Silver Co., 2 Cir., 11 F.2d 147; Wall v. United States, 4 Cir., 164 F.2d 462; Keefe v. Cote, 1 Cir., 213 F.2d 651.
The next matter to be weighed is the question of whether there was a further default in the letter and spirit of the charter, brought about by the situation which developed when the corporations in the year 1951 collectively made long-term unsecured loans in the sum of $ 1,270,000 to three corporations whose common stock was owned and controlled (and still is) by Sidney Sarner. These corporations, Linwood Park Business Center, Inc., Linwood Park Business Center, Inc., Section 1, and Linwood Park Recreation Center, Inc., were organized for the erection and maintenance of buildings for a shopping and recreation center near the rental housing projects above referred to, but independent of them and of the control of the plaintiff corporations. These unsecured loans were represented by promissory notes payable in twenty to twenty-five years, with interest at 5%. While it is true that there is judicial pronouncement that 'there is a distinction between a temporary loan of the surplus funds of a corporation * * * and the practice of lending the moneys of the corporation as if the corporation were a bank', Murray v. Smith, 166 App.Div. 528, 152 N.Y.S. 102, 106, nevertheless the circumstances surrounding this extraordinary transaction clearly partake of the nature of a business transaction and as such it would seem to be within the prohibition of the charter provisions. This court as a consequence finds that the loan definitely constituted a default, made as it was without the antecedent authorization of the holders of the shares of preferred stock.
There remains to be passed upon a third alleged default. Section 8(f) of the articles of incorporation of each of the plaintiff corporations provides as follows:
'At the request of the Commissioner, or of the holder of a majority of shares of the preferred stock, his or their agents, employees, or attorneys, the corporation shall give specific answers to questions upon which information is desired from time to time relative to the income, assets, liabilities, contracts, operation and condition of the property and the status of the insured mortgage and any other information with respect to the corporation or its property which may be requested.' (Emphasis supplied.)
On June 17, 1954 the Federal Housing Administration sent questionnaires to the plaintiff corporations requesting certain information, which they refused to answer. Following the general practice pursued by other corporations in similar circumstances, the plaintiff corporations assert that there is no charter provision requiring the furnishing of the information requested in the questionnaire, alleging that all answers to pertinent questions have been furnished to the Authority and that this questionnaire is an unwarranted attempt to secure information which the Authority has no right to demand. Inspection of the quoted provision of the charter makes it quite evident that the Authority has the right to seek any information with respect to the corporation or its property, and the information sought in the questionnaire relates 'to the corporation or its property.' Refusal to supply the required information constitutes a further default.
Because of these findings the court feels that it must grant the motion of the defendant for summary judgment in its favor, and the relief sought by plaintiffs is denied.
This opinion would seem to be an adequate expression of findings of fact and conclusions of law.
Let an order be submitted in conformity with this opinion.
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