10 Misc. 161 | New York Court of Common Pleas | 1894
No evidence was adduced on the trial, and the complaint was dismissed for insufficiency of the facts alleged to constitute a cause of action. The judgment recites that certain allegations of the complaint (those referring to the construction contract of the railroad company with Brown, Howard & Co.) were waived or withdrawn in open court; but, since the record does not support the judgment in this respect, we are constrained to predicate our decision of the complaint as it was presented to us upon this appeal. Kley v. Healy, 127 N. Y. 555, 28 N. E. 593.
Fraud, in law, is of two kinds,—actual and constructive. The
Assuming the plaintiff, in his capacity as receiver, to have succeeded to all the rights and property of the railroad company, and viewing the complaint as one grounded in constructive fraud, its allegations are sufficient. The facts alleged, and the facts inferable from such as are alleged, all of which must, for the purposes of the motion to dismiss the complaint, be taken as admitted (Cutler v. Wright, 22 N. Y. 472; Marie v. Garrison, 83 N. Y. 14; Kain v. Larkin, 141 N. Y. 144, 36 N. E. 9), are, in substance, that the plaintiff was duly appointed and has duly qualified as receiver of the Rochester & Pittsburgh Railroad Company, a corporation organized under the laws of the state of New York in September, 1881; that the plaintiff was, by order of the court, permitted to prosecute this action; that the defendants, while severally directors of the railroad company, and acting or in duty bound to act as such, caused the railroad company to issue to them, for their personal benefit, $4,000,000 of its capital stock in exchange for an equal amount of the capital stock of the Rochester & Pittsburgh Coal & Iron Company, which the defendants owned as individuals, and which was of lesser value than the railroad stock; that, again, while the defendants were such directors, acting or in duty bound to act as such, they caused the railroad company to issue to them, for their personal benefit, $20,000,-000 of its capital stock at less than its par and market values, from the sale of which stock the defendants have derived large profit;, and, lastly, that while such directors, acting or in duty bound to act
A vice of the complaint, however, whether it be considered as one for actual or constructive fraud, is that the plaintiff’s right to dis-affirm the transactions between the railroad company and the defendants does not appeal*. It is not alleged that there are creditors of the railroad company, or that the' company is insolvent; hence the plaintiff cannot insist that he may avoid or disaffirm the acts of the company done in fraud of the rights of creditors or others interested in the trust estate, pursuant to the authority conferred upon receivers and trustees generally by chapter 314 of the Laws of 1858. Only such as are affected by the fraud may complain thereof. French v. Shotwell, 5 Johns. Ch. 555, affirmed 20 Johns. 668. Yet it does not appear that either the railroad company or its stockholders have repudiated the transactions with the defendants. Until such appears, no cause of action is extant. Furthermore, the right to dis-affirm a contract or conveyance on the ground of fraud is inseparable from the equitable title to the property affected thereby. McMahon v. Allen, 35 N. Y. 403; Graham v. Railroad Co., 102 U. S. 148, 26 Lawy, Ed. 106; Dickinson v. Burrell, L. R. 1 Eq. 337; Williams v. Boyle, 1 Misc. 364, 20 N. Y. Supp. 720; Greenh. Pub. Pol. 432, etc. But the complaint does not apprise us that the plaintiff has succeeded to the railroad company’s equitable title to the moneys sought to be recovered in this action. No transfer or assignment from the company is alleged. So far as appears, the plaintiff, as receiver, is no more than the custodian of its property, without title, legal or equitable, thereto. Keeney v. Insurance Co., 71 N. Y. 396. With*
The complaint informs us that the plaintiff was “appointed the receiver of the property of the said railroad company, as also its books, papers, stock, bonds, rights, claims, franchises, contracts, things in action, and effects of every kind and nature, with the usual power- and duties of receiver;” but neither of the nature of the plaintiff’s receivership, nor of the nature of the action or proceeding in which he wras appointed receiver, is there any intimation. It is only in. proceedings instituted for the purposes of the dissolution of a cor poration that the title to the corporate property is transferred to the receiver, and the corporate existence is merged in the receivership, but that is only by force of the statute for such cases made and provided. Decker v. Gardner, supra. It is not to be inferred, therefore, that the plaintiff has any title whatever to the moneys sought to-be recovered in this action; and, without such title, he is without right to disaffirm the contracts under which the defendants are alleged to claim the right to the possession of those moneys. Where-the plaintiff does not ask for leave to. amend, and the facts alleged in the complaint do not set forth a cause of action, the granting-of a motion to dismiss the complaint is not a matter of discretion. It is error to deny it. Tooker v. Armoux, 76 N. Y. 397; Scofield v. Whitelegge, 49 N. Y. 259; Coffin v. Reynolds, 37 N. Y. 640.
The judgment should be affirmed, with costs. All concur.