Meredith v. Art Metal Construction Co.

97 Misc. 69
CourtNew York Supreme Court
DecidedOctober 15, 1916
StatusPublished
Cited by5 cases

This text of 97 Misc. 69 (Meredith v. Art Metal Construction Co.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Meredith v. Art Metal Construction Co., 97 Misc. 69 (N.Y. Super. Ct. 1916).

Opinion

Wheeler, J.

In order to understand the merits of the motion, it becomes necessary to consider the allegations of the complaint and the cause of action set forth, and the general rules of law governing such cases.

The action is brought by the plaintiff, as a stockholder in the Art Metal Construction Company, in behalf of himself and of all other parties in interest who may join in the action, and asks for the appointment of a receiver of said corporation; that the damages sustained by the defendant corporation by reason of the matters and things stated and set forth be ascertained, and that the individual defendants be adjudged and decreed to pay said corporation certain specific [72]*72sums of money aggregating $469,040, and the further sum of $250,000, damages done to the good name, the good-will and other property rights of the said corporation.

. The complaint alleges that the Art Metal Construction Company was a prosperous and successful corporation, organized under the laws of the state of New York, and located at Jamestown, N. Y., prior to March 31-, 1913. That at about said date the Art Metal Construction Company, a Massachusetts corporation of the same name, was- organized, and all the property and assets of the New York corporation were thereafter transferred to, and the said -corporation became merged into, the Massachusetts corporation, one of the defendants in this action.

The complaint further alleges, in substance, that the defendants* -other than "the Art Metal - Construction Company, were stockholders, officers and directors of three different corporations, to wit: the United States Metal Products Company, the Assets Realization Company, and the National Steel and Bronze Corporation.

'..That said defendants formed and became members, officers and agents of a conspiracy, the purpose and object of which was to acquire control of the assets, property, credit and business of the defendant' the Art Metal Construction Company, and divert the same to" the benefit of the three corporations above named, and for the benefit of the individual defendants themselves, and to use the credit and appropriate the quick assets of said defendant Art Metal Construction Company- to - their own advantage and profit, and to the financial loss of the plaintiff and other stockholders of said company, and to the financial loss of the said defendant the Art Metal Construction Company, arid that, in furtherance of said conspiracy, the individual [73]*73defendants performed and committed certain acts, to wit: 1 -

(a) Organized a syndicate to buy and acquire a controlling interest in the capital stock of the Ark Metal Construction Company, of New York.

(b) Organized the National Steel and Bronze Corporation with a capital stock of $5,000,000, divided into $3,500,000 of common and $1,500,000 of preferred stock at par — took a controlling interest in said shares, and elected a nominal, but dummy, board of directors, subservient to the wishes and directions of said conspirators. That said corporation was simply a holding company, and through its exploitation the said conspirators obtained the money with which to pay them for money borrowed by them to acquire a controlling interest in the stock of the Art Metal Construction Company.

(c) That, having acquired a controlling interest in the stock of the Art Metal Construction Compány, the conspirators proceeded to elect a board of directors amenable to their orders, wishes and directions; and procured the passage and adoption by said board of á resolution to merge the business of said Art Metal Construction Company with the United States Metal .Products Company, by depositing a controlling interest in the shares of stock of each company with the National Steel and Bronze Company, and by loaning the credit of said Art Metal Construction Company to said Assets Realization Company, to buy for $1,200,000 the entire preferred stock of said National Steel and Bronze Corporation, which was and is worthless, all of which inured to the benefit and profit of said' conspirators. -

(d) That said conspirators secured the adoption of a resolution authorizing and directing said Art Metal [74]*74Construction Company to guarantee the dividends of seven per cent on the preferred stock of the National Steel and Bronze Corporation, and to sell said stock to the holders of the note of said Art Metal Construction Company, which note had been given in payment of said preferred stock, in pursuance of the resolution set forth in paragraph —, said guarantee being intended and adopted to give said conspirators a profit, as well as ready funds with which to pay a loan by which they secured money to buy a controlling interest in said Art Metal Construction Company.

(e) That thereafter, and in March, 1913, by concealment and false representations, and in furtherance of said conspiracy, the conspirators secured the assignment of all the assets and property, plant and business of said Art Metal Construction Company as a New York corporation to said Art Metal Construction Company, a Massachusetts corporation, .with a greatly increased capital, which transfer inured to the benefit and profit of said conspirators, and to the loss of the plaintiff and other stockholders of the company; and thereupon said conspirators elected a board of directors of said Art Metal Construction Company wholly ■ subservient to their wishes, orders and purposes, for the sole purpose of carrying out the purposes of said conspirators.

(f) That said defendants directed the nominal directors and officers of said Art Metal Construction Company to lend the credit of said company for the benefit of the individual defendants.

(g) That said conspirators caused said Art Metal Construction Company to lend, at various times in the year 1913, upwards of $100,000 to the Assets Realization Company, without security, when said Assets Realization Company was known to the defendants to [75]*75be financially embarrassed, which was used for the benefit of said individual defendants, of which sum only $5,000 has been repaid, and the balance is a total loss to the defendant company.

(h) That said conspirators caused said Art Metal Construction Company to lend upwards of $280,000 to the United States Metal Products Company upon its notes, wholly unsecured, and at times when said Metal Products Company was known to defendants to be financially embarrassed, with no prospects of being able to pay said loans, and said loans were made for the benefit of the individual defendants, no part of which loans has been repaid, and is a total loss to said defendant company.

(i) That by fraud and misrepresentation said individual defendants caused the capital stock of the defendant company to be increased to the par value of $4,000,000, and a portion of such increased shares to be exchanged for shares of the stock of the United States Metal Products Company at a time when the shares of that company were worthless, and the stock of the defendant company valuable, which exchange inured to the benefit of the individual defendants in this action, and the loss of the defendant company and of this plaintiff.

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Bluebook (online)
97 Misc. 69, Counsel Stack Legal Research, https://law.counselstack.com/opinion/meredith-v-art-metal-construction-co-nysupct-1916.