Davis v. Congregation Beth Tephila Israel

57 N.Y.S. 1015 | N.Y. App. Div. | 1899

Barrett, J.:

The plaintiff' alleges that the consolidation agreement' is illegal, and his demand is that it be adjudged void. W é shall, therefore, consider but this one question.

This agreement did not affect the corporate existence of either defendant.. There was no merger. Legislative authority existed permitting them to merge and form a new corporation (Religious Corporations Law, chap. 723, Laws of 1895, § 12; Membership Corporations Law, chap. 559, Laws of 1895, § 7), but no attempt whatever was made to comply with either of these statutory requirements. Thus we have simply an agreement to consolidate the assets and members of the two corporations -r— to combine them under a slightly different name. There was no authority, either common-law or statutory, for such an arrangement. At common law corporations have, as was said in New York & Sharon Coal Co. v. Fulton Bank, (7 Wend. 412), “ certain powers, but not such as would authorize the forming of a partnership or the consolidation of two corporations into one.” Legislative authority is necessary to accomplish such a result, and that already referred to does not validate the defendants’ acts since there was no compliance with the conditions upon which it was granted. (See People v. North River Sugar Refining Company, 121 N. Y. 582, 624.) The agreement was, therefore, ultra vires ; and it has long been settled that a single dissenting memljer of a corporation may maintain an action to set aside such an agreement, or to restrain the corporation from proceeding in any transaction which is manifestly beyond its powers. (27 Am. & Eng. Ency. of Law, 396, and numerous cases there cited.)

The result would be the same if we should accept the paper executed in Hebrew on the 31st day of May, 1897, as expressing the true agreement of the parties. It is open to precisely the same objections, and in fact does not essentially differ from that of June 2, 1897. • ' '

It is argued that the congregation of which the plaintiff was a member acquired all the property of the other, and hence that he was in no way prejudiced. This is no answer to the plaintiff’s complaint. He has a right to keep the corporation of which he is a member within its chartered powers. And the ultra vires act cannot be defended by the pretense that it is advantageous. (Tomkinson v. Southeastern Railway Company, 35 Ch. Div. 677; Mills v. Central Railroad Company, 41 N. J. Eq. 1, 12, 13.) It is quite problematical, however, whether the combination here was in reality advantageous either to the plaintiff or to his congregation. The Congregation Beth Tephila. Israel accepted all the members of the other congregation along with its property. The plaintiff was thus compelled to accept these new members as his associates. His rights in the property of his own corporation were thus proportionately diminished. Whether this was made up to him by the property brought in by the other corporation; whether in fact his share of the combined property proportionate to the combined membership was greater or less than his previous proportion of the property of his own corporation, is, to say the léast, uncertain. Such considerations, however, are here of no moment. The court cannot require the plaintiff to submit to an ultra vires agreement upon any such consideration of supposed advantage.

It is contended further that plaintiff was not a member of the Congregation Beth Tephila Israel at the time he began this action. It appears that he was in arrears for dues. The by-law relating to the subject of unpaid dues was not put in evidence, and only oral versions of it are given. These fail to show whether, upon non-payment of dues to a certain amount, the membership of the person in default ipso facto terminated, or whether the by-laws merely provided that he became liable to expulsion. In the latter case it is clear that plaintiff remained a member until corporate action was had. (Thomp. Corp. § 881.) The defendant in its answer does not claim that the plaintiff’s membership, upon non-payment of dues, ipso facto terminated. The complaint alleges that “ at all the times herein stated plaintiff was a member in good standing ” of the Congregation. Beth Tephila Israel. The - answer “ denies that at the time of the commencement of this action said plaintiff was or is a member in good standing of this defendant, but alleges that, in and by the constitution and by-laws of this defendant, all of its members are required to pay dues to this - defendant, and that in the event of the failure of a member to pay such dues at the time or in the manner therein set forth, stich member ceases to be and remain in good standing as such member.” The effect' of this is an admission that the plaintiff was a member, coupled with an. assertion that he was not in good standing. But his membership entitled the plaintiff to maintain the action. His standing did not affect his legal rights,, although it may have subjected him to internal discipline.

• There is a further question, namely, whether it was. incumbent upon the plaintiff to allege and prove that he made a demand ujpon the proper officers'of the Congregation Beth Tephila Israel to bring "this action, which demand was refused. ’This question, however, was not raised in any manner’ at the trial or in " the pleadings, and we. need not, therefore^ give it any special consideration.' We may say, however, that there is authority for the proposition that, whére the managing agents of the: corporation are themselves ;the authors of the wrong, against the corporation involved in the ultra vires act, or where the corporation cannot safely be left to obtain relief through the action of- its agents, a. stockholder may proceed directly and without, any demand-against-the corporation and itlie other interested parties to .set aside such acts and to obtain relief with regard thereto. (Heath v. Erie Railway Company, 8 Blatchf. 347, 406, 407; Board of Commissioners v. L., M. & B. R. R. Co., 50 Ind. 85, 115, 116; and see Currier v. The N. Y., West Shore & Buffalo R. R. Co., 35 Hun, 355, and 1 Morawetz Corp. §§ 242, 245.)

• The judgment should be. reversed and a - new trial ordered, with costs, to the appellant to -abide the event. ." . . ,

Van Brunt, P. J., Rumsey, Ingraham and McLaughlin, jj., concurred. . , !

.Judgment reversed, new trial "ordered, costs to appellant to abide event..