FIRST DEPARTMENT, JUNE, 1904. [Vol. 96. organized and controlled by the officers and directors of the vendor corporation, who are also the stockholders of the new corporation; that the property so sold was worth $250,000, and as a consideration for the property the purchasers assumed a mortgage of $50,000, the indebtedness of the corporation amounting to the sum of $16,000, thus securing property of the value of $250,000 by assuming an indebtedness of $66,000. As the complaint was dismissed, these facts must be assumed to be true, and the answers of the defendants which deny many allegations of the complaint and alleged facts in defense of the transaction, which, if proved, would be a defense to the action, cannot be considered on this appeal, the only question being whether this complaint, conceding all the facts therein alleged, stated a cause of action in equity against the defendants. * Under the provisions of section 33 of the Stock Corporation Law (Laws of 1892, chap. 688, added by Laws of 1893, chap. 638, and amd. by Laws of 1901, chap. 130) " a stock corporation except a railroad corporation * with the consent of two-thirds of its stock, may sell and convey its property, rights, privileges and franchises, or any interest therein or any part thereof to a domestic corporation engaged in a business of the same general character, or which might be included in the certificate of incorporation of a corporation organizing under any general law of this State for a business of the same general character." We think that this sale to the new corporation was authorized by this provision of the law, and if the officers of this corporation, in good faith, acting under the authority of more than two-thirds of the stock of the corporation, sold the property and franchises of the old corporation to the new corporation, the plaintiff as a minority stockholder could not complain. But the complaint expressly denies the good faith of the transaction. It alleges that the new corporation was organized and controlled by the officers and directors of the old corporation; that the stock of the new corporation was owned by the officers and directors of the old corporation, and thus the majority of the stockholders of the old corporation sold to themselves as the stockholders of the new corporation all of the property of the old corporatlon, valued at $250,000, for $66,000. If these facts are true, and for the purpose of this appeal they must be accepted as true, there can be no question but that the sale was fraudulent, and that the old corporation would have the right App. Div.] to rescind the sale, and either require the reconveyance of the property or hold the directors who have thus violated their trust responsible for the damage caused to the old corporation by reason of this fraudulent disposition of its property. That the directors or officers of a corporation stand in a fiduciary relation to the corporation and its stockholders is settled, and that relation imposes upon the directors and officers of a corporation an obligation of good faith in dealing with the property of the corporation. The fact that these officers and directors are the owners of a large majority of the stock of the corporation does not affect the obligation to act in good faith which exists between the corporation and its officers and directors. Directors who own a majority of the stock can no more for their own benefit and advantage appropriate the property of the corporation than the directors who own a minority, and where the act is in itself a violation of the duty that arises from the fiduciary relation that exists between the corporation and its officers and directors, the corporation can rescind that act and hold its directors responsible for the violation of their trust; and a vote of the stock owned by the directors ratifying or approving the act of the directors which violates their duty to the corporation, although a majority of the stock of the corporation, does not protect them, or avoid responsibility to the corporation for a violation of their duty which they owe to it. For the majority of the stockholders of a corporation who are also its officers and directors to organize another company, become its officers and directors and stockholders, and then sell all of the property of the corporation of which they are directors to themselves as stockholders of such other company at a grossly inadequate price, would be a fraud upon the vendor corporation which would justify the vendor corporation in rescinding the transfer and holding its directors responsible for the injury caused to it by a violation of their duty. (Farmers' Loan & Trust Co. v. N. Y. & N. R. Co., 150 N. Y. 410; Niles v. N. Y. C. & H. R. R. R. Co., 176 id. 119.) Now, this is what the complaint alleges the individual defendants did, and while these facts are denied by the answers, upon this appeal we are bound to treat all of the allegations of the complaint as true. It is the violation of duty which follows from the directors of the old corporation acting under a resolution of the APP. DIV.-VOL. XCVI. 2 FIRST DEPARTMENT, JUNE, 1904. [Vol. 96. stockholders selling to a new corporation of which they were the stockholders all the property of the old corporation, worth $250,000, for $66,000, which in itself is a breach of duty that the officers of the corporation owed to their cestui que trust, the corporation, which imposes an obligation upon these defendants. The plaintiff is a stockholder of the old corporation and brings this action to enforce a cause of action existing in favor of that corporation against the defendants. It is not necessary to determine to just what relief the corporation in whose behalf the plaintiff brings the action is entitled. That other rights have intervened by the purchase of stock in the new corporation which would prevent the sale from being set aside and the property retransferred would not prevent the old corporation from calling its directors and officers to account for their acts as its officers and directors; but I think that upon these facts alleged the old corporation, in whose behalf the plaintiff brings this action, would be entitled to some relief in equity. (Sage v. Culver, 147 N. Y. 241.) It follows that the judgment appealed from must be reversed and a