New-York tribune., 1910-09-03
court PROTECTS A CLIENT
Decides That Lawyer WrongfulIy
Diverted S35, 900 in Stock.
SAYS CONTROL WAS SEIZED
Enjoins Defendants and Will
Name Receiver for Alleged
Holding Corporation.

Holding Corporation.
Justice Page in a decision yesterday SAID
that from the records in the case it ap-
peared that Reno r. Ellington, lawyer at
No. As Broadway, had wrongfully diverted
from Justice n Williams. client, stock OF
the New York Central Storage Company
valued at $4,000 TO a corporation of which
apparently the justice said, the lawyer
had control
Williams was formerly president of the
storage company. He held 250 of the $50
shares of stock in the concern, representing
a capitalization of s50,00o. Williams wanted
TO convert his holdings into cash and re-
invest the proceeds. Ellington was attor-
ney for Williams. as well as for the storage
company. The Mount Morris Storage Com
pany was formed on his advice and in the
interest of the latter concern Williams
transferred his stock in the New York Cen
trail company to Charles E. Stadt. In ex-
change Williams received bonds of the
new company of a value equal to the stock
he had turned over.
Alleges Scheme to Defraud.
Williams complains in a suit that he has
brought against Ellington and Thomas w
Smith. the nominal holder of the remaining
eighty shares of the New York Central
stock, that the new company has no as
sets except the stock that he turned over
to 1t, and that Ellington, who got control
of the Mount Norris company, is appro-
priating the property to his own use. He
says that Ellington got possession of the
property by fraudulent means in his pro-
fessional relations and that the whole plan
was to defraud him CWilians). The plain
tiff says that the incorpora tors of the
Mount Norris company are fictitious and
that there has been no subscription to the
stock of Sc, 900.
He goes further in his allegations, and de-
clares that the corporation is illegal because
it did not have $500 in its treasury when 1T
was Incorporated and that the directors
dummies. Williams explains going
into the transaction by saying that Billing
ton represented to him that the bonds which
he would receive would be a first lien on
the companys assets and that their ready
sale would give him his money back. Also,
the new company was to put UP $4,000 to
pay the debts of the New York Central
company.
Ellington says that the Mount Morris
company is merely the holding company tor
the older concern. and that Williams re-
ceived both stock and bonds to equal the
value of his own stock. He says that the
new companys capital is all paid in in
property and that the board of directors
are all responsible business men, He says
that while Williams was president of the
New York company he paid himself $1,000
in commissions without the knowledge of
the other officers, and never did much for
hi Of
that the change in the old company was
into debt.
Interference Required. Says Court.
Justice Page says ii appears by aff1da-
Wits that certain persons ascribing them
selves as reputable business men are inter
ested in the progress and management of
the Mount Norris Company, but 1t does not
appear that they hold any stock, and there
is evidence TO controvert the allegations
OF the responsibility of the Mount Morris
Company. Williams had asked in his COM
pIeint that the transfer of his stock be set
aside; had demanded an accounting from
Ellington, and asked for an injunction re-
straining the defendants from meddling or
interfering with the assets of the New
York Central Storage Company.
The necessary conclusion is that con-
dition certainly exists which requires the
interference Of a court of equity" says
Justice Page In his decision The plaintiff,
through the Vaccinations of the defendant,
Billington. his confidential legal adviser,
has been induced to part with his large
majority holdings in a going and solvent
business. and SO far the papers before
me show. has received absolutely nothing
therefor. Because the New York Central
Storage Company is not made party the
court cannot grant a receiver for that cor
poration, and while the plaintiff does not
ask for a receiver for the Mount Morris
Storage Company I feel that the condition
of affairs shown gives rise to the necessity
for a stringent action on the part of the
court
THE plaintiff seeks the aid and protec-
ton of court of equity that his property
rights may be protected. The papers show
that these rights have passed without con-
sideration into the hands OF one who. in
the capacity of legal adviser, has seized the
opportunity to secure possession and con-
troll of these property rights 10 his own
use and purpose without payment.
1T cannot be said that the broad powers
of a court of chancery, irrespective of and
despite seeming statutory limitation.
have been so curtailed as to send this pc
titorer forth without redress when the
court IS cognizant of facts sufficient to
warrant the exercise CT Jurisdiction because
the facts are improperly set forth"
The court announced that he would issue
the injunction asked for against all the de-
PENDANTS would appoint a receiver for the
Mount Morris company and would instruct
the receiver TO proceed with all possible
speed to bring proper measures to have
the receivership extended to the assets of
the New York Central company.