7 Misc. 2d 283 | N.Y. Sup. Ct. | 1956
Motions 2260 and 2320 are consolidated and disposed of as follows.
In a derivative action, the defendants, Equitable Life Assurance Society of the United States, Murphy, Dow, Klein and
Prior to the commencement of this action plaintiff petitioned this court for an order directing the Superintendent of Insurance and the Attorney-General to bring this action. Said proceeding was finally determined by an order of. the Appellate Division denying the relief sought by the plaintiff-petitioner. The Per Curiam opinion of the Appellate Division was as follows: “ The order of the Special Term should be affirmed. It may not be said that the refusal of the Superintendent of Insurance and the Attorney-General was without reasonable basis. We do not pass upon any of the other questions ruled upon by Special Term, including the question as to whether this policyholder has the right to institute suit. Order unanimously affirmed, with $20 costs and disbursements to the respondents.” (Matter of Garfield v. Holz, 1 A D 2d 820.)
The petition for leave to commence this action was prompted by the holding in Isaac v. Marcus (258 N. Y. 257). There, the plaintiff, a stockholder of the Bank of United States, brought a derivative action for an accounting against the directors of the bank. The complaint was dismissed on motion of the Superintendent of Banks. As statutory receiver of the bank, the Superintendent of Banks was vested with authority to maintain any action vested in the bank, or its stockholders or creditors. The court held the right of the Superintendent of Banks to maintain the action to be paramount to plaintiff’s and that plaintiff must first exhaust the available means to induce action by the superintendent. The appropriate procedure indicated by the court was an order to show cause why the superintendent should not bring the action or why the plaintiff should not be allowed to do so.
Defendants argue the determinations of the Superintendent of Insurance and the Attorney-General affirmed by the Appellate Division preclude the prosecution of this action. It does not appear that the superintendent contemplates proceedings under
The determination of the Attorney-General refusing to institute this action, likewise affirmed by the Appellate Division, does not constitute a bar to its prosecution by the plaintiff. Chapter 400 of the Laws of 1890 (Insurance Law of 1892, § 56) proscribed any accounting or injunction in respect of any life or casualty insurance company, except on application of the Attorney-General. The said section was repealed by section 15 of chapter 326 of the Laws of 1906. Said repeal carried with it the legislative policy relied on by the court in Swan v. Mutual Reserve Fund Life Assn. (155 N. Y. 9). There is therefore no exclusive right in the Attorney-General as to this action. Nor does it appear by prior decision or statute that the consent or approval of the Attorney-General is a requisite in a derivative action such as is here involved.
The defendants advert to the superintendent’s paramount and exclusive jurisdiction in the area of investments and finances in respect of insurance companies and suggest that this action is in the nature of a collateral attack on determinations made by the superintendent. We do not reach that question on the instant motions. Assuming the validity of the defendants’ position, thereby it is not demonstrated for the purpose of the pending motions that plaintiff’s allegation as to the defendants’ failure to exercise the care and prudence required of them may be ignored. In other words, if we assume the validity of the investments involved, it cannot be held as matter of law that the defendants exercised the required care and prudence. Particularly is this so in regard to the leasing transactions and the expenditures incidental thereto. The determination, if any, of the superintendent may serve as relevant data on the issue of prudence and care. Whether that be so, and the extent to which such data is decisive of the ultimate issues is not for decision at this time.
It may be also conceded that the relief sought is excessive. Nevertheless if a cause of action is alleged, for the purpose of these motions, the complaint is sufficient. (Niagara Falls Power Co. v. White, 292 N. Y. 472,480.)