153 N.Y.S. 332 | N.Y. App. Div. | 1915
On the 29th day of November, 1904, the plaintiff was a stockholder of the defendant corporation. An agreement in writing of that date was made between him and other stockholders of the company and the defendants Poor and Bennett as trustees. The plaintiff brings this action, not only in his own behalf, but also in behalf of all other stockholders who became parties to said agreement or succeeded to the rights of parties thereto, to compel an accounting by the trustees with respect to acts under and by virtue of said agreement and in connection therewith, alleged to have been in excess of their authority and in violation of their duty, and by the defendant Stephens, who is alleged to have conspired and co-operated with them in the acts of which complaint is made.
The decision of the demurrer requires that the issues tendered by the complaint be quite fully stated; but in setting them forth we merely state the facts alleged and for the purpose of presenting certain legal questions admitted by the demurrer, and, of course, it is not to be inferred that the charges have been proved.
It is alleged or shown by the contract, which is made part of the complaint, that the defendant corporation is a domestic corporation, having 1,500 shares of first preferred, 4,500 shares of second preferred, and 19,000 shares of common stock; that in November, 1903, it owed $300,000 on promissory notes held by various hanks, and, among others, the Garfield National Bank, the American Exchange National Bank, and the National Park Bank, made or indorsed by it, which it was unable to pay, and that thereupon said banks appointed a “ creditors’ committee,” consisting of the defendant Poor, who was president of said Garfield Bank, the defendant Bennett, who was assistant cashier of said American Exchange Bank, and one Van Cleaf, who was vice-president of the National Park Bank, for the purpose of preventing legal proceedings to recover said indebtedness and of enabling the committee to direct the affairs of the company until said indebtedness was paid or satisfactorily secured; that Van Cleaf resigned and his successor also resigned, and no other successor was appointed; that in November, 1904, as a condition of the reissue and extension of said notes, and
The trustees demurred to the amended complaint on four grounds: (1) That plaintiff has not legal capacity to sue; (2) that there is a defect of parties plaintiff; (3) that causes of action have been improperly united; and (4) that it does not state facts sufficient to constitute a cause of action.
The first ground of the demurrer is clearly without merit. The claim that plaintiff has not legal capacity to sue is predicated on the erroneous assumption that the action is brought in the right of the corporation. The action is not derivative but representative. It is brought in behalf of all stockholders who acquired rights under and by virtue of the agreement, which is annexed to and made a part of the complaint. The complaint contains some allegations, which would be appropriate to an action by or in the right of the corporation, and are not essential to an action by stockholders for an accounting under the contract; but the Court of Appeals has finally established the rule that in determining the nature and scope of the action attempted and intended to be pleaded, the court
The claim with respect to there being a defect of parties plaintiff is that the allegations are insufficient, under section 448 of the Code of Civil Procedure, to authorize the action in the right of all the stockholders who became parties to the agreement or succeeded to their rights, in that the number of such stockholders is not stated and it is not shown that it would he impracticable to bring them in, and it is not shown that the question at issue is common or of general interest to them all. The second ground of the demurrer is likewise without merit. It is sufficiently alleged, and is manifest, that there was a great number of the former stockholders of the Anthony Company, and of persons who have succeeded to their rights who occupy a similar position with respect to said agreement to that occupied by the plaintiff, who, if he be entitled to an accounting, are entitled to like relief.
As I view the complaint, it was designed to plead hut a single cause of action for breaches of trust. There are no allegations clearly showing an attempt to plead a cause of action in the right of the Anthony Company, and any intent so to do is disclaimed in the brief. The plaintiff shows, in effect, that it was intended when the assets and franchises of the Anthony Company were transferred to the Ansco Company to dissolve the former corporation and that the trustees undertook to take the necessary steps therefor; and that the stockholders, if not all legally bound by the plan at the time of the transfer, subsequently ratified it by acquiescing therein and receiving through the trustees what they then supposed was their entire share of the surplus of the consideration for distribution. What the plaintiff complains of is not that the trustees unlawfully trans
Ingraham, P. J., McLaughlin", Clarke and Scott, JJ., concurred.
Orders reversed, with ten dollars costs and disbursements, motions granted, with ten dollars costs, with leave to respondents to withdraw demurrers and to answer on payment of costs in this court and in the court below.
Now Stock Corp. Law (Consol. Laws, chap. 59; Laws of 1909, chap. 61), §§ 16, 17.— [Rep,