new trial ordered, with costs to the appellant to abide the event. MCLAUGHLIN and LAUGHLIN, JJ., concurred; PATTERSON, J., concurred in result; VAN BRUNT, P. J., dissented. VAN BRUNT, P. J. (dissenting): I dissent. This action was not, and does not pretend to have been, brought in right of the corporation. Judgment reversed, new trial ordered, costs to appellant to abide event. RAY SOKOLSKI, Appellant, v. JOSEPH L. BUTTENWIESER and JULIUS B. Fox, Respondents. Specific performance of a contract to convey real property- when defects in a building contracted to be built do not justify the vendee in refusing to take the title quære as to the right to enforce specific performance with a deduction from the price because of such defects. A contract for the sale of land, upon which the vendor, prior to making the conveyance, was to construct a building substantially equal to a pattern building, provided that the deed should be delivered November 1, 1901, if the building should then be occupied, and, if not then completed, adjournments should be App. Div.] FIRST DEPARTMENT, JUNE, 1904. had from time to time not exceeding July 1, 1902, to allow for the completion of the building, and that the vendor should be entitled to an adjournment of not exceeding sixty days after the completion of the building for the purpose of placing a mortgage loan upon the premises. The contract further provided: "It is expressly agreed that the vendor will make any repairs in the nature of defects required within sixty days after closing title hereunder, provided such repairs are not caused by the acts of the tenants or by the public or from a stoppage of the plumbing.” The vendor completed, or claimed that he had, the construction of the building April 1, 1902. March 25, 1902, the vendee served upon the vendor a demand for the delivery of the deeds on April 1, 1902. On the day mentioned she refused to take the title except on condition that the vendor would supply alleged omissions in the work done on the building or allow her a certain sum out of the purchase price to cover such alleged omissions. The vendor having refused to accede to this demand, the vendee brought an action to compel specific performance of the contract upon payment of the contract price, less certain deductions for the alleged omissions in the work done on the building. Held, that the complaint was properly dismissed; That, as the contract gave the vendor sixty days after closing the title within which to make any repairs in the nature of defects, it was the duty of the vendee, if there were no objections to the title, to accept the deed, and if the vendor did not remedy any defects which existed within the sixty days allowed by the contract, she might then maintain an action at law against him. Quare, whether, if the contract had not given the vendor sixty days after closing the title within which to repair any defects, the court would decree specific performance with a diminution of the contract price on account of such defects. APPEAL by the plaintiff, Ray Sokolski, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 7th day of July, 1903, upon the decision of the court, rendered after a trial at the New York Special Term, dismissing the complaint upon the merits. Edward W. S. Johnston, for the appellant. Edward M. Shepard, for the respondents. PATTERSON, J.: The plaintiff appeals from a judgment dismissing the complaint upon the merits. The action was brought for the specific performance of a contract, made between the plaintiff as vendee and the defendant as vendor of real estate in the city of New York, known as No. 125 Second avenue. It is not to be disputed that the action is one for specific performance, for every alternative demand for FIRST DEPARTMENT, JUNE, 1904. [Vol. 96. relief in the complaint relates to specific performance. The contention of the plaintiff in the court below and on this appeal is that she was entitled to the relief prayed for, but she also insisted that she was so entitled, not in accordance with the exact terms of the contract, but with an allowance of certain deductions from the purchase price named in the contract. The dismissal of the complaint was without prejudice to the right of the plaintiff to institute an action at law to recover damages for the breach of the contract. We are of the opinion that the complaint was properly dismissed. The material facts appearing in the record are the following: The plaintiff is the owner of premises No. 123 Second avenue. Prior to May 6, 1901, an action was pending in the Supreme Court between this plaintiff and other parties to compel those other parties to convey to her the adjoining premises, No. 125 Second avenue. On the 6th of May, 1901, the plaintiff, claiming to have an easement in the premises No. 125 Second avenue, by reason of some restrictions contained in deeds affecting those premises, entered into an agreement with the defendant which, after reciting the pendency of the action referred to and that the parties defendant in that action had contracted to sell the premises No. 125 Second avenue to the defendant Buttenwieser, and that the plaintiff claimed that there were restrictions affecting those premises in favor of her adjoining property, provided that the defendant Buttenwieser would complete his purchase from the third parties above referred to and take a conveyance from them within the month of May, 1901, and thereupon this plaintiff agreed to discontinue her pending action against such third parties and to cancel the notice of pendency of the suit for specific performance and the record thereof in the clerk's office of the city of New York. After those recitals, the defendant Buttenwieser, as party of the first part to the agreement upon which the present action is brought in consideration thereof and of his having received a deed of 125 Second avenue, and of the sum of $63,000 which the present plaintiff stipulated to pay, agreed to sell to her all the parcel of land known as No. 125 Second avenue, describing it by metes and bounds, and also agreed to erect upon that lot of land, in place of a building then standing on it, another building seven stories high according to plans filed in the office of the department of buildings, it being expressly agreed that the quality of the materials and |