« AnteriorContinuar »
tion it was originally executed. They have, with permission certain conditions for the not acquired any rights upon the faith of its service of process, and the principle upbeld The contracts which they seek to enforce was that the company could not defeat the were not secured by defendant from those rights of the policy holder and by an atwho expected protection under it. We not tempted withdrawal from the state force only think that it is legal and equitable that him into some foreign jurisdiction. defendant's revocation should be effective as Mutual Reserve Fund Life Association v. against these parties, but that it would be | Phelps, 190 U. S. 147, 23 Sup. Ct. 707, 47 L extremely inequitable to hold the reverse. Ed. 987, was based upon the same principle
The learned counsel for the plaintiff has of upholding in favor of a citizen of Kencalled to our attention many cases which he tucky who had received from the plaintif claims are opposed to the views expressed. in error a policy of insurance while it was While some of them may contain isolated ex. regularly transacting business in that state, pressions which seem to sustain his view, the right to Institute action by service of we think that all of them which ought to process upon the insurance commissioner be at all controlling upon this court may in accordance with the provisions of a statbe clearly distinguished from the case at ute which permitted the company to transbar, and we shall only refer briefly to a few act business in that state under conditiong of them.
allowing such service of process, notwithIn Connecticut Mut. Life Ins. Co. v. Sprat standing the company after issuing the poliley, 172 U. S. 602, 19 Sup. Ct. 308, 43 L. Ed. cy had attempted to withdraw from the 569, it appeared that plaintiff in error had state and cancel the right of service upon been engaged for many years in transacting the commissioner. a general insurance business in Tennessee In Birch v. Mutual Reserve Life Ins. Co., under a statute which, amongst other things, 91 App. Div. 384, 86 N. Y. Supp. 872, affirmprovided that any corporation that had any ed without opinion 181 N. Y. 583, 74 N. EL transaction with persons or concerning any 1115, judgment was recovered in the state of property situated in the state through any North Carolina upon various contracts of agency whatever acting for it within the life insurance executed in that state while state should be held to be doing business the defendant was regularly engaged in within the meaning of the act, and also transacting its life insurance business there. that process might be served upon any Action was commenced by service of process agent of the corporation found within the upon the insurance commissioner, and it county where the suit was brought no mat was held that such service was good, alter what character of agent such person though the defendant had attempted to withmight be. Thereafter, having issued many draw from the state and revoke its power policies, the corporation assumed to with. of attorney before service was made. We draw from the state by recalling its agents see nothing in any of these cases which imand refusing to take new risks or issue new pairs the force of the conclusions reached by policies within the state. At this time many us. policies were outstanding upon which it con The judgment appealed from should be tinued to collect premiums through an modified by reducing the same by the agent residing in another state. Action was amount of $8,792.42, with interest thereon brought in the courts of Tennessee upon from May 5, 1902, and, as so modified, should policies issued for the benefit of residents of be affirmed, without costs to either party. that state while the company was regularly engaged in doing business there and before CULLEN, C. J., and O'BRIEN, HAIGHT, its attempt to withdraw, and service in said VANN, and WERNER, JJ., concur. WIL action was made upon a' conceded repre
LARD BARTLETT, J., not sitting. sentative of the company who had come into the state for the purpose of adjusting and Judgment accordingly. settling losses under said policies. It was held that under the circumstances of that case the company was doing business within
(184 N. Y. 152) the state, and that service was properly
JACOBSON et al. v. BROOKLYN LUMBER made upon it in the manner indicated. It
CO. et al. will be at once observed that independent
(Court of Appeals of New York. Feb. 27, 1906.) of the statutory provision defining what
1. APPEAL-REVIEW-INTERMEDIATE COURTS should be held to constitute doing business
-QUESTIONS OF FACT. within the meaning of the act under which Under Const. art. 6, § 9, providing that the plaintif in error operated in the state of jurisdiction of the Court of Appeals, except in
certain cases, shall be limited to the review of Tennessee, this decision was entirely in line
questions of law, and that no unanimous deciwith the principle adjudicated by this court
sion of the Appellate Division of the Supreme in the Woodward Case. The rights involve Court that there is evidence supporting a finded were those of a policy holder resident in ing of fact shall be reviewed, an action decided the state who had there contracted with the
before the enactment of Code Civ. Proc. $
1023 (Laws 1904, p. 1252, c. 491), will not be company while it was transacting business
reviewed as to such facts, although appellant w that state under a statute which coupled I did not bave opportunity to obtain at Special
Term a ruling upon additional facts which he deemed established by the evidence. 2. SAME.
Under Const. art. 6, § 9, it is only the evidence and the proceedings on the trial that the court will not examine, and, the pleadings being part of the judgment roll, they may and should be read by the Court of Appeals in connection with a decision upon the issues to ascertain whether the facts admitted and found sustained the judgment. 3. CORPORATIONS-ACTION AGAINST OFFICERS
- RIGHT OF STOCKHOLDERS - CONDITION, PRