Court Opinion

ID: 5194164
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:40:46.95814+00
Date Added: 2024-06-11T08:27:01.102139
License: Public Domain

Patterson, J. (dissenting):
I do not concur in the views expressed in the opinion of the majority of the court in this case. I agree with the general propo*536sition that the courts of this State will not exercise visitatorial power-over foreign corporations and that they have no disposition to interfere in the management of the affairs of such corporations. But when foreign corporations become domesticated in this jurisdiction they subject themselves tó such constitutional statutory provisions as may exist relating to them. By the act of 1870, extending to-foreign corporations the provisions of the Revised Statutes relating to judicial supervision of domestic corporations, which provisions are-now included in the Code of Civil Procedure, the State of New York has made applicable to foreign corporations the remedies which were available to certain persons to prevent acts of spoliation by directors of corporations and the perpetration of frauds, where such corporations carry on business within the State or have within the State a business or a fiscal agency or an agency for the transfer of stock. While every action authorized by section 1781 of the Code of Civil Procedure against a domestic corporation may not be available against a foreign corporation, some of them plainly are, namely, those arising under the 1st, 2d, 5th and 6th subdivisions of that section. ' The courts of this State have not hesitated to entertain actions which relate to the acts of directors of foreign corporations where such actions are brought by residents of the State, Such are Prouty v. Mich. Southern & N. I. R. R. Co. (1 Hun, 655) and Boardman v. Lake Shore & Mich. Southern Ry. Co. (81 N. Y. 157).
The present action is brought under subdivisions 1 and 2 of section. 1781 of the Code of Civil Procedure. If this were a suit by a-stockholder, as such, the jurisdiction of the court would not be challenged. The reasons for its exercise are well stated by Cullen,. J., in Ernst v. Rutherford & B. S. Gas Co. (38 App. Div. 392). An action will be entertained in the courts of this State by a stockholder to prevent spoliation and the fraudulent disposition of property of a foreign corporation where the directors are conspiring to do such acts within this State. (Hallenborg v. Greene, 66 App. Div. 590.) Both of those cases in some degree relate to the internal, management of a corporation and to- the acts of the directors thereof. They indicate that under certain circumstances the courts of this State will, to prevent frauds upon stockholders or creditors, interfere with the management of foreign corporations, and it is to, be *537observed that subdivision 1 of section 1781 relates merely to compelling trustees, directors, managers or other officers to account for official conduct in the management and disposition of the funds and property of corporations committed to their charge. It does not relate to any other subject,- and subdivision 2 of the same section refers to compelling such trustees, directors, managers, or other-officers to pay to the corporation which they represent or to its creditors any money and the value of any property which they have acquired to themselves or transferred to others or lost or wasted by a violation of their duties. If jurisdiction of the subject-matter exists, the question is as to the right of the plaintiff to sue as a director. The statute (Code Civ. Proc. § 1782) designates the persons who may bring the action, and I see no reason why a resident director may not be authorized to enforce the remedy against those of his fellow-directors who have perpetrated or intend to perpetrate acts 'which have resulted or may result in the diversion, waste or fraudulent disposition of corporate property.
Hatch, J., concurred.