Case ID: ad_149/html/0687-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Laughlin, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Gilbert H. Montague, as Receiver of Hotel Gotham Company, Respondent, v. Hotel Gotham Company, Defendant, Impleaded with Henry L. Goodwin, Appellant.
    First Department,
    March 8, 1912.
    Corporation — action to recover money paid to officer in violation of section 66 of the Stock Corporation Law — allowance to officer for rent and board—amendment of pleading.
    Where a hotel company has failed to pay certain installments of rent due under its lease, a subsequent payment to its president for services as manager is a violation of section 66 of the Stock Corporation Law, prohibiting transfers of property to officers or stockholders of a company after it has failed to pay its debts, and the amount so paid may be recovered in an action by the receiver of the company.
    But in such an action it is proper to allow the president a certain amount for the rent of rooms and board to which he was entitled under his agreement for services, and such amount, having been returned, may be deducted from the recovery.
    Where parties by mutual consent, in effect, modify the pleadings on the trial, they are bound thereby on appeal.
    Appeal by the defendant, Henry L. Goodwin, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 23d day of May, 1910, upon the decision of the court rendered after a trial at the New York Special Term.
    
      Alexander S. Andrews, for the appellant.
    
      John Thomas Smith [Edward A. Craighill, Jr., and C. W. Gormly with him on the brief], for the respondent.
   Laughlin, J.:

This action is brought to recover the sum of $5,000, paid to the appellant Goodwin by the Hotel Gotham Company on the 8th day of May, 1908, on the ground that prior to that time the company had failed to pay certain installments of rent due to its landlord under a lease in writing, and that the payment constituted a transfer of property to an officer, stockholder or director of the company for the payment of an indebtedness due to him from it and was prohibited by the provisions of section 48 of the Stock Corporation Law (Gen. Laws, chap. 36 [Laws of 1892, chap. 688], as amd. by Laws of 1901, chap. 354), which were re-enacted by section 66 of the Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61), and which, so far as deemed material to the appeal, are as follows: “No corporation which shall have refused to pay any of its notes or other obligations, when due, in lawful money of the United States, nor any of its officers or directors, shall transfer any of its property to any of its officers, directors or stockholders, directly or indirectly, for the payment of any debt, or upon any other consideration than the full value of the property paid in cash.”

The appellant was the president of the hotel company and he was employed by the board of directors to act as manager of the hotel, and the payment was made for services pursuant to this employment. We agree with the learned trial court that, upon the theory upon which the case was tried and has been presented upon the appeal, the payment was made in violation of the statute. There is evidence in the record which might afford ground for the contention that the Gotham Hotel Company was operating the hotel as agent of its landlord, and that the payment to appellant by the Gotham Hotel Company was made by it as agent of the Fifty-fifth Street Company; but since that point is not taken by appellant we express no opinion thereon. We are of opinion, however, that even on the theory that the Hotel Gotham Company was operating the hotel in its own right, the recovery against appellant is excessive. It is true that he admitted by his answer that he received the $5,000 to his own use; but upon the trial he was permitted, without objection and exception, to give evidence tending to prove that on or ahout the same day he returned to the company $1,100 of the $5,000 for rent of rooms occupied by his family and himself and for their board during the time he was living at the hotel as manager, and that under the agreement by which he was employed he was entitled to the free use of the rooms and to board and to the $5,000 in addition thereto. This evidence was not controverted. The learned counsel for the respondent contends that the appellant was not entitled to a deduction on account of this payment for the reason that he did not plead the fact. The parties by mutual consent, in effect, modified the pleadings and, therefore, the rights of the appellant must be determined on the appeal as if the answer had been duly amended. Moreover, if, as the evidence tends to show, it was contemplated by the appellant’s employment that he should not be charged for such accommodations and board it would not have been a violation of the statute to have allowed him the use of rooms and the board; and if that were the agreement there could have been no recovery by the receiver of the hotel company therefor under the statute in question if appellant had not paid over the money. We cannot, therefore, adopt respondent’s theory that the appellant should be left to present his claim to the receiver for the payment made under a mistake or misapprehension, either with respect to the law or the facts.

The findings are insufficient to warrant this court in modifying the judgment and, therefore, it should be reversed and a new trial granted, with costs to appellant to abide the event, unless the respondent stipulates to reduce the recovery by the sum of $1,100, and interest thereon from said 8th day of May, 1908, and if so stipulated the judgment is modified accordingly and affirmed, without costs to either party.

Ingraham, P. J., McLaughlin, Miller and Dowling, JJ., concurred.

Judgment reversed and new trial granted, with costs to appellant to abide event, unless respondent stipulates to reduce judgment as stated in opinion, in which event judgment as modified affirmed, without costs. Order to be settled on notice.