Marvin F. Butler and Others, Appellants, v. Standard Milk Flour Company and Others, Respondents, Impleaded with Elmer E. Burlingame, Defendant

Marvin F. Butler and Others, Appellants, v. Standard Milk Flour Company and Others, Respondents, Impleaded with Elmer E. Burlingame, Defendant. First Department, November 3, 1911. Court — jurisdiction — election of officers of foreign corporation— deposit of sto.ck in escrow —injunction restraining depositary from exercising rights of stockholder. The courts of this State will not undertake to set aside an election of officers of a foreign corporation or restrain their official action. But where the majority of the stock of a foreign corporation was placed in escrow in the hands of an attorney to be held by him for delivery to a person who had an option to purchase within one year,- and the attorney is charged with fraudulently inserting a provision in the contract whereby he was authorized to hold the stock until the expiration of three years, the courts of this State may, where the one having the option has elected not to purchase, enjoin the attorney from exercising any of the privileges of a stockholder as respects the shares held as trustee. Appeal by the plaintiffs, Marvin F, Butler and others, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 12th day of July, 1911, denying the plaintiffs’ motion to continue an injunction pendente lite. W. C. Prime, for the appellants. Edward S. Clinch, for the respondent Robinson. Percy L. Klock, for the respondents Stowell and others. Charles DeHart Brower, for the respondent Standard, Milk Flour Company. Joab H. Banton, for the respondent Austin. [MAJORITY — Miller, J.:] Miller, J.: Ptir to April 19, 1909, the plaintiffs and the defendant Austin ownd a majority of the stock of the Standard Milk Flour Company, a Maine corporation. The defendant Bobinson owned 500 shares of common and 50 shares of the preferred stock of sád corporation, which had been issued to him for legal services. On said date the parties entered into a contract pursuant to which the said stockholders agreed to deposit their stock with the defendant Robinson, the same to be transferred on the books of the' company and held by him with. all the powers incident to stock ownership, and the defendant Burlingame was to have the privilege at his election to purchase the same between April 19,1911, and April 19,1912, upon complying with certain conditions therein stated. The purpose of the contract was expressly stated to" be “to place in escrow the control or majority of all of the stock of the Standard Milk Flour Company of Maine for delivery to second party [said Burlingame] on his election to take same. ” It is Undisputed that said Burlingame has elected not to purchase the stock and has renounced his rights under said contract. It is asserted by the plaintiffs that the defendant Robinson, who drew the contract, caused a provision to be inserted without their knowledge or consent to the effect that, in case Burlingame failed to take the stock within the period specified, it was to be left in his (Robinson’s) hands until April 19,1914. It is also alleged that the defendant Robinson caused a ineeting of stockholders to be held on May 1, 1911, and by means of the voting power which the said contract gave him, caused the plaintiffs, who were directors of the corporation, to be voted out of office, and substituted for them men associated with him or in his employ. It is also alleged that the defendants threaten to issue and sell treasury stock of the corporation for the purpose of securing to themselves the control thereof, and that the various acts complained of were done by the defendant Robinson, who originally was retained by the plaintiffs as counsel for the corporation, for the purpose of securing control in himself and of ousting the plaintiffs from control. The plaintiffs ask for an injunction restraining the defendant Robins'on during the pendency of the, action from exercising any of .the privileges of a stockholder'1' the defendant corporation, whether individually or as.dastee by virtue of the shares of stock deposited with him uder the terms.of the agreement of April 19, 1909, and all of 5e-defend-ants, other than the defendant Burlingame, iron selling or otherwise disposing of or issuing treasury stoqc and from fluting as directors and officers of the corporation. ■ In so far as the court was asked to interfere with, the internal affairs of the Maine corporation the motion was properly denied. It is unnecessary to cite authority for that proposition. Plainly the courts of .this State will not undertake to set aside the election .of officers of a foreign corporation, nor will it restrain their action as such. We think, however, that in one respect the motion should he granted. It being the declared purpose of the agreement of April 19, 1909, to place a majority of the stock in escrow to enable a third party at his election to purchase it prior to April 19, 1912, it is difficult to see any legitimate purpose to be served by the provision requiring the stock to remain in the hands of Bobinson as trustee until April 19, 1911. The plaintiffs’ charges are sharply contradicted and are met by counter charges. We shall not undertake to decide the merits on affidavits. But it being undisputed that the declared purpose of the agreement, pursuant to which the defendant Bobinson holds the plaintiffs’ stock, cannot be effectuated, and it being charged that Bobinson, while acting as counsel, and without the plaintiffs’ knowledge, inserted the clause giving him control until April 19, 1911, we think he should be restrained during the pendency of the action from exercising any of the privileges of a stockholder by virtue of the plaintiffs’ stock held by him as trustee. That will in nowise interfere with the internal affairs of the corporation. Such a restraining order will operate only against the defendant Bobinson in personam. It will prevent him as an individual during the pendency of the action from acting under a provision of the contract, claimed to have been inserted by him in fraud of his clients’ rights and without their knowledge or assent. The order should be' reversed, without- costs, and the motion granted to the extent of enjoining the defendant Bobinson from exercising any of the privileges of a' stockholder in the defendant corporation by virtue of the shares of stock in said corporation, deposited with him by the plaintiffs, pursuant to the agreement of April 19, 1909. Ingrabam, P. J., McLaughlin, Laughlin and Clarke, JJ., concurred. Order reversed, • without costs, and motion granted to the extent stated in opinion. Order to be settled on notice.