Court Opinion

ID: 5253117
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:19:32.70134+00
Date Added: 2024-06-11T08:27:58.625887
License: Public Domain

Page, J. (dissenting):
Mary Drosnes, an owner of ten shares of stock of the Film Amusement Company, Inc. (this being one-third of the capital stock issued and outstanding), moved the court on petition and affidavits, for the appointment of three persons to appraise the value of her stock and designating the time and place at which the appraisers shall meet and also direct the manner in which payment for said stock be made as provided in section 17 of the Stock Corporation Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61). The petition alleges upon information and belief that a meeting of the stockholders of the said corporation was called to be held at the office of Abram A. Silberberg, attorney for said company, on the 20th day of November, 1915, and was held at that time and place to consider and vote upon a proposition to sell and convey certain of its property, rights and privileges, to wit, the chattels and things at Nos. 2078-2080 Third avenue, borough of Manhattan, and to lease the theatre building occupied by the said corporation to the G. & G. Amusement Corporation, a domestic stock corporation; that the petitioner duly attended said meeting by Louis 0. Drosnes, who has a power of attorney from the petitioner, and that a vote was taken at said meeting upon the proposition to convey said property, rights and privileges of the said Film Amusement Company, Inc., to the G. & G. Amusement Corporation aforesaid, and that two-thirds of the stock voted in favor of the proposition of sale or conveyance, and after the declaration of the result of the vote said Louis 0. Drosnes, in behalf of the petitioner, protested at said meeting against the proposed sale, and then and there demanded payment for the petitioner’s stock; that prior to making the petition and within twenty days after the date of said meeting the petitioner caused to be served upon the corporation a written notice, signed by her, objecting to the proposed sale and demanding payment for said stock; that sixty days have *433not elapsed since said meeting was held. On the return day of the motion an answer was presented by the corporation denying that a meeting of stockholders of the corporation was held at the time and place alleged in the petition or at any other time to consider and vote upon a proposition to sell the company’s rights, properties and privileges; denying that the petitioner attended any stockholders’ meeting by' Louis 0. Drosnes or any other person and denying that a vote was taken at any stockholders’ meeting upon the proposition to convey property, rights and privileges of the said corporation to the G. & G. Amusement Corporation and also denying that two-thirds of the stock voted in favor of the proposition of sale or- conveyance, and that after the declaration of the result, Louis O. Drosnes protested against the proposed sale and demanded payment of the stock. It admits that a notice such as alleged in and a copy of which is annexed to the petition was served upon the president of the company. The answer then sets forth the facts according to its contention. Upon presentation of these papers to the court, it appointed a referee to take proof of the issues made by the petition and answer and to remit the testimony to the court. Upon the coming in of the report of the referee the petitioner’s attorneys served a notice of motion upon the report, testimony and upon the motion papers, and the opposing affidavits, for the relief demanded in the petition. After hearing argument the court denied the motion. It was clearly established that the meeting called to meet, and which met, at the office of Mr. Silberberg was a special meeting of the directors of the corporation. The notice of the meeting was addressed to four persons, two of whom were directors and not stockholders. It stated: “ Please take notice that a special meeting of the directors of the Film Amusement Company will be held at the office of Abr. A. Silberberg, the company's attorney,” giving the address and specifying ten a. m. of Saturday, November 20, 1915, as the time for holding the same, for the purpose of transacting the business specified in the petition. The minutes of the meeting were offered in evidence and showed three directors present; the report of the president that he had on November seventeenth executed *434a contract for the sale of the chattels and things in the theatre and for a lease of the theatre; that a resolution was offered that the corporation sell all the chattels and things owned by the company in the theatre and lease the same to Abraham Grossman and Isidore Golbinsky, or their nominee, and that a “ vote was called for by the directors present and the vote was recorded as follows: Mr. Nathan Doniger voted in favor of the resolution; Mr. Jacob Herskowitz voted in favor of the resolution and Mr. Louis 0. Drosnes voted against the resolution.” Nowhere in the minutes are the words “ stock ” or “ stockholders ” mentioned. These minutes were introduced in evidence during the cross-examination of Louis O. Drosnes, who stated that they were correct, and furthermore it was proved by him that he had stated as the grounds of his opposition that he had a better offer from the Aurora Amusement Company, who offered the same terms but in addition agreed to take him in as a shareholder. The petitioner thus wholly failed to prove the allegation of her petition.. This is a statutory proceeding, and the sole question presented on this appeal is whether upon the evidence the petitioner has shown herself entitled to the relief demanded. In this proceeding we are not called upon to review the acts of directors. If they have exceeded their powers and wrongfully disposed of corporate property there are ample remedies which may be invoked by a stockholder in which the legality of their acts and their accountability to the corporation can be determined. Nor is the question whether the sale is void or voidable. That question could only be determined in an action in which the purchasing corporation was a party.
