Case ID: ad2d_18/html/0983-01.html
Source: Caselaw Access Project
Author: {"author": "", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Joseph Mook et al., Individually and as Stockholders of the American Fabrics Company, Suing on Behalf of Themselves and All Other Stockholders Similarly Situated, Appellants, v. Harry Merdinger et al., Respondents.
   Order entered on October 6, 1958 unanimously modified to dismiss the second counterclaim with leave to replead; and as thus modified, affirmed, without costs. The second counterclaim does not plead a good cause of action. It alleges that one of plaintiffs acting as an attorney for the corporate defendant committed a breach of trust in “ a matter ” delegated to him; and that he was guilty of misfeasance as a director in the same matter. Recovery of all later payments for other legal services in subsequent matters is sought by the second counterclaim. There is no allegation that such subsequent services involved a breach of trust or were otherwise less valuable to the corporation because of the earlier alleged breach. Unless there is some breach of duty or contract in the services performed and paid for, or some adverse consequences to the corporation affecting those services arising from the earlier alleged breach of trust, a basis of recovery of these payments is not demonstrated. As to the first counterclaim, it seems possible to infer from the pleading that the prior suit maintained by plaintiffs was actuated by legal malice and itself constituted a willful breach of trust in respect of the corporation. In narrowly limited circumstances damages have been held to include the defense of such an action. (O’Horo v. Kelsey, 60 App. Div. 604.) The third counterclaim is good if its different allegations are brought together, as they may be, to plead that the actions sought to be taken by defendant corporation’s executive operations committee were hindered and obstructed by plaintiffs and that plaintiffs made false allegations and charges ” against the corporation’s officers and employees from all of which the corporation suffered impairment of its credit and reputation and loss of business. Concur — Breitel, J. P., Valente, Eager and Bergan, JJ.