable friction between himself and the managers of the corporation. If he has been injured or his rights impaired by the officers and directors of the corporation he has his remedy at law or in equity and that remedy is still preserved to him under section 57 of the Stock Corporation Law. It was not intended by sections 1781 and 1782 of the Code that the Attorney-General should intrude into a mere private family quarrel in which the people have no interest, and carry on a litigation for the enforcement of individual and private rights where the parties have their remedy at law or in equity. If the directors have failed to care for the property and manage the affairs of the corporation in good faith, and have been guilty of a violation of their duties as trustees, resulting in waste of the corporate funds and assets, or unlawful gain to themselves, they are liable to account in equity the same as ordinary trustees and an action in equity for an accounting may be maintained against them to discover and fix the value of assets improperly withheld, pursuant to any conspiracy, and of all property lost by their wrongful acts, and to compel them jointly and severally to pay the aggregate amount thereof over to the corporation. (Bosworth as Receiver v. Allen, 168 N. Y. 157; Brinkenhoff v. Bost-. wick, 88 N. Y. 52; Sage v. Culver, 147 N. Y. 241; Graves v. Gouge, 69 N. Y. 154.) It is apparent therefore, that the petitioner can himself obtain substantially all the relief asked for on this application by proceeding directly against the directors. If he has in his possession proof to substantiate the charges of theft and assault contained in the moving papers, it would seem to be his duty to submit the same to the District-Attorney. I am not convinced that the public interests require that an action should be brought in behalf of the people of the State, nor am I satisfied that there is good reason to believe that such an action if brought could be maintained, and I am therefore, of the opinion that the application should be denied. Respectfully submitted, ALEX T. MASON, Application denied June 11, 1906. Deputy Attorney-General. JULIUS M. MAYER, STATE OF NEW YORK, ATTORNEY-GENERAL'S OFFICE, June 20, 1906. Messrs. WOODWARD, KISSELBURGH & HOPKINS, 17 Battery Place, New York City: Gentlemen. I am in receipt of the opinion of former Justice Hatch, in the Matter of the Application re Zeltner Brewing Company.* In accordance with his report and opinion to me, leave is hereby granted to bring an action against Amasa Lyon and William H. Zeltner, but not against Rubino. A bond in the sum of $1,000, for which form is inclosed, is herewith required, and the usual rules of this office are to be observed as to service upon us of papers and advices as to the progress of the litigation. Your firm will be designated as attorneys representing the . people, upon the condition that no charge of any kind or description is made against the people of the State for any services which may be rendered in the litigation or in matters incidental thereto. Yours very truly, JULIUS M. MAYER, Attorney-General. * For opinion of Judge Hatch, see pages 219-220. |