70 N.Y. St. Rep. 655 | N.Y. Sup. Ct. | 1895
Dissenting Opinion
(dissenting):
Upon the authority of Brinckerhoff v. Bostwick (88 N. Y. 52) I think the action is maintainable. The suit is one brought by stockholders who, on behalf of the corporation, demand an accounting for property which has been taken, or allowed to be taken, from the corporation. The acts complained of, although happening at different periods of time, are but cumulative and constitute a single cause of action. It is true that certain of these defendants were not directors, but were transferees of the assets of the corporation; but their being made parties does not change the nature of the action, nor make what was one cause of action multifarious. The purpose sought is to enable a court of equity to reach out and recover diverted assets. Although different relief may be accorded as against the different defendants, this does not effect a severance
The following was the opinion of the Special Term:
This is an action brought by resident stockholders of the Hall Signal Company, a corporation created under the laws of the State of Maine, having its business office in New York, against its directors and their transferees of its assets. The plaintiffs sue on behalf of themselves and all other stockholders who shall come in and contribute to the expenses of the action, and the corporation is joined as one of the defendants. It is alleged in the complaint that the directors, or some of them, have voted money and treasury stock from the treasury to some of their own number, and to their superintendent in some cases, without legal consideration; in some cases for grossly inadequate consideration ; in some cases when no quorum was present; in some cases when, the presence of the donee was necessary to a quorum; in some when the vote of the donee was necessary to a majority, and in all cases contrary to the standing rule of the board established under the direction of a,stockholders’ meeting. It is also alleged that they have voted treasury stock to some of their own number at fifty dollars when they knew that said stock was selling at over ninety dollars per share; that they have taken stock from the treasury at fifty dollars per share and with it filled orders at ninety dollars and over, obtained from the purchasers by the company’s agent; that the directors have failed properly to apply and account for moneys received by them for the company; that they have neglected its interests and imperiled its assets. It is also alleged that during all this time the corporation had its principal office for doing business in the city of New York, and that those transactions were had in the city of New York, and that the defendants issued their circulars from the office of the defendant company, 50 Broadway, New York. It is further alleged that the principal individual defendants voted 500 shares of the stock to one of their own number, the president, at one-half the par and little more than one-half the market value, under the pretext of remunerating him for “ extraordinary services” previously rendered;
By the complaint-it appears that no relief in favor of the plaintiffs individually is asked. The relief prayed for is that the defendants who have not demurred may be required to repay into the treasury of the defendant corporation the amounts alleged to have been illegally taken or obtained by them therefrom. There is enough stated in the complaint, I think, to bring this case within the principle established by Brinckerhoff v. Bostwick (88 N. Y. 52) and Briggs v. Spaulding (141 U. S. 132). It is quite apparent from the allegations of the complaint, and from the demurrer which is interposed in this action, that the corporation refuses to prosecute the individual directors who are claimed to have been guilty of an abuse of their trust or a misapplication of the funds of the company, and it is also quite apparent that the individual defendants, against whom relief is mainly sought, are still in control of the corporation. As was said by Rapallo, J., in the case of Brinckerhoff v. Bostwick (supra): “ In such cases a demand upon the corporation. to bring the suit would be manifestly futile and unnecessary. A suit prosecuted under the direction and control of the very parties against whom the misconduct is alleged and a recovery is sought would scarcely afford to the shareholders the remedy to which they are entitled; and the fact that the delinquent parties are still in control of the corporation is of itself sufficient to entitle the shareholders to sue in their own names.” (Hodges v. New England Screw Co., 1 R. I. 312; Heath v. Erie Ry. Co., 8 Blatchf. 347.) In addition to the cases above cited, the cases of Holmes v. Abbott (53 Hun, 617), Garner v. Harmony Mills (6 Abb. N. C. 212), Gaines v. Chew (2 How. [U. S.] 619) and Brinckerhoff v. Brown (6 Johns.
Lead Opinion
In case A and «B, directors in a corporation, waste its funds during one year, and B and 0, directors, by some act not connected with the first devastavit, waste its funds in another year, the three cannot be joined in an equitable action brought by or in behalf of the corporation to compel them to account for and pay the damages sustained by these independent, wrongful acts. Wasting the property of a corporation by its directors is a tort. A is not liable for the acts of B and 0, and C is not liable for the acts of A and B, and these independent, tortious acts constitute distinct causes of action which cannot be united in one complaint. .
The interlocutory judgment should be affirmed, with costs, on the opinion of Lawrence, J., at Special Term.
Judgment affirmed, with costs.