Case Name: Emma A. Davis, Appellant, v. Timanus J. Wilson, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1912-05-31
Citations: 150 A.D. 704
Docket Number: 
Parties: Emma A. Davis, Appellant, v. Timanus J. Wilson, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 150
Pages: 704–706

Head Matter:
Emma A. Davis, Appellant, v. Timanus J. Wilson, Respondent.
First Department,
May 31, 1912.
Corporations — suit by creditor against president -on individual claim — allegation of misappropriation of corporate funds — action at law unauthorized — complaint — allegations of claim against corporation •—• demurrer.
A suit by a creditor, brought under section 91 and subdivision 2 of section 90 of the General Corporation Law, to recover moneys misappropriated by the directors or other officers of a corporation should be brought by the plaintiff in a representative capacity.
An individual action at law cannot be maintained, for the only relief under the statute is a representative suit in equity.
Complaint in an action by a creditor against the president of a corporation to recover the balance due on her claim upon the ground that the defendant sold his stock to another director and received the note of the corporation in payment, and that the corporation received no consideration for such note, examined, and held, that, since the allegations of the plaintiff’s claim are too general and do not sufficiently set forth the existence of a valid indebtedness of the corporation in favor of the plaintiff, and since the plaintiff only seeks to recover the exact balance due on her claim, irrespective of the rights of other creditors, a demurrer by the defendant should be sustained.
Appeal by the plaintiff, Emma A. Davis, from an order of the Supreme Court, made at the New York- Special Term and entered in the office of the clerk of the county of New York on the 13th day of October, 1911.
Eli J. Blair, for the appellant.
Norman D. Fish, for the respondent.

Opinion:
Dowling, J.:
Appeal from'an order sustaining a demurrer to a complaint. The action is brought by plaintiff, claiming to be a creditor of the Wilson & Kenney Company, a Maryland corporation, to recover the sum-of $3,482.12, the balance of her claim. The complaint sets forth- the incorporation of the Wilson & Kenney Company, the ownership' by defendant. of 1,125 shares of the common stock thereof, and that he was the president and a director of the company. It then contains allegations that defendant undertook to sell his stock to one Kenney, taking in payment the note of the corporation in the sum of $12,000, with interest at twelve per cent, and the payment of the note at maturity out of the funds of the company, which received no consideration of any kind therefor. The only averments as to plaintiff's original claim are the following:
"(11) That on or about the 20th day of May, 1907, the Wilson & Kenney Company abovementioned, was indebted to this plaintiff on a promissory note made by it in the sum of four thousand ($4,000) dollars.
" (12). That the said Wilson & Kenney Company was so indebted to this defendant at the time of the misappropriation of the funds of said Wilson & Kenney Company hereinabove set forth."
These allegations are too general and do not sufficiently set forth the existence of a valid indebtedness of the corporation in favor of plaintiff. (Sampson v. Grand Rapids School Co., 55 App. Div. 163; Sheridan v. Jackson, 72 N. Y. 170.) The complaint further sets forth the filing of a proof of claim by the plaintiff with the receivers of the company, which had become insolvent, its allowance by them, payment to plaintiff of the sum of $997.92 on account of her claim, the discharge of the receivers and the dissolution of the corporation. Plaintiff claims to have been unaware of the facts as to the defendant's misappropriation of the funds of the corporation until after all these events had happened. She then avers that there is due and owing to her the sum of $3,482.12, with interest, and demands judgment in that amount.
The action is brought pursuant to the provisions of sections 90 and 91 of the General Corporation Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28). Under subdivision 2 of the former section the relief to be granted is that the moneys misappropriated by the directors or other officers shall be paid to the corporation which they represent or to its creditors. The action is a representative one, and when brought by a person authorized to sue, as provided by section 91, is properly brought by the plaintiff described in his representative capac ity. (Miller v. Quincy, 179 N. Y. 294; Powell v. Hinkley, 93 App. Div. 138.) While the nature of the relief demanded does not necessarily determine the character of the action,- the judgment demanded by the complaint herein is for a sum of money only, and for no equitable relief whatever. This, however, is but the logical conclusion of the pleading, for nowhere is there even a hint that this is a representative action, or that any one is interested therein save the plaintiff. She does not seek the repayment of the funds misappropriated either to the representative of the corporation or to the creditors. She seeks only to recover the exact balance due on her claim, irrespective of the rights of other creditors and of the proportion which her debts may bear to the total corporate indebtedness. Such an individual action at law cannot be maintained, for her only relief is a representative action in equity. The order appealed from will, therefore, be affirmed, with ten dollars costs and disbursements to respondent, and with leave to the appellant to serve an amended complaint within twenty days, on payment of costs in this court and -in the court below.
Ingraham, P. J., McLaughlin, Laughlin and Miller, JJ., concurred.
Order affirmed, with ten dollars costs and disbursements, with leave to plaintiff to amend on payment of costs.