People v. Troy Chemical Co.

Full title: THE PEOPLE OF THE STATE OF NEW YORK, Appellant, v . TROY CHEMICAL COMPANY…

Court: Appellate Division of the Supreme Court of New York, Third Department

Date published: Mar 13, 1907

118 App. Div. 437 (N.Y. App. Div. 1907)

104 N.Y.S. 22

Opinion

March 13, 1907.

Julius M. Mayer and Hinman, Howard Kattell, for the appellant.

William W. Morrill and Andrew P. McKean, for the respondent.

CHESTER, J.:

It is claimed by the defendant that McKallor caused this suit to be instituted to take the life of the defendant for the purpose of leaving his company, of the same name, the only one in existence, and that the action is not for a public but for a private purpose. A sufficient answer to this contention is that the action was instituted by the Attorney General in the name of the People under a provision of the Code of Civil Procedure authorizing him so to do. (Code Civ. Proc. § 1786.) It appears that the action was so begun by the Attorney-General upon the verified application of McKallor, who was a creditor of the defendant, after a hearing thereon before a Deputy Attorney-General, upon notice to the defendant, upon which hearing defendant appeared by its attorney, who conceded that the facts stated in the complaint were true. The Attorney-General, therefore, was fully justified in commencing the action, and nothing appears to indicate that it was not brought in the discharge of a public duty and in entire good faith on his part.

It was admitted in the answer that since the time of filing the said petition in bankruptcy (May 10, 1904), the business of the defendant had not been conducted. The action was commenced February 13, 1906, and the answer was dated April 20, 1906. This admission alone shows that the defendant had suspended its ordinary and lawful business for more than a year, which is one of the reasons assigned in the statute for which a judgment dissolving a corporation may be had.

Another ground for a judgment of dissolution is where a corporation has neglected or refused for at least one year to pay and discharge its notes or other evidences of debt. It is true that the notes held by the Union National Bank of Troy so far as they have not been paid by dividends from the bankrupt estate, have been discharged in bankruptcy, but such a discharge is not a payment of the notes. ( Dusenbury v. Hoyt, 53 N.Y. 521.) The Legislature has seen fit to provide that a corporation must "pay and discharge" its obligations to save itself from being subjected to an action of this character. That it has not done and it has allowed these notes to remain outstanding and unpaid for more than one year. The fact that it has received a discharge in bankruptcy cannot avail to save its corporate life, for the statute has decreed otherwise. (Code Civ. Proc. § 1785, subd. 2.)

We need not go into the question as to whether or not the learned trial court was correct in its conclusion that the defendant was not insolvent under the facts found, for the other two reasons are sufficient to require a reversal. The defendant, however, claims that the statute is simply permissive and that the court may or may not, as it deems wise in the exercise of its discretion, award judgment dissolving a corporation, even though facts justifying its dissolution may be found.

Even if it should be assumed that the court had some discretion in actions of this kind, it would evidently not be a proper exercise of it, when a cause of action is clearly established, for the court to prevent the law from taking its course and from being made effective. The plaintiff, having shown facts which under the law are clearly sufficient to sustain an action dissolving a corporation, should have been awarded a judgment for that purpose.

The judgment should be reversed on the law and on the facts and a new trial granted, with costs to the appellant to abide the event.

All concurred, SMITH, P.J., and KELLOGG, J., in result.

Judgment reversed on law and facts and new trial granted, with costs to appellant to abide event.