2 N.Y.S. 298 | N.Y. Sup. Ct. | 1888
The defendants the Fort Scott, Wichita & Western Railway Company, (herein called for convenience the Fort Scott Company,) Russell Sage, Amos L. Hopkins, and Jay Gould join in the demurrer to the complaint in this action. The defendants John F. Dillon and Jay Gould, as trustees, and George J. Gould, individually, join in the demurrer to the complaint. These demurrers are substantially identical in form and language. The grounds of the demurrer are: First, that the causes of action have been improperly united in the complaint; second, that the complaint upon the face thereof; does not state facts sufficient to constitute a cause of action against the defendants demurring.
As to the first ground of "demurrer, that causes of action have been improperly joined, it is claimed that the complaint contains the following alleged causes of action, namely: (a) For the specific performance of a contract alleged to have been made by the Missouri Pacific Railway Company; (b) for damages from such railway company for breach of said contract; (c) the cancellation of a mortgage made by defendant the Fort Scott, Wichita & Western Railway Company to Gould and Dillon as trustees; (d) for removal Of all the officers and directors of the Fort Scott, Wichita & Western Railway Company, or for restraining them from acting as such officers and directors; (e) for damages from all of the directors of said Fort Scott, Wichita & Western Railway Company, for alleged mismanagement and misdirection of its affairs and revenues. If several causes of action, as enumerated, are set forth in one complaint, it would seemingly require little argument to demonstrate under our system of pleading that the demurrers should be sustained, as they are neither homogeneous, nor does each affect all the defendants. It is contended, however, that the complaint sets forth but a single cause of action, consisting of many elements, and based upon many transactions, all parts of a single scheme to injure the plaintiff; and .that the facts alleged showing the right to the several grounds of relief demanded are all part of the same transaction or transactions, connected with the same subject of action, and, taken together, amount only to a specific performance of the agreement sued upon. It is also suggested that, as the complaint contains but one count, it cannot be said to embrace several causes of action. The case of Goldberg v. Utley, 60 N. Y. 427, and Wiles v. Suydam, 64 N. Y. 173, are authorities for the position that “if
To determine the different contentions presented, a reference to the complaint itself is necessary. This, in substance, shows that the plaintiff was a stockholder of the St. Louis, Fort Scott & Wichita Railway Company. The Missouri Pacific Railway Company was the holder of the first and second mortgage income bonds of that railroad company. The St. Louis, Fort Scott & Wichita Railroad Company (hereafter called for convenience the St. Louis Company) had defaulted on both of its mortgages, and a foreclosure suit upon both mortgages had proceeded to final decree. The plaintiff, with two others, constituting a committee of the stockholders of the St. Louis Railroad Company, entered into an agreement with the Missouri Pacific Company, whereby the latter undertook to purchase, or cause to be purchased, at foreclosure sale, the property of the St. Louis Company, and that a new company should be organized, which should issue an amount of first mortgage and income bonds corresponding to the like issues of the foreclosed company, and also capital stock corresponding in amount to the issue of the old company; the bonds of the new company to be delivered to the holders of the old bonds, and the stock of the new company to be delivered to the stockholders in the old company upon a contribution by them of $10 per share, and that stock of the new company remaining over by reason of the failure, etc., of the stockholders of the St. Louis Company to deposit their stock with the Mercantile Trust Company on or before July 1,1888, and pay the contribution of $10 per share whenever called upon by the trust company to do so, on 80 days’ advertisement, should be distributed ratably to those entitled to new stock. The foreclosure proceedings were carried to sale, and the property was bid in by the Union Trust Company, trustee of tile first mortgage. Subsequently, and in the month of July, the charter of the Fort Scott & Wichita Railroad Company (hereafter called for convenience the Fort Scott Company) was filed in the office of the secretary of state of the state of Kansas. Four out of seven of the incorporators signing the charter were directors of the Missouri Pacific Railroad Company. ¡None of the directors of the new company had deposited any stock with the Mercantile Trust Company under the agreement of May 10th. The Mercantile Trust Company never advertised for payment of the assessment, of $10 per share on St. Louis Company’s stock, (it is not alleged that the Trust Company was ever called upon to advertise.) The plaintiff has tendered $10 per share on his stock to the Union Trust Company, the Mercantile Trust Company, the Missouri Pacific Company, and the new Fort Scott Company, and has demanded the delivery to him of the stock of the Fort Scott Company, to which he alleges himself entitled under the agreement of May 10th, but these parties have omitted and refused to deliver such new stock to him. The new company issued its bonds, secured by a first mortgage, to the amount of $4,666,-UÜ0, and its second mortgage income obligation for $1,000,000, and 70,000 shares ($7,000,000) of its capital stock, to the Union Trust Company, in payment for the property of the old St. Louis Company, acquired by it in purchase from the Union Trust Company. The income bond for $1,000,000 was secured by an income and second mortgage to the defendants Dillon and Gould, as trustees. The stock issued to the Union Trust Company is alleged to be still in its possession. It is alleged that the directors of the Fort Scott Company, or those controlling the company, fraudulently and collusively managed its property in the interest of the Missouri Pacific Company, and so as to bring about, at an early date, the foreclosure of its two mortgages; and it is also alleged that the failure of the Missouri Pacific Company to carry out the agreement of May 10th has resulted in loss and damage to the plaintiff; and that the acts of the directors of the Fort Scott Company in pretending to organize it, and in the issue of its securities, have been fraudulent and collusive, and
