Hegener v. Party Tyme Products, Inc.

24 A.D.2d 742, 263 N.Y.S.2d 479, 1965 N.Y. App. Div. LEXIS 3311

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: October 14, 1965
• Status: Published

Opinion

Order entered May 20, 1965, granting motion of defendants to vacate notices of examination, unanimously reversed, on the law and the facts, and the motion denied, with $30 costs and disbursements to appellants. The complaint in this derivative action by stockholders of Party Tyme Products, Inc. (Products) alleges improper diversion of corporate assets by the individual defendants through the medium of Party Tyme Sales, Inc. (Sales), a corporation formed tc act as exclusive sales agent of Products. Two defendants, who are officers and directors of Products, are respectively the treasurer and the secretary of Sales, and each owns 11% of its stock. A third defendant, the president and a director of Products, has a brother who is vice-president of Sales and owner of 39% of its stock. The three individual defendants above mentioned constituted a majority of the board of directors of Products at the time its agreement with Sales was authorized, and the brother was also a board member at that time although he abstained from voting. Such interconnections provide a sufficient basis for inquiry (Pearson v. Rosenberg, 22 A D 2d 225). Settle order on notice fixing examination dates. Concur—Botein, P. J., Breitel, McNally, Eager and Steuer, JJ.