Case Name: PIZA v. BUTLER et al.
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1895-11-15
Citations: 35 N.Y.S. 721
Docket Number: 
Parties: PIZA v. BUTLER et al.
Judges: 
Reporter: West's New York Supplement
Volume: 35
Pages: 721–723

Head Matter:
PIZA v. BUTLER et al.
(Supreme Court, General Term, First Department.
November 15, 1895.)
Corporations—Action against Director for Official Misconduct.
In an action against a director of a corporation to compel him to account for his official acts, and to pay over money of the corporation, etc. (Code Civ. Proc. §§ 1781, 1782), defendant will be enjoined, pending the action, from collecting any money of the corporation, or paying out or parting with any of its assets, and a receiver will be appointed where the moving papers state facts showing that plaintiff will be entitled to some portion at least of the relief demanded in the complaint, and it is necessary to preserve the existing status in order to make the judgment effectual.
Appeal from special term, New York county.
Action by Joshua Samuel Piza against Elliott L. Butler, individually and as treasurer and member of the New York Fur Cutting Company, and others, to compel defendant Butler to account for his official acts as treasurer of said company, and to pay over certain moneys to said company, etc. From an order granting an injunction and appointing a receiver, defendant Butler appeals. Affirmed.
Argued before VAN BRUNT, P. J., and FOLLETT and PARKER, . JJ.
Louis V. Booraem, for appellant.
Lorenzo Ullo, for respondent.

Opinion:
PER CURIAM.
The plaintiff, who is one of the three directors and the president of the New York Fur Cutting Company, brought this action under and in pursuance of the provisions of subdivisions 1, 2, 5, and 6 of section 1781 of the Code; his authority to bring it being affirmed by section 1782 of the Code. Gildersleeve v. Lester, 68 Hun, 532, 22 N. Y. Supp. 1026. The relief demanded in the complaint is: (1) That the defendant Elliott L. Butler, as treasurer and director of the corporation, be compelled to account for his official conduct in the management and disposition of the funds and property of the corporation. (2) That he be compelled to pay to the corporation, or the holders of the notes signed by the manager, all the moneys which, in violation of his trust, the defendant Butler caused to be made payable by the corporation. (3) That the alienation of the property of the corporation made by the defendant Butler by pledging the same for his own use and benefit be set aside, and that he be compelled to return it, and to pay all damages by reason of such alienation. (4) That he be restrained from collecting any part of the insurance moneys had by reason of the burning of the property of the corporation, or from paying out or parting with any of its property, securities, or assets of the corporation, or from in any way interfering with them for the purpose of paying to himself or to his firm, Belt, Butler & Co., the amounts claimed to be owing to them by the corporation. (5) That a receiver be appointed.
The New York Fur Cutting Company is a domestic corporation, organized in May, 1894, and succeeded to the business of a similar company having the same name, organized under the laws of New Jersey. Its three directors were the plaintiff, the defendant Butler, and Staats M. Sackett. The plaintiff was the president, Butler the treasurer, and Sackett the general manager. Of the capital stock of $100,000 plaintiff held 360 shares, Belt, Butler & Co. 370, the defendant 170, Sackett 70, and Thomas J. Hand 30. The treasurer. Butler, was also a member of the firm of Belt, Butler & Co. On the reorganization of the company its capital stock was entirely invested in its plant, and in contemplation of the fact an agreement was entered into by which the firm of Belt, Butler & Co. undertook to furnish, by loan in account current, during two years succeeding the 19th of February, 1894, all the necessary moneys needed for the management of the business of the defendant corporation, in an amount not less than $100,000. This agreement also provided that the defendant "Butler should have the general supervision of the corporation. In December, 1894, the plaintiff requested an account from Butler, together with an inventory of the assets of the corporation and the stock on hand. In response to this request he made a statement, but it did not prove satisfactory to the plaintiff. During the following month the factory of the company burned, together with all of its contents; the insurance policies thereon aggregating $167,000. Prior thereto the defendant Butler negotiated certain notes which he had procured the manager of the factory of the corporation to sign. They were indorsed by the firm of Belt, Butler & Co., and discounted. He also pledged certain property consisting of furs of the value of about $45,000. No authority was given for this action by any vote or special sanction of the board of directors, and it appears from the affidavits of the plaintiff and his codirector Sackett that they were not informed of such facts until shortly prior to the commencement of this action. Butler also pledged the claims of the corporation to various creditors, under its policies of insurance, which covered its plant and contents, which were destroyed by fire; and these facts, it appears from the affidavits of the plaintiff and Sackett, were not made known to them until after the commencement of this action. Complaint is also made that Butler omitted to sell the furs so pledged, when he had opportunities to do so, at advantageous prices, although urged so to do by his codirectors, and that they were pledged and alienated as security for loans.
On the motion for an appointment of a receiver, the defendant Butler contended that what he did as treasurer was justified by the agreement entered into between himself, Sackett, and Belt, Butler & Co. If what has been done is correctly described in the affidavits presented on the part of the plaintiff on this motion, we are not able to agree with the contention that every act is fully justified by its provisions. But in some important respects the affidavits are in conflict, and it is quite apparent from their reading that the result of a trial will be a harmonious and connected account of all the transactions, and unaffected by the shading which the interests of the parties seem to have given to the affidavits, on the one or both sides. Because of that fact it is not our purpose to give expression to any views which may possibly affect the disposition to be made of the case when it comes on for trial on the merits. But, if the facts be substantially as stated by the plaintiff and his co-director Saclcett, it is apparent that the plaintiff will be entitled to some portion of the relief, at least, which he demands in the complaint. And to make the judgment effectual it is apparently desirable, if not absolutely necessary, to preserve the present status, and to that end the granting of the injunction appears to have been a proper exercise of the discretion vested in the special term. We are also of the opinion that so much of the order as appoints a temporary receiver should not be interfered with. The power of the court to make the appointment cannot be doubted, and under its direction he will doubtless so act as to protect and preserve the interests of all the parties pending the final determination of the questions involved by a proper judgment.
The order should be affirmed, with flO costs and printing disbursements. All concur.