Case Name: In the Matter of Harry Kunin et al., as Stockholders of Title Guarantee and Trust Company, Appellants. Title Guarantee and Trust Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1953-05-12
Citations: 281 A.D. 635
Docket Number: 
Parties: In the Matter of Harry Kunin et al., as Stockholders of Title Guarantee and Trust Company, Appellants. Title Guarantee and Trust Company, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 281
Pages: 635–641

Head Matter:
In the Matter of Harry Kunin et al., as Stockholders of Title Guarantee and Trust Company, Appellants. Title Guarantee and Trust Company, Respondent.
First Department,
May 12, 1953.
Joseph K. Reichbart of counsel (Lester Gutterman with him on the brief; Gutterman, Newman & Reichbart, attorneys), for appellants.
Joseph V. McKee of counsel (John J. Boyle with him on the brief; Joseph V. McKee, attorney), for respondent.

Opinion:
Per Curiam.
On this record we believe that respondent, Title Guarantee and Trust Company, made the transfers here in question in good faith and for a purpose that the directors and officers considered was for the best interests of the corporation and the stockholders. Petitioners appellants, however, owning a total of 5,800 shares of respondent's stock and owners of many shares for years, objected and disapproved the transfers and demanded an appraisal of their stock and payment to them of the determined value thereof.
The transfer was made on the approval of over two thirds of the stockholders of the company. But respondent contends that the assets transferred were not needed for the company's proper and successful operation; that the consent of stockholders under section 20 of the Stock Corporation Law was not needed; and that it was an authorized transfer in the regular course of business in line with the company's activities and subject to the exercise only of the honest judgment of its trustees.
The sole question before us is whether the transfer of $2,125,000 of the respondent's assets to North River Securities Company in exchange for the capital shares of that company to be distributed share for share to respondent's stockholders entitles appellants, dissenting stockholders, to an appraisal under section 20 of the Stock Corporation Law.
The test is whether the sale was a sale in the ordinary course of business. The sale in question involved about one third of the respondent's assets. It resulted in an investment by the Title Guarantee and Trust Company stockholders in the North River stock, a substantially different business, and one in which Title Guarantee and Trust Company was not authorized to engage; and a divorcement of the assets from the business and distribution to stockholders, compelling them to make an investment in an altogether different business from the one in which they invested when they bought respondent's stock. This can hardly be termed a sale in the ordinary course of business. Each case must be considered on its own facts and circumstances. In spite of respondent's good faith and its intention to aid its stockholders to avoid prohibitively high taxes, we think, in the light of all the facts and circumstances disclosed, that the learned court erred in denying in toto petitioners' application and that the sale may not properly be held to be a sale in the ordinary course of respondent's business.
Respondent admits that the transfer involved in its disposal of its banking and fiduciary business would give rise to the right under section 20 of an appraisal to dissenting stockholders. As a result of that prior transaction, however, respondent now contends that the assets here disposed of are no longer needed as working capital and that the sale here in question was a subsequent and separate transaction. However, it is significant that respondent, before consummation of this sale, sought and procured approval of the Superintendent of Banks and the Banking Board.
The sale and exchange of stock was not something in furtherance of the purpose for which the corporation existed as in Matter of Miglietta (2660 Broadway Corp.) (287 N. Y. 246). On the contrary, it was pro tanto going out of the only business in which, after disposal of its banking and fiduciary business, respondent was authorized to engage, viz., the business of title insurance; and the exchange of stock puts the stockholders into an entirely different corporation in an entirely different business which respondent as such would have no right to carry on. It is most important that stock instead of cash was received in exchange. Even though the stock was not retained by respondent itself but delivered to the shareholders share-for-share, it was not a sale in the ordinary course of business because it put the stockholders into an entirely different business and a dissenting stockholder has the right to say: non liceo in fcederá veni, and to insist on an appraisal of his stock under section 20.
Petitioners opposed this transfer from the start; they gave respondent formal and timely notice of their opposition; and appeared by counsel in opposition at the stockholders ' meeting. Accordingly, in view of all the facts disclosed including the illness of petitioner Maxwell Kunin and his inability to have access to the vault in Chicago where petitioners' shares were deposited, petitioners should be relieved of their default in presenting their stock for notation.
The motion is for the appointment of an appraiser. Because it believed that the stockholders' consent was not necessary, respondent made no offer for the stock and did not furnish the financial statements required by section 21 of the Stock Corporation Law. It may be that the great expense of appraisal proceedings can in any event be avoided after petitioners' certificates have been presented for notation and the relevant provisions of section 21 are complied with.
Accordingly, the order appealed from should be modified, without costs, to the extent of granting the motion so as to relieve petitioners from their default in presenting their certificates for notation and to direct the parties to comply with the procedure prescribed by section 21 of the Stock Corporation Law and, as so modified, the order is affirmed.