The opinion of the court was delivered by: BAER
Harold Baer, Jr., United States District Court Judge.
Plaintiffs are former shareholders in the now defunct Princeton Corporation. Plaintiffs filed this action seeking to recover $ 117,000 from Defendant who allegedly misappropriated this money while Executive Vice President and Director of the Princeton Corporation. This bench trial was heard on September 21, 1995.
For the reasons that follow, I find that Plaintiffs failed to meet their burden of proof. Accordingly, Plaintiffs' complaint must be dismissed.
The Princeton Corporation ("Corporation") was incorporated under the Business Corporation Law of the State of New York in May of 1985 for the purpose of importing griege goods into the United States where the goods were processed and later sold. Plaintiffs are two of the original four shareholders in the Princeton Corporation. Defendant Victor Piha is also an original shareholder.
As Executive Vice President, Defendant was responsible for managing and controlling the monies and affairs of the Corporation. Corporation By-laws require two authorized signatures for the proper execution of all checks drawn on the corporate checking account. Plaintiffs' Exhibit No. 3, Section 6.1. While working for the Corporation, Defendant received thirty-nine checks, each in the amount of $ 3,000 for a total of $ 117,000, which were drawn on the corporate checking account. Each check was signed and indorsed by the Defendant and co-signed by another Director, Mr. Imre Rosenthal, or his delegate, Mr. James Scott. The checks were designated as "expenses."
Plaintiffs seek to recover $ 117,000 from Defendant under the theory that Defendant violated his fiduciary duties as an officer of the Corporation. Plaintiffs allege that Defendant violated the by-laws of the Corporation as well as Sections 717, 720(a)(1)(A), and 720(a)(1)(B) of New York State's Business Corporation Law (the "B.C.L."). N.Y. Bus. Corp. Law §§ 717, 720(a)(1)(A), (B) (McKinney 1986 & Supp. 1995).
Under section 717 of the B.C.L., a corporate officer or director is obligated to act in the best interests of a corporation. N.Y. B.C.L. § 717. Accordingly, an officer or director is prohibited from exercising their corporate powers for their private or personal advantage or gain. Similarly, under sections 720(a)(1)(A) and (a)(1)(B), an action may be commenced against a corporate officer, subject to the corporation by-laws, for the officer's violation of his duties in managing and disposing of corporate assets committed to his charge, and for acquiring corporate assets in violation of his duties. N.Y. B.C.L. § 720(a)(1)(A), (B).
Plaintiffs bear the burden of proving that Defendant violated the B.C.L. by a preponderance of the evidence. In Duke Laboratories v. United States, 222 F. Supp. 400, 406 (2d Cir. 1963), Justice Timbers wrote a much quoted definition of the burden in a civil case:
To establish by a preponderance of the evidence means very simply to prove that something is more likely than not so. In other words, a preponderance of evidence means such evidence as, when considered and compared with that opposed to it, has more convincing force and produces . . . the belief that what is sought to be proved is more likely true than not true.
This Court finds that the Plaintiffs failed to sustain their ...