Section 16 of the Stock Corporation Law, so far as material to this case, provides: “A stock corporation, * * * with the consent of two-thirds of its stock, may sell and convey its property, rights, privileges and franchises, or any interest therein or any part thereof to a domestic corporation, engaged in a business of the same general character, * * *. Before such sale or conveyance shall be made such consent shall be obtained at a meeting of the stockholders called upon like notice as that required for an annual meeting.”
I cannot agree with Mr. Justice Shearn that this require*435ment is a mere technicality which may be disregarded, and that the sale may be made at a meeting of directors, if the directors voting for the proposition, individually own two-thirds of the stock, or that the owners of two-thirds of the stock without . holding any meeting can consent to the sale in writing and that a dissenting stockholder can in such cases waive the meeting and elect to stand on the sale, and thereby become entitled to the relief given by section 17. That section provides: “If any stockholder not voting in favor of such, proposed sale or conveyance shall at such meeting, or within twenty days thereafter, object to such sale, and demand payment for his stock, he may, within sixty days after such meeting, apply to the Supreme Court ” for the appointment of ' appraisers.
It is clear that the relief can only be granted where a meeting of stockholders has been held pursuant to section 16, and that the dissenting stockholder has the right to invoke the remedy provided in section 17. For a meeting of stockholders pursuant to section 16 is a condition precedent to section 17 becoming effective. Matter of Timmis (200 N. Y. 177), relied upon by Mr. Justice Shearn, is not an authority to the contrary. In that case a meeting of stockholders was held pursuant to notice, and the resolution authorizing the sale was adopted by the votes of the holders of more than two-thirds of the capital stock. The appellant claimed that as no specific mention was made in the notice that the meeting was held pursuant to section 16, no right to invoke the remedy under section 17 arose. The court said: “ The sale in question would not be valid without resorting to section sixteen, and by resorting to that section the appellant opened the door for the respondent to enter and demand his rights under section seventeen. The claim that the earlier section was not invoked by specific mention in the notice calling a meeting of stockholders to authorize the sale, is met by the statement therein that ‘ under the charter of the. corporation the calendar department cannot be transferred to a separate corporation without the authorization of the holders of two-thirds of the capital stock.’ ” (p. 183). This is far from authorizing a stockholder to waive the requirement of notice and a meeting of stockholders, and~claiming the benefit of section 17, when *436directors assume to act without having been authorized by a vote of two-thirds of the stock, or the consent to the sale is evidenced by a writing signed by the holders of two-thirds of the stock.
There is a fundamental distinction between the powers of directors acting at a directors’ meeting and even the same persons acting as stockholders in a stockholders’ meeting.
The distinction is not a mere technicality that may be disregarded. Where powers are conferred on directors they must be exercised in meetings of directors and cannot be exercised by stockholders. And where powers are to be exercised by stockholders at stockholders’ meetings, the directors cannot assume those powers and discharge them at a directors’ meeting, These distinctions are declared by law and are not a mere matter of nomenclature, as my brother Shearn seems to assume, when he states: “This contention is advanced in face of the fact that, although the meeting was called a directors’ meeting, those who constituted the board either owned or represented every share of stock.”
The Legislature has declared that a sale may be made when authorized by a two-thirds vote of the stock at a stockholders’ meeting called for that purpose in a specified manner, and when that is done a non-assenting stockholder by complying with section 17 may require the corporation to purchase his stock at an appraised price. The courts have no power to amend this statute and substitute provisions that we assume are as good or better, nor should we attempt to do so on the theory that we are doing substantial justice in a particular case. The petitioner failed to show that she was entitled to the relief demanded and the motion was properly denied.
The order should be affirmed, with costs, as on an appeal' from a judgment.
Merrell, J., concurred.
Order reversed, with ten dollars costs and disbursements, and petition granted, with ten dollars costs and costs of the proceeding.