The entire scope of this complaint, it is contended, is to procure what will in substance amount to a specific performance of the contract of May 10, 1887, made by the Missouri Pacific Railway Company. That all-the specific relief claimed by plaintiff, by way of damages against the Missouri Pacific Railway Company, or for the cancellation of the unwarranted mortgage given for the income bond to Dillon and George J. Gould, and for the removal or enjoining of the. officers of the organized road who have no stock in the company, and who liave never paid, or become liable to pay, anything for.the capital stock thereof, or for damages against the unauthorized directors for the mismanagement and misdirection of the revenues and affairs of the - company while in possession,—that all these are but parts of the relief essential to give to the .plaintiff, and those in the same position with him, the rights which they would have had, had they been permitted to reorganize the road on or after July 2,1887, before which day the defendants Gould, Sage, and the others had commenced the unwarranted and unauthorized reorganization alleged in the complaint. There is no doubt that it was clearly competent to state a cause of action in the same complaint against the Missouri Railway Company for specific performance of its agreement on May 10th, and for damages for breaches of that agreement, as are alleged.. In addition, however, the complaint contains clear and distinct causes of action against the directors of the Fort Scott Railway Company to disfranchise and depose them from office, and for damages for their malfeasance, whereby the earnings and revenues of that company have been diverted to the Missouri Pacific. It is difficult to see what interdependence there is between these causes of action. They cannot be said to relate to the same transaction or transactions connected with the same subject of action. The cause of action upon contract against the Missouri Pacific is a cause-of action in the plaintiff’s own right. The causes of action against the directors of the Fort Scott Company are those which the plaintiff acquires derivatively, and can enforce only in the right of the corpora
As has been well stated in the argument, there is nothing in the organization of the Fort Scott Company which relieves an action against its directors for mismanagement, diversion of revenues, etc., from the incidents and characteristics of such an action. For wrongs to this corporation committed by its officers, redress belongs to the corporation itself, in the first instance, as would be the case with any other corporation subjected to like wrongs. And such a cause of action in favor of stockholders is derivative from the corporation, and accrues to the stockholder only upon the refusal of the corporation to act. The mismanagement and malfeasance of the directors, alleged in the complaint, have no relation to the organization of the company, but are wrongs subsequent to, and entirely disconnected from, the organization. Until the plaintiff has recovered upon his contract with the Missouri Pacific the shares of stock to which he alleges himself to be entitled under that contract, lie has no legal status whatever to enforce in the name of the Fort Scott, Wichita & Western Railway Company, or in its behalf, any claim which it may have against its officers for malfeasance in office. The stock of the Fort Scott Company is in the hands of the trustees of the Missouri Pacific, and therefore within reach of any recovery which the plaintiff may have as against the Missouri Pacific. But until he has acquired this stock, .his rights are those of contract with the Missouri Pacific alone, and he has no relation to a claim upon the Fort Scott, or, through it, any demand upon the directors. The Fort Scott Company had no part in, and has no concern with, the agreement between the plaintiff and the Missouri Pacific Company. It was not in existence at the time the agreement was made. There is no allegation that it has ever ratified' or become a party to the agreement. It is at entire liberty to disregard it. The promotion by the Missouri Pacific of the organization of the Fort Scott Company in no way affects the absolute independence of the company. “A corporation is not responsible for acts performed or contracts entered into before it came into existence by promoters or other persons assuming to bind the company in advance.” 1 Mor. Priv. Corp. § 547, and cases cited. Such contracts only bind the individual who makes them. Munson v. Railroad Co., 103 N. Y. 58, 8 N. E. Rep. 355.
Taking into consideration the allegations of the complaint, and the relief asked, it is evident that two separate and distinct causes of action are pleaded; and, even if they had been brought against the same defendant, it is doubtful if they could be united in the same complaint. In Paulsen v. Steenbergh, where two causes of action were pleaded,—one against the defendant as an individual, and one against him as president of the company,—the court in that case said: “The plaintiff disclaims any intention to allege but one cause of action; but the relief asked for shows that the pleader had in his mind two claims,— one in the plaintiff’s favor against the defendant, and the other in favor of the corporation against the defendant in his official capacity. The causes of action are improperly joined, and the objection is properly taken by demurrer. ” 65 How. Pr. 342. It has also been held to be an improper joinder of causes of action for equitable relief against a corporation, with a claim for damages against individual defendants. House v. Cooper, 16 How. Pr. 292. Another argument against uniting these causes of action is that the one against the Missouri Pacific is upon contract, while that against the directors of the Fort Scott Company is in tort. Actions in contract and tort may not be united in the same complaint. Compton v. Hughes, 38 Hun, 380; Nichols v. Drew, 94 N. Y. 22. It is unnecessary, in view of the foregoing, to analyze the complaint for the purpose of determining whether causes other than those mentioned are set forth in the complaint, and improperly united. A single instance of two misjoined causes of action is suf
