Court Opinion

ID: 5244683
Source: CourtListenerOpinion
Date Created: 2022-01-06 17:55:46.749464+00
Date Added: 2024-06-11T08:27:51.027520
License: Public Domain

Davis, J. :
This is a proceeding to dissolve a corporation under article 9 of chapter 28 of the Laws of 1909, known as the General Corporation Law (Consol. Laws, chap. 23).. Pursuant to section 172 of the act, the appellant, upon notice to the Attorney-General, presented to the Special Term of the Supreme Court a petition praying for a final order dissolving McLoughlin & Donovan, Inc., a domestic corporation. The court entertained the application and made an order under section 178 of the act (as amd. by Laws of 1909, chap. 240) requiring all persons interested in the corporation to show cause before a referee named in the order why the corporation should not be dissolved. Thereafter, on motion of the respondent corporation, the court vacated the order appointing a referee as well as all proceedings taken thereunder, and dismissed the petition herein. The appellant has appealed from the latter order.
It appears from the petition that the petitioner is one of the directors of the McLoughlin & Donovan corporation; that the others are Richard J. Donovan and Thomas J. Evers; that the petitioner owns fifty per cent of the stock, and that Donovan *655owns the other half, except one share given to Evers to qualify him as a director. The petitioner also alleges pursuant to sections 170 and 172 of the act, that he deems it beneficial to the interests of the stockholders that the corporation should he dissolved. Section 170 of the act requires this allegation. Then follow allegations showing the grounds of' the petitioner’s belief that the best interests of the stockholders demand a dissolution. The petition brings this application clearly within the provisions of section 172. It is alleged that the stock is equally divided between conflicting interests; that Evers as the dummy director under the control of Donovan voted with Donovan and removed the petitioner from the office of treasurer; that Donovan has excluded petitioner from any part in the management of the business and has refused to allow him to examine the corporation’s books; that he has misappropriated the money of the corporation and wasted the money of the corporation in extravagant expenditures to the ultimate destruction of the business of the corporation and the loss of petitioner’s investment.
In vacating the order appointing a referee the learned court at Special Term took the view that the petition disclosed merely a deadlock between the stockholders and failed to show any reasons why a dissolution would be beneficial to the stockholders, and, therefore, was insufficient to entitle the petitioner to the order appointing the referee under section 172 of the act. We are of opinion that the petition is sufficient in both respects.' It allege^ the deadlock between the conflicting interests in the corporation and as shown above it also sets forth reasons showing that a dissolution would be beneficial to the stockholders. Section 172 provides that in case of a deadlock such as that existing here a stockholder or stockholders “may present a petition as prescribed in section one hundred and seventy * * that is, where, as in this case, stockholders owning fifty per cent of the stock for any reason “deem it beneficial to the interests of the stockholders that the corporation should be dissolved, they may present a petition to the Supreme Court praying for a final order dissolving the corporation * * *. ”
The contents of the petition are prescribed by section 174 (as amd. by Laws of 1909, chap. 240). Among other things the. *656petition must, state the reasons which induce the petitioners to desire the dissolution of the corporation. The petition under consideration specifies such reasons quite fully. Section 174 also requires that the petition must show that" the case is one of those specified in sections 170 and 172. The respondent contends that because the petition fails to allege also that a majority of the managing directors or trustees deem it beneficial to the interests of the stockholders that the corporation should be dissolved as set forth in section 170, the petition is insufficient under section 174. There is no merit in this contention. If it prevailed, a majority of the directors could not apply for a dissolution of the corporation even in case of insolvency of the corporation without alleging in their petition that there was a deadlock under section 172. If the owners of fifty per cent of the stock must allege in their petition facts bringing them within both sections 170 and 172, the petition of a majority of the directors must contain similar allegations because section 174 applies to all petitioners • alike. The construction suggested by respondent would render unworkable the method of dissolving a corporation prescribed by this statute. As a matter of first impression it would seem that under section 174 the petition must show that the case comes within both section 170 and section 172. The difficulty is created by the use of the word “and’*' where in fact the intention was to use the disjunctive “ or.” To carry out the evident purpose and plan of article 9 we must construe section 174 as if it read as follows:
“Contents of petition.—The petition must show that the case is one of those specified in sections one hundred and seventy or one hundred and seventy-two of this chapter * *
Therefore, we are of opinion that the owners of fifty per cent of the stock have the right to present a petition to the court for a dissolution under section 172, as was done in this case, without regard to any action of a majority of the directors under section 170, and that similarly a majority of the directors may file a petition for dissolution irrespective of any of the provisions of section 172. Having reached these conclusions, it is unnecessary to consider the effect of the failure to give the AttorneyQsneral notice of the application, to vacate the original order, *657although it seems that under section 312 such notice should have been given.
The order-appealed from is, therefore, reversed, with ten dollars costs and disbursements, and the original order reinstated.
Clarke, P. J., Scott, Page and Shears, JJ., concurred.
Order reversed, with ten dollars costs and disbursements, and original order reinstated. Order to be settled on notice.