Opinion
April 11, 1949.
Present — Nolan, P.J., Carswell, Adel, Sneed and MacCrate, JJ.
Action by plaintiffs for themselves and other stockholders of Queens Roller Rink, Inc., to impress a trust on property purchased by a director of the corporation in his own name. The complaint alleges that the director took title for himself and another defendant, not a director, in violation of his duty as a director to offer to the corporation the opportunity to purchase. Plaintiffs, by the complaint, prayed that their reasonable counsel fees and expenses in prosecuting the action should be charged against the corporation. Judgment has been rendered in favor of plaintiffs, decreeing that the defendant director convey the property to the corporation, after he has accounted to it for the cost and carrying charges and income, upon payment by the corporation of the amount due the director on the settlement of the account. The judgment enjoins the individual appellants forever from using the property as a roller skating rink in the event the corporation does not take title. Plaintiffs, by the judgment, are granted $1,500 against the individual appellants for expenses and counsel fees in the prosecution of the action. Judgment modified on the law and the facts as follows: by striking out the seventh decretal provision and substituting therefor the following: "Ordered, Adjudged and Decreed that plaintiffs may move at the foot of this judgment for an allowance of their reasonable counsel fees and expenses in this litigation, chargeable to the corporation, in the event it takes the property herein described or has acquired other property for the conduct of a roller skating rink with which a rink on the property herein described would compete. Such allowance to be based on proof that the corporation has benefited by the provisions of this judgment"; by inserting in the first decretal paragraph after the words "as a constructive trustee for the corporation Queens Roller Rink, Inc.," the following: "until such time as the corporation fails to make the payment hereinafter provided, in which event the trust shall terminate,"; and by striking out the second decretal paragraph and inserting in place thereof the following: "Ordered, Adjudged and Decreed that the said corporation is entitled to have conveyed to it the premises described in the deed made by Frederick Reiner to Nathan Steinberg, dated December 29th, 1945, and recorded in the Office of the Register of Queens County in Liber 5113 of Conveyances at page 251, so held by the defendant Nathan Steinberg as constructive trustee until such time as the said corporation fails to make the payment hereinafter provided, in which event the trust shall terminate." As so modified, the judgment is unanimously affirmed, without costs. All findings of fact are affirmed. Conclusions of law 11, 13 and 19 are modified in accordance with the modifications of the judgment. In the absence of seasonable warning that counsel fees and expenses would be sought to be charged against the individual defendants, they should not have been held to payment thereof. ( Godley v. Crandall Godley Co., 212 N.Y. 121, 137.) Moreover, until benefit to the corporation is established to have resulted from the litigation, it should not be charged with counsel fees and expenses. ( Masholie v. Salvator, 269 App. Div. 846.) Until the corporation accepts the property purchased by the director, or acquires other property for a roller skating rink with which that of the director would compete, the corporation cannot be said to have gained a real benefit from the litigation. Its landlord has restricted the use of the other parcel so that it cannot compete with the corporation until after condemnation of the corporation's leased property. That benefit was not created by this litigation. If it cannot meet the condition necessary to acquire the "corporate opportunity", there will be no real benefit to it obtained by the direction to transfer on condition that it pay. Likewise, if it has no roller skating rink with which one on the "opportunity" could compete, no actual benefit is gained from an injunction against use of the other property. While it was no defense to the action that the corporation was not financially able to take the opportunity to buy ( Meinhard v. Salmon, 249 N.Y. 458, 465), nevertheless plaintiffs cannot be allowed expenses against it for prosecuting an action on its behalf if no real benefit has come by reason of the litigation.