15 Daly 245 | New York Court of Common Pleas | 1889
This action is brought to obtain an accounting from the defendants Seymour for moneys charged to have been unlawfully drawn by them
In reply to the motion to discontinue the action the affidavit of Mrs. Ayer, the president of the company, who instituted this action in the name and on behalf of the company, is read, in which she shows that of the 1,000 shares of the stock of the company she owns 968, of which 498 are pledged to defendant James W. Seymour to secure a debt which she is informed and believes has been paid; that she has begun an action to recover that stock; that the trustees A. Lewis Seymour and Albert Watson, own each one share of stock; that no meeting of the board of trustees has been held for a year; no annual meeting of the stockholders has been held since the formation of the company in 1887; a meeting of the stockholders has been called by her as president, by
The question presented for decision upon the motion to discontinue the action and dismiss the complaint is whether the president of a corporation, being a trustee, may authorize and maintain an action in the name of a corporation without the authority of the board of trustees, and against the express direction of the board. Ordinarily he may not. In the board of directors or trustees is vested the authority to undertake litigation on behalf and in the name of the corporation. But this rule has manifestly no application where a majority of the directors or trustees are engaged in the wrongful diversion of the corporate funds, or other injury to its business, and the neglect to sue or the resolution to discontinue suit or suits already commenced to recover the moneys diverted, or to remedy the wrong and injury committed, are simply acts in furtherance of the said breaches of trust. In such a contingency any trustee not implicated in the wrong may authorize the bringing of the action which' the board of trustees should have authorized. The minority' of the board, and any single member of it, is not divested of his office or of its powers and duties by the unfaithfulness of his colleagues. So it was held in the case of Church v. Bowden, 14 Abb. N. C. 356. It was said that, the majority of the trustees by their conduct having virtually abdicated their official functions so far as the bringing of suit was concerned, the remaining trustee might sue in the name of the corporation. It was added, however, that in a case of doubt as to which of the trustees is in the right it would be inexpedient to permit the minority to sue in the name of the corporation. We have no difficulty of the kind in this case, it being conceded by the counsel appearing for the motion to discontinue that if the action might be authorized by a single trustee the plaintiff was entitled to the injunction pendente lite which it applied for. Upon principle and authority I hold that the action may be authorized and maintained by one trustee under the circumstances set forth in the complaint and affidavits, notwithstanding the objection of a majority of the board of trustees. Motion to discontinue the action and dismiss the complaint denied. Motion to continue the injunction granted, with $10 costs to plaintiff.