Court Opinion

ID: 5384624
Source: CourtListenerOpinion
Date Created: 2022-01-08 09:18:52.698061+00
Date Added: 2024-06-11T08:30:12.469183
License: Public Domain

Peck, P. J.
(dissenting). While the president of a corporation has presumptive authority to institute an action in behalf of the corporation, that authority is subject to the control of the board of directors and may be negatived, as it was here, by the president submitting his recommendation to the board and failing to carry it. A motion not carried is lost. To hold that the president may nevertheless proceed on his own to commit the corporation by legal action is to vest the president with a weighted and deciding vote. I know of no sanction in law for such power. There might be critical occasions in corporate affairs where time of action is of the essence and no adequate alternative to action by the president exists, when his claim to authority to institute suit should be upheld. But no critical condition is suggested here and an equally available alternative exists in a stockholders’ action.
The majority opinion recognizes the unusual authority it accords the president and is careful to confine it, for the present, to the peculiar circumstances of this case, where the objection to the suit is based on the opposition of directors allied with the defendants’ interests. If that should be the controlling consideration, it should not matter whether the president happens to be on one side or the other, but suit in the name of the corporation at the behest of half of the directors should always be authorized against a defendant in which the other directors *469are interested. The president may as likely be in the latter camp as the former. The decision should not turn on the happenstance that he is on the affirmative.
But, further, it seems to me that the very circumstances existing here point to the desirability of denying the president authority and relegating the parties to a stockholders* action. The litigation is a difference between evenly divided interests within the corporation. One group of stockholders is taking up cudgels against another group. Such litigation is peculiarly appropriate to a stockholders’ action. That procedure is as available, prompt and efficacious as a law action. It seems preferable in the circumstances. One side should not be entitled to maintain an action in the name and at the expense of the corporation simply because the president happens to be allied with its interests.
The order appealed from should be affirmed.
Cohn and Van Voorhis, JJ., concur with Callahan, J.; Peck, P. J., dissents in opinion, in which Shientag, J., concurs.
Order 'reversed, with $20 costs and disbursements to the appellant and the motion to vacate the summons and complaint denied. Settle order on notice.