Case Name: THE PEOPLE OF THE STATE OF NEW YORK, Appellant, v. WILLIAM J. H. BALLARD and Others, Respondents
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1890-02
Citations: 63 N.Y. Sup. Ct. 125
Docket Number: 
Parties: THE PEOPLE OF THE STATE OF NEW YORK, Appellant, v. WILLIAM J. H. BALLARD and Others, Respondents.
Judges: 
Reporter: Supreme Court Reports (Hun)
Volume: 63
Pages: 125–136

Head Matter:
THE PEOPLE OF THE STATE OF NEW YORK, Appellant, v. WILLIAM J. H. BALLARD and Others, Respondents.
Attorney-general only cmthorieed to Tiring a suit to call the trustees of a corporation to account when public intes'ests a/re involved — not to settle private disputes between the trustees and certain of the stockholders.
In an action t>roug]it by the attorney-general, in the name of Tlie People, to compel the defendants, who were trustees and officers of the Spring Yalley Hydraulic Gold Company, a corporation created under the general manufacturing act of 1848, to account for their official conduct in the management and disposition of the property of the company, and to pay to the company the value of' the property which they had transferred to other corporations in violation of their official duties, it appeared that the trustees were guilty of a technical wrong to a minority of the stockholders, dissenting from their action, in transferring without their consent the company’s property to a new corporation, but. that such action on the part of the trustees was necessary to save the property, - and was, in truth, a substantial benefit to all concerned.
Held, that while the non-assenting stockholders had a right to refuse to accept the benefit conferred by this action of the trustees, it was not a proper case for the attorney-general to bring an action in the name of the People to compel the trustees to account for such official conduct on their part.
The attorney-general of the State of New York, under the provisions of section 1808 of the Code of Civil Procedure, authorizing him to bring an action, if, in his opinion, “the public interests ” require it, has no authority to bring an action in the name of The People for the settlement of strictly private disputes between the trustees and a portion of the stockholders of a private corporation not charged with any public duties.
Where it appears that an action has been brought in the name of The People by the attorney-general, not upon the relation or for the benefit of creditors of a corporation, but solely in the interests of certain stockholders thereof, who are dissatisfied with the action taken by its trustees, it is competent for the court to inquire into the question as to whether there is an enforceable public interest involved in the action.
Appeal by plaintiff from a judgment dismissing the plaintiff’s •complaint, entered in the office of the clerk of the county'of New York on the 23d day of March, 1889.
The action was brought, pursuant to the authority contained in .sections 1781 and 1782 of the Code of Civil Procedure, to compel the defendants, who were trustees and officers of the Spring Yalley Hydraulic Gold Company, to account for their official conduct in the management and disposition of the property of the company, .and to pay to the company the value of the property which they bad transferred to other corporations in violation of their official duties. The defendant, the Spring Yalley Hydraulic Gold Company, was incorporated on February 11,1880, under the general manufacturing .act of the State of New York, passed February 17, 1848.
The court found that there was no evidence in this action of a public grievance, and that the People, having no interest in the subject-matter of the action, or of any of the acts therein complained of, could not maintain the action.
J. Lwigdon Ward, for the appellant.
Treadwell Cleveland and Joseph U. Choate, for the respondents.

Opinion:
Barrett, J.:
The question is here presented whether the People can maintain .an action under sections 1781 and 1782 of the Code, to redress a .strictly private wrong ? There is not a suggestion of public right or interest in the case.
The corporation is not a public one, nor is it a private corporation with public duties. The People of the State have no special interest -to be subserved by tlie proper and effective administration of the franchise, nor have the people of any locality in the State, nor has any class of citizens. It is, in fact, an ordinary business corporation, organized under the general act of 1818, for the purpose of mining in California, and it is, therefore, essentially what is known as a private corporation.
The attorney-general has brought this action in the name of the People alone. There is no relator. It does not seem to have been brought for the benefit of creditors, for it nowhere appears that any creditor has invoked the attorney-general's authority, and, indeed, the creditors were apparently provided for by the arrangement which the action questions. It is quite clear, upon the face of the complaint, that the action is solely in the interest of certain stockholders who are dissatisfied with the action of the trustees. The entire dispute, both upon the pleadings and the proofs, is between the trustees and a small minority of stockholders.
For the action complained of the trustees have the authority of a large majority of the stockholders. By that action they undoubtedly saved the property of the company for the ultimate benefit of both stockholders and creditors. They were, however, guilty of a technical wrong to the minority in transferring, without their consent, the company's property to the new California corporation ; and, although this action of theirs was necessary to save the property, and was, in truth, a substantial benefit to all concerned, yet the non-assenting stockholders have a right to refuse the benefit and to insist that they shall not be saved, against their will, by an act in excess of the trustees' authority. This is precisely what this case comes to, and, while no court should deny to the minority their full legal rights under the circumstances, it seems to me that they might well have been left to secure these rights by action in their own name and at their own risk and expense. The question of The People's right, as quasi statutory guardian for these stockholders, to maintain this action, was very fully and thoroughly considered by Mr. Justice Ingraham at Special Term, and his conclusion was adverse to the right. The same question was discussed by Judge Earl in the late case of the People v. Lowe (117 N. Y. 175), and that learned judge also denied the right. Unfortunately, the decision in that case was placed upon another ground, and the question was not determined by the Court of Appeals. Judge Earl's opinion, therefore, is only his individual judgment, but, as such, it is entitled to the consideration always due to the reasoning of this distinguished jurist. My own judgment, upon a careful examination of the statute, in the light of these opinions, and after due consideration of the history of the law on the subject down to the passage of the Code of Civil Procedure, is that the legislature never intended to afford this as a concurrent remedy in ordinary disputes between stockholders and trustees of private corporations. It may be going too far to say that the actions provided for in subdivisions 1, 2, 5 and 6 of section 1781 of the Code, must relate, when brought by the Attorney-General in behalf of the People without a relator, to public corporations or corporations clothed with public duties. The wording of the revisers' notes to that provision of the Revised Statutes from which this section of the Code was, in part, drawn, gives color to this view; but the language used by the revisers in the act seems broader than the intent expressed in the note. That language may, without affecting the result in the present case, be deemed broad enough to cover cases where the public is in any wise interested in the management and disposition of the funds and property of a corporation, public or private, or in the faithful administration of the duties imposed upon its trustees. But, to maintain such an action, there must be some sort of public interest. That seems to be contemplated by the language used in section 1808, where the Attorney-General is authorized to bring the action, if, in his opinion, " the public interests " require it. His judgment on that head, however, does not conclude the inquiry as to whether there is an enforceable public interest involved.
A public right may be involved and the attorney-general may or may not deem it in the public interest to enforce that right by action. His judgment is conclusive as to the propriety and wisdom of bringing the action, not, of course, as to the right to maintain it. The reference in the section, however, to public interests is significant, and I cannot but think that it is illustrative of what was contemplated by sections 1781 and 1782. The history of the law on the subject also favors this construction, and is opposed to a literal reading of either the Revised Statutes or the Code.
The public interest which authorizes the maintenance of the action may, doubtless, be intimately associated with private right. But I cannot believe that the door was opened as widely as the appellant claims, or that it was intended to permit the Attorney-General, upon behalf of the People, to interfere in strictly private disputes, entirely dissociated from public interests, merely because such disputes happen to occur within corporate lines.
Mr. Justice Daniels evidently appreciates the difficulties which must follow his conclusion. For he acknowledges that, owing to the estoppel operating upon the assenting stockholders, the liabilities of the trustees must necessarily be limited to the measure of redress due to the non-assenting stockholders. The statute, however, authorizes no such limitation, nor does it make any provision for the settlement of the equities as between the assenting and non-assenting stockholders. How would it be possible in an action to which these stockholders are not parties to go into such questions ? To take . proof and adjudicate that some were estopped and others not ? To bind the People thereby and to shape the judgment with relation thereto ? The statute contemplates nothing of the sort. On the contrary, it distinctly provides for a judgment compelling the derelict trustees to pay to the corporation or to its creditors the value of any property which they have transferred to others by a violation of their duties.
And that, indeed, is the judgment which the People here demand. They do not; and they could not, ask for a judgment compelling the trustees to pay to the stockholders the proportionate value of the property transferred, that is, proportionate to the amount of the non-assenting stock. Nor could the court compel the trustees to pay such proportionate sum to the corporation for the use and benefit of the non-assenting stockholders. It follows that the People were not entitled, upon the pleadings and proofs, to such a judgment as the statute authorizes, and that the complaint was properly dismissed.
If the non-assenting stockholders had brought their action against the trustees, they would have been.met with proof, in mitigation of damages, of the almost hopeless condition from which the property was rescued by the united action of the trustees and the majority of the stockholders. By the present action, brought, no doubt, in perfect good faith by the attorney-general upon their representations, the non-assenting stockholders are enabled to evade this situation, and. if they were successful, the statute would have been utilized in the name of equity to work real injustice.
The judgment should be affirmed, with costs.