Ashodian v. Star Dye House Inc. ( 1931 )

BLODGETT, P. J.

Heard upon motion of Sarkis Chartalian for leave to foreclose a mortgage executed by respondent.

The mortgage in question was executed June 21, 1929, by Star Dye House, Inc., by John N. Ashodian, President, and Borghas De Bedrosian, Treasurer, and recorded the same day, and covers real estate and personal property of respondent, and was given to secure a note of even date also signed by the president and treasurer of said respondent.

September 7, 1929, Edward L. Leahy was appointed permanent receiver of said corporation, said corporation being insolvent.

Chartalian was a stockholder in said corporation before the time of execution of said mortgage, and the record shows the mortgage to have been given when the corporation owed from $25,000 to $30,000 to creditors. Chartalian was also an employee of said corporation. No corporation records were produced showing any vote of the corporation authorizing the officers to execute said mortgage.

Chartalian in March 1929 purchased 28 shares of capital stock of said corporation for $6,250 and the note in question for $6,200, and the mortgage securing the same was given to him (Chartalian) for the purchase by the corporation of said shares standing in his name.

For corporation: Knauer & Fowler. For petition to foreclose mortgage: Boss, iShepard & McMahon.

Such purchase would impair the capital of said corporation which was in debt to the amount of $25,000 at the time of said purchase, which debt it was admitted by the officers, the corporation could not pay.

A corporation can not use its funds or property for the purchase of its own shares of capital stock when such use would cause an impairment of its capital.

Sec. (g) of See. 5 of Chap. 248 Gen. Laws 1923.

Motion denied.