Court Opinion

ID: 5204738
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:59:15.946791+00
Date Added: 2024-06-11T08:27:15.911426
License: Public Domain

McLaughlin, J. (dissenting):
This action was brought against the Yates &'Porterfield Trading Company, a foreign corporation, and one Brown, to recover damages from the latter for the breach of a contract entered into between him and a copartnership by the name of Yates & Porterfield. The corporation demurred to the complaint upon the ground that it did *509not state facts, so far as it was concerned, sufficient to constitute a cause of action. The demurrer was overruled and the corporation has appealed.
The complaint alleges the formation of the corporation under the laws of the State of Hew Jersey; that the plaintiff is a stockholder and brings the action on behalf of himself and all others similarly situated; that the corporation was organized for the purpose of acquiring the business and good will of a copartnership carried on under the firm name and style of Yates & Porterfield in the city and State of Hew York and elsewhere, and upon its incorporation it took over and acquired the going business of that firm, for which it issued its entire capital stock, consisting of' 2,000 shares of preferred and 2,000 shares of common stock of the par value of $100 per share ; that the defendant Brown was instrumental in organizing the corporation and entered into an agreement with the members of the copartnership of Yates & Porterfield, by which he promised and agreed with them that in consideration of their transferring and assigiiing to the corporation 1,130 shares of the preferred stock, and transferring and assigning to him 1,020 shares of the common stock and 50 shares of the preferred stock, and of the payment of $1,000 in cash, he would sell and dispose of at par at least 500 of the 1,130 shares of the preferred stock to be transferred to the corporation ; that the members of such copartnership performed their part of the agreement, and that Brown failed to perform in that he only sold 100 of the 500 shares of stock which lie agreed to sell; that, by reason of his failure to carry out his contract, the corporation has been rendered insolvent; that the plaintiff has requested the directors, to bring an action in the name of the corporation against Brown, which they have failed and neglected to do; and the judgment demanded is that the corporation recover the damages which it and the stockholders have sustained by reason of Brown’s failure to perform.
Conceding, as we must for the purpose of determining the .validity of the complaint, the truth of the facts stated, as well as such facts as may reasonably and fairly be inferred from them, I do not think a cause of action is stated against the corporation. It is not. alleged, nor is there anything in the complaint from which it can be inferred, that the contract between Brown and the mem*510hers of the copartnership' of Tates & Porterfield was made for. the benefit of the corporation which was thereafter to be formed, or that the contract was assigned to. the corporation after it was forrnpd, or that it then or at any other time ratified or adopted the contract. It is to be. presumed that the corporation received full value for the stock which it issued. The fact that the firm of Tates & Porter-field, under an arrangement with Brown, saw fit to give to- the cor poration some of their stock, which Brown in violation of his agreement did not sell, in no way gave the corporation .a cause of action against him. The stock was, doubtless, given to the corporation by the members of the copartnership of Tates & Porterfield because they believed it would enhance the' value of the balance of the stock which they held, and they -may have a. cause of action for damages against Brown, but that question is not before us. Brown has never agreed with the corporation to do anything for it, nor has it ever agreed that he could sell at least 500 shares of the stock held by it at par. A valid contract presupposes the meeting of minds of the contracting parties. A fair test of whether this complaint states a cause of action against the corporation is this: Suppose Brown had sued the corporation to compel it to deliver to him for sale at par the 400 shares of the stock which lie had not sold, could it be -seriously contended that such an action, upon the facts here set otit, could be maintained ? Or suppose, the stock could have been sold for more than par, would the corporation have been justified in turning it over to Brown at par ? I think each question must be answered in the negative.
I think this demurrer should also have been sustained upon another ground. There is no allegation in the complaint to the effect that the corporation itself had a right to or could have maintained the action in this State, and if it could-not then the directors properly refused to bring the action. The General Corporation Law provides that no foreign stock corporation, other than a moneyed corporation, shall do business in the State of New York without having first procured from the Secretary of State a certificate that it has complied with all the requirements of law to authorize it t,o do business in the State (§§ 15 and 16) ;* and section 181 of the Tax *511Law* provides that no action shall be maintained or recovery had in any of the courts in this State by such foreign corporation without first obtaining a receipt for the license fee required to be paid. This corporation, according to the allegations of the complaint, was formed for the purpose of taking over and conducting the business which the firm of Yates & Porterfield carried on in 'this State, at least in part: Before the corporation could do business in this State it had to obtain the certificate authorizing it to transact such business and for its failure in this respect it was prohibited from maintaining an action in the courts of the State. The complaint, therefore, should contain an allegation to the effect that the corporation itself could have maintained the action against the defendant Brown. If it could not, the directors obviously were justified in refusing to bring the action.
The complaint in an action of this character should state the facts showing a cause of action in favor of the corporation in exactly the same manner and with the same detail as would be proper in case the corporation itself had brought the action. (Kavanaugh v. Commonwealth Trust Co., 181 N. Y. 121.) This court has held that, unless it appears in the complaint in an action brought by a foreign corporation that it has obtained the certificate referred to in section 15 of the General Corporation Law, facts are not stated sufficient to constitute a cause of action. (Halsey v. Jewett Dramatic Co., 114 App. Div. 420 ; Welsbach Co. v. Norwich Gas & El. Co., 96 id. 52; affd., 180 N. Y. 533 ; Emmerich Co. v. Sloane, 46 Misc. Rep. 513; affd., 108 App. Div. 330, on opinion of court at Special Term.) Had the corporation itself, therefore, brought the action upon the facts stated in this complaint, a cause of action .would not have been stated.
The views thus expressed are not in conflict with what is said in South Bay Co. v. Howey (113 App. Div. 382) and Portland Co. v. Hall & Grant Construction Co. (121 id. 779). What was field in the former case was that inasmuch as it did not appear in the complaint of a foreign corporation, suing in this State, that it was a stock corporation, it was error to dismiss the complaint because it did not contain an allegation that the corporation was authorized to *512do business in this State — the presumption being that the corporation had a right to sue in this State and none but foreign stock corporations came within the prohibition of the' statute. In the latter case it was held that the trial court erred in admitting proof of the fact that plaintiff was a foreign stock corporation — in. the absence of an allegation in the'pleadings to that éffect —and after receiving such proof, dismissing the complaint on that ground.
I am unable, for the foregoing reasons, to concur in the opinion of Mr. Justice Patterson. I think the judgment appealed from should be reversed and the demurrer sustained, with leave to plaintiff to serve an amended complaint on payment of the costs in this court and in the court below.
Ingraham, J., concurred.
Judgment affirmed, with costs, with leave to- defendant to withdraw demurrer and to answer on payment of costs.

 See Laws of 1892, chap. 687, § 15, as amd. by Laws of 1901, chaps. 96, 538, and Laws of 1904. chap. 490 ; Id., § 16, as amd. by Laws of 1895, chap. 672.— [Rep.