Court Opinion

ID: 5199767
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:50:01.420155+00
Date Added: 2024-06-11T08:27:10.563763
License: Public Domain

Clarke, J. (dissenting):
I dissént upon the ground that while the complaint “ is open to criticism as lacking in that clearness and fullness of statement essential to good pleading * * * the complaint will be deemed to be sufficient whenever the requisite allegations can be fairly gathered from all the averments, though the statement of them may be argumentative and the pleading deficient in logical order and in technical language.” (Sage v. Culver, 147 N. Y. 241.)
The action is against the president of a corporation to compel him to account for moneys of the corporation drawn by him without authority from the funds of the corporation and retained and fraudulently converted to his own use, and for wrongful diversion and appropriation of the assets of the corporation to further the interests of a separate and distinct business in which he is personally interested and from which he has been and is deriving profits.
The plaintiff is a stockholder. The corporation is made a party defendant. It is quite clear that the cause of action belongs to the corporation as such. (Kavanaugh v. Commonwealth Trust Co., 181 N. Y. 121.) The allegation of the complaint that the defendant McClenahan “ has at all times had and now has the absolute control and management of the affairs of said company and the possession of its property and assets and has so managed same as though he were the sole and absolute owner thereof in his own right,” together with other allegations thereof, furnish sufficient reason upon demurrer to show that it would be idle to request the corporation to sue and gives the stockholder the right to sue on its behalf. “ Where the corporation is exclusively under the control of the-trustees and officers, whose acts and management are questioned, a demand that the corporation bring the action would be idle and fruitless, and in such cases equity permits the stockholder to bring the action in his own name.” (Sage v. Culver, supra, and cases cited.) The stockholder did not in form sue in his own name and for other stockholders who might *76choose to come in as plaintiffs. This course would have been proper. He made, however, all the stockholders defendants, though he asked no relief against any of them with the exception of the president, McClenahan, and the final prayer of the complaint was “ that said plaintiff and the stockholders of said company have such other or further judgment, order or relief as against the said James McClenahan as in the premises may be proper.”
The complaint alleges that “ the defendants herein and plaintiff are the only persons now having any interest as stockholders in said company.”
It seems to me that this course was also proper. The cause of action belonged to the corporation. It would not sue. Every stockholder had the right' to complain of the acts alleged and to bring a similar action. The reason for joining them as parties plaintiff seems-to warrant these being joined as parties defendant. It prevented a multiplicity of suits, and all parties being before the court, a proper judgment could be reached. The action was, therefore, in fact on behalf of all the other stockholders. “ Where a bill alleges maladministration on the part of the officers of the corporation, the complainant must either sue for the benefit of all having like interests as himself, so that they may come in and share in the conduct of the suit, or make them defendants.” (20 Ency. Pl. & Pr. 771; Smith v. Rathbun, 66 Barb. 402; Davis v. Peabody, 170 Mass. 397.)
The interlocutory judgment should be affirmed, with costs, with leave to the appellants to withdraw their demurrer and answer on payment thereof and within twenty days.