Opinion
November 25, 1908.
Hinman, Howard Kattell, for the appellants.
Frederick E. Hawkes and H.C. Mandeville, for the respondents.
The number of shares of stock represented by the appellants is small. It would appear, however, that these appellants represent in fact the lodge itself, which owns 230 shares of the capital stock. It is probably true that, not being stockholders, they never were de jure directors of this corporation. The situation was apparently known, however, to all the stockholders at the time of their election, and within the authority of Matter of Santa Eulalia Silver Mining Co. (21 N.Y. St. Repr. 89) they were authorized to sign this petition for a dissolution. That case was affirmed upon the opinion below in 115 New York, 657.
It is claimed, however, that the proceedings to reduce the number of directors in August, 1907, operated to vacate their office, as they were not properly qualified when elected. One difficulty with this proposition is that of the directors who would be left as the directors of the corporation, the majority were not members of the lodge. If those appellants, therefore, were de facto directors the court will not hold their offices vacated when the effect of such an holding would be to leave a majority of the board disqualified as not being members of the Manoca Lodge. The statute authorizing the reduction of the number of directors makes no provision as to how that reduction is to be effected after it has been voted. It is impossible to say that certain of the directors have been ipso facto deprived of office while others remained as directors of the corporation. Unless, therefore, the number can be reduced by the voluntary act of the directors themselves, it would seem that the proceeding can only become effective when the terms of office of a sufficient number of directors expire. We think, therefore, that the petition was sufficient under section 2419 to authorize the granting of the order to show cause.
We are satisfied that a temporary receiver should not be appointed in this case unless upon full hearing of all parties. The respondents here represent the larger interests both of the stockholders and of the creditors, and they at least should be heard upon the question as to whether a temporary receiver should be appointed. The order appealed from should, therefore, be reversed, with ten dollars costs and disbursements, and the original order modified so as to strike therefrom the provision for the appointment of a temporary receiver, without prejudice, however, to any of the parties to proceed upon notice to the respondents for the appointment of a temporary receiver if they should be so advised.
All concurred; KELLOGG, J., concurring in result; except CHESTER, J., dissenting.
Order reversed, with ten dollars costs and disbursements, and original order modified so as to strike therefrom the provision for appointment of temporary receiver, without prejudice to motion on behalf of any of the parties, upon notice to the respondents, for appointment of temporary receiver if they should be so advised.