25 N.Y.S. 560 | N.Y. Sup. Ct. | 1893
There is no conflict in the evidence in this case. All of the material facts were testified to by the officers and employes of the defendants, who offered no evidence except the order of December 30, 1879, discharging Hugh J. Jewett as receiver of the Erie Railway Company. By the transactions set forth in the statement of facts, the Erie Railway Company and its successor, the Hew York, Lake Erie & Western Railroad Company, have -acquired the property reserved in the lease, without any consideration being paid therefor. This was effected through the complaint board of directors of the Buffalo, Bradford & Pittsburgh Rail
“The action to recover such losses, as before observed, should, in general, be brought in the name of the corporation; but, if it refuses to prosecute, the stockholders, who are the real parties in interest, will be permitted to sue in their own names, making the corporation a defendant Greaves v. Gouge, 69 N. Y. 154. And that course of proceeding is also allowed if it appears that the corporation is still under the control of those who must be made the defendants in the suit. See Butts v. Wood, 37 N. Y. 317; Robinson v. Smith, 3 Paige, 222. 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. Screw Co., 1 R. I. 318; Heath v. Railway Co., 8 Blatchf. 347. If they could not be permitted, in such cases, to assert their own rights in a court of equity, the directors, so long as they remained in office, could set them at defiance.”
The Buffalo, Bradford & Pittsburgh Railroad Company was not a party to the action for the foreclosure of the mortgage under the judgment in which the property of the Erie Railway Company was sold, and acquired by the Hew York, Lake Erie & Western Railroad Company, and the rights of the Buffalo, Bradford & Pittsburgh Railroad Company are not cut off by the judgment and sale;
Upon, the discovery of the fraud, an action could be maintained by a shareholder (the corporation refusing to sue) to set aside the deed of December 30, 1876, and the subsequent conveyances and liens, but' to such an action the subsequent grantees and holders of liens are necessary parties; or an action could be maintained against the parties to the fraud, and those who subsequently aided in its consummation, to compel them to account, as trustees ex maleficio, for whatever they have received through the wrongs which they committed. To such an action the subsequent grantees and lienors are not necessary parties, for no relief could be granted against them; and in this case, for a stronger reason, the Northwestern Mining & Exchange Company and the New York, Lake Erie & Western Coal & Railroad Company are not necessary parties to such an action, for the stock of both corporations is entirely owned by the New York, Lake Erie & Western Railroad Company.
It is asserted that in no event can Jewett, as receiver, be compelled to account. This may or may not be so. The conveyance of December 30, 1876, by which the Buffalo, Bradford & Pittsburgh Railroad Company was deprived of its property, was executed when Jewett was acting as the receiver of the Erie Railway Company; and for several years he, as receiver, received a portion of the rents and profits of the lands conveyed. We think he should be required to account, and to show how these receipts were disposed of. It may be that it will appear that his accounts rendered to the court were so stated that its order approving of his transactions, and discharging him, will be a defense, but this cannot be determined in advance of the accounting.
Under the evidence contained in this record, we can seen no answer to the plaintiff’s claim that the New York, Lake Erie & Western Railroad Company should be required to account, and pay over to the plaintiff the rents and profits acquired by it through these fraudulent dispositions of the property of the corporation in which the plaintiff is a shareholder.
The defendants not having pleaded that the subsequent grantees of the Buffalo, Bradford & Pittsburgh Railroad Company, and the persons and corporations who have acquired liens upon the property, were necessary parties, they were not in a situation to ask to have the action dismissed on the ground that these corporations and persons should have been brought into the action. Code Civil Proc. § 499. • When a defect of parties is pleaded, and the plea is sustained by the evidence, the court may refuse to allow The the cause to stand over, and dismiss the suit; but when a defect to parties is not pleaded, and the necessity for other parties to the action appears on the trial, the plaintiff not being guilty of loches, the suit should not be dismissed, but ordered to stand over, on proper terms, to enable the plaintiff to bring the necessary parties before the court. Colt v. Lasnier, 9 Cow. 320; Van Epps