59 Misc. 2d 321 | N.Y. Sup. Ct. | 1969
Motions numbered 137 and 149 of March 14, 1969 are consolidated and disposed of together.
These are motions by the defendants in this action to dismiss the complaint on the ground that plaintiffs do not have legal capacity to sue. Plaintiffs ‘ ‘ individually and as members ’ ’ of the Bide-A-Wee Home Association, Inc., a membership corporation, organized under the laws of this ¡State, have brought this derivative action on behalf of the corporation, charging those in control of its policies with waste and other improper conduct. It is alleged that the officers and directors of the corporation wasted assets in hiring and paying the salary of a consultant to the Home, by lending money to said consultant and by patronizing a brokerage firm in which one of the directors had an interest. It is also alleged in the complaint that, contrary to their representations to members, contributors and the general public, that Bide-A-Wee will not destroy animals entrusted to its charge unless the animals become incurably ill, the defendants have in fact “ resumed or are about to resume, the practice of destroying animals entrusted to their care although such animals are not incurably ill. ”
Corporate derivative actions are generally governed by article 6 of the General Corporation Law. Excluded from the
The fact that there are available other means of looking into the affairs of a corporation does not prevent a derivative suit from being instituted even where a membership corporation is concerned (Stoddard v. Schwab, N. Y. L. J., March 9, 1937, p. 1179, col. 2, affd. 253 App. Div. 720). In fact, one of the reasons set forth in the Stoddard case (supra) for recognizing the right to bring such actions despite the court visitation provisions contained in section 26 of the Membership Corporations Law is that the visitation provisions permit inquiry only into ‘ ‘ transactions during the twelve months next preceding ” the granting of an order thereunder, and not to prior transactions. The same reasoning is applicable to the matter at bar.
As for the provision relating to shareholders in the section 61 of the General Corporation Law, such provision was inserted in 1944 as a limitation upon actions brought on behalf of stock corporations to eliminate incidence of “ strike suits.” This limitation imposed on shareholders in stock corporations in no way affected the then existing rights of others entitled to maintain such actions. Accordingly, the fact that plaintiffs are not “ shareholders ” in the true sense or were not members of the corporation at the time of the transactions complained of is irrelevant.
The thrust of defendant’s further argument that plaintiffs are not ‘ ‘ members ’ ’ of the corporation and therefore have no standing herein is centered around the by-laws of the corporation which limit voting in the corporation to “ executive ” and “ life ” members only. Concededly, plaintiffs belong to neither
Defendant’s argument that special consideration should be given to a membership corporation which operates as a charity is not persuasive. Such consideration, if appropriate, must come from the Legislature.
The within determination is confined solely to the questions raised on this motion with respect to the standing of the plaintiffs to bring this action. It in no way should be considered as reflective upon the merits of the action. Motion to dismiss the complaint is denied.