191 A.D. 820 | N.Y. App. Div. | 1920
This is an action by minority stockholders of the St. Joseph Lead Company, which will be referred to as the company, a domestic corporation, in the right of the corporation, against Clinton H. Crane and Hugh N. Camp, two of its directors, and the executors of Dwight A. Jones, a deceased director, for an accounting for property and funds of the corporation used ultra vires through their alleged neglect and failure to perform their duties as directors and through alleged violations of law by them as officers and directors of the company. The number of directors prescribed in the certificate of incorporation was seven and it is stated in the points that at all the times in question there were eleven directors. Therefore, these three directors, who for brevity will be referred to as the defendants when all are meant, at no time constituted a majority of the board. A demurrer to the original complaint for insufficiency was sustained at Special Term on the ground, among others, that in so far as the complaint was predicated on ultra vires acts, it was not alleged that the directors sought to be charged with responsibility therefor participated therein, and his opinion is reported in the New York Law Journal of January 3, 1916. An amended complaint was then served and a like demurrer thereto was overruled at Special Term and the order was affirmed by this court (176 App. Div. 914).
The amended complaint sufficiently charged the defendants with responsibility for the alleged ultra vires acts of the corporation. It was therein alleged that the ultra vires acts were brought about through fraud and conspiracy on the part of
The only findings made by the trial court which are challenged by the appellants are those relating to the acquiescence by the' plaintiffs in and their ratification of the ultra vires acts and they ask that those findings be reversed and that an interlocutory judgment be entered on the decision as thus modified, requiring respondents to account for the property and funds of the company thus misappropriated ultra vires by the board of directors.
The material facts found by the trial court with respect to the ultra vires acts of the company may be summarized as follows: That prior to the time any of the defendants became directors or officers of the company, there had been incorporated in the year 1890, under the laws of Missouri, the Farmers’ and Miners’ Bank with a capital of $12,000, consisting of 120 shares of the par value of $100 each, at Bonne Terre, Mo., which was a small mining town, and this was the only bank there then and was used by the company for the deposit of funds for the payment of its employees and by its employees as a bank of deposit; that.in 1899 the bank became involved in financial difficulties and the company, through its officers, purchased 100 shares of its capital stock and paid therefor $25,985.10 in order that it and its employees might continue to have the benefit of such a bank and such purchase was ratified by the board of directors and by the stockholders on the 17th of May, 1900; that the decedent Jones became a
There remains only the question with respect to liability arising out of the dissolution of the trust company. The court further found that the defendants were present and took part in the adoption of a resolution by the board of directors of the company held on the 20th of March, 1913, authorizing Jones and said Parsons, who was a director, to vote the company’s trust company stock for the voluntary liquidation of the trust company and giving them full authority to take any other necessary action; that the trust company never failed and it was neither “ insolvent nor threatened with insolvency, nor embarrassed ” in the years 1912-1913, but on the 14th of July, 1913, all its stockholders authorized its hquidation and the distribution of its assets pro rata among its stockholders and assigned their stock to Edward A. Rozier and M. P. Cayce to immediately liquidate the trust company and to receive from the St. Joseph Lead Company, its depositor, the funds necessary for that purpose and permitted the St. Joseph Lead Company to participate in the distribution of the assets, provided that it advanced the money for the liquidation of the trust company, and consented thereto and authorized the
The finding that the plaintiffs acquiesced in and ratified the acts of which they complain is not sustained by the evidence. The evidence on that subject does not purport to relate to acquiescence or ratification by all of the plaintiffs but only by the decedent Holmes and the plaintiff Belle R. Holmes and it consists of their having been represented by proxy at a stockholders’ meeting of the company prior to the organizing of the trust company at which a report of the treasurer was presented, showing that the company was carrying the bank stock, but if that knowledge could be imputed to them through their proxy, it did not show how the stock had been acquired, and for aught that appeared it might have been lawfully acquired in payment of a debt. However, no accounting is
Appellants acquiesce in all the findings with the exception of those relating to their acquiescence and ratification, and those they ask to have reversed. They should be reversed if that would be of any avail to the plaintiffs, but I think it would not. They, however, insist that they are entitled to an accounting by the defendant Camp and the executors of Jones for the organizing of the trust company and the moneys deposited with it, and by Crane, after he became director, and by all of them with respect to the settlement on the dissolution of the trust company by which the St. Joseph Lead Company received less than its share of the assets of the trust company and they claim that the stock of the St. Joseph Lead Company taken on the settlement should be retained as an asset of the company but that the defendants should be credited with only its market value at the time, which would leave a larger balance owing to the company on its entire business relation with the trust company. The findings of the trial court, however, which the appellants accept, show, as has been seen, that none of the defendants participated in the organization of the trust company and do not show that they controlled or could have prevented the deposits of money that were made with the trust company. There is no possible theory of liability of any of the defendants except in failing to secure for the company its full proportionate share on the liquidation of the trust company and with respect to that the court has held that they acted in good faith and for what they deemed to be the best interests of the company and were not even guilty of negligence. The act of the company in acquiring the stock in the trust company being ultra vires it could not be ultra vires to undo it by bringing about the liquidation and dissolution of the trust company. Thus it is not shown that any
It follows that the judgment should be affirmed, with costs.
Clarke, P. J., Smith and Merrell, JJ., concur; Page, J., dissents.
Judgment affirmed, with costs.