Case Name: The People, App'lts, v. William J. H. Ballard et al., Resp'ts
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1890-02-14
Citations: 29 N.Y. St. Rep. 926
Docket Number: 
Parties: The People, App’lts, v. William J. H. Ballard et al., Resp’ts.
Judges: 
Reporter: New York State Reporter
Volume: 29
Pages: 926–933

Head Matter:
The People, App’lts, v. William J. H. Ballard et al., Resp’ts.
(Supreme Court, General Term, First Department,
Filed February 14, 1890.)
Corporations—Action against directors — Code Crv. Pro., §§1781, 1782.
.The people cannot maintain an action under §§ 1781,1782, of the Code, against the directors of a private corporation to redress a strictly private, wrong.
(Daniels, J., dissents.)
Appeal from a judgment dismissing the plaintiff’s complaint on trial at special term. The facts appear in the opinion of Daniels, J., dissenting.
J. Langdon Ward, for app’lts; Tredwell Cleveland and Joseph S. Choate, for resp’ts.

Opinion:
Barrett, J.
The question is here presented whether the people can maintain an action under § 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 the 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 1848, 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 pleading 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 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 those legal 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, 27 N. Y. State Rep., 138, 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 subds. 1, 2, 5 and 6 of § 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 reviser's 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 anywise 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 § 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 interests to enforce that right by action. His judgment is conclusive as to the propriety and wisdom of bringing the action, not of course of 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 § 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 Bevised Statutes or the Code.
The public interest which authorizes the maintenance of the action may doubtless be ultimately 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.
H 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 this 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.
Van Brunt, P. J.
I concur in the result of the within opinion. An examination of the cases decided under the Revised Statutes shows that the courts, by judicial construction of the provisions of the statutes, had so limited their operation that such statutes-had not the force which the plain meaning of the words employed gave to them.
The provisions of the Code upon this subject are substantially the same as those contained in the Revised Statutes, and should receive the same construction until the interpretations placed upon the Revised Statutes are reconsidered.
It follows that the decision in respect to the sections of the-Code in question, made in the case of The People v. Lowe, 47 Hun, 577; 15 N. Y. State Rep., 105, was erroneous.