112 Misc. 464 | N.Y. App. Term. | 1920
The action was brought against the defendant who was the president and director of a corporation known as Beauman-Basch, Inc., in his individual capacity, on the ground, as the camplaint alleges, that in December, 1917, when the above named corporation ceased conducting business, it was insolvent, and that the defendant, with knowledge of such insolvency and during the process of liquidation, disbursed all the moneys of the corporation among certain of its creditors only, and failed and neglected to apply any portion thereof toward the payment of a judgment
Section 90 of the General Corporation Law, upon which the complaint was framed and the action brought, provides as follows:
“An action may be maintained against one or more trustees, directors, managers, or other oEcers of a corporation, to procure a judgment for the following purposes, or so much thereof as the case requires:
“ (Sub. 2) Compelling them to pay to the corporation, which they represent, or to its creditors, any money, and the value of any property, which they have acquired to themselves, or transferred to others, or lost, or wasted, by or through any neglect of or failure to perform or by other violation of their duties.”
We think it is clear that an action brought under this section of the Corporation Law is one for the benefit
In People v. Equitable Life Assurance Soc., 124 App. Div. 714, an action based on section 1781 of the Code of Civil Procedure, subsequently re-enacted in 1909 as section 90 of the General Corporation Law, it was likewise held that this form of action is one in equity. Justice Laughlin there said: “ Each of the parties there named has the same right to bring the action specified in section 1781 of the Code of Civil Procedure, and while I think it is quite clear that the action is to be brought in equity, * * * there must still be alleged the facts to show that the defendants have violated their duties and that such violation of duty has resulted in a loss of money or property to the corporation which the corporation is entitled to recover.”
Respondent is evidently mistaken in citing Cullen v. Friedland, 152 App. Div. 124, as authority for the maintenance of this form of action at law, for that action was tried at Special Term, as the report discloses. Nor does that case or Buckley v. Stansfield, 155 App. Div. 735, or Darcy v. Brooklyn & New York Ferry Co., 127 id. 167, support his claim that the action is an individual and not necessarily a representative one. In none of these authorities were there any other judgment creditors than the one maintaining the action; and Foote, J., in the Buckley case assumes that the Appellate Division of this department had no intention of overruling the Davis case in their decision in Cullen v. Friedland, supra, basing the decision of that case, however, on the distinct ground that the question was not involved in the appeal, since it had neither been raised or advanced before the referee.
In the instant case the action was brought by the
We think it plain from the above cited cases that the plaintiff has misconceived his remedy in bringing an action at law for the benefit of his judgment alone instead of in equity for the benefit of himself and other creditors similarly situated.
Upon the foregoing, the judgment is reversed, with costs, and complaint dismissed.
Bijur and Mulleh, JJ., concur.
Judgment reversed, with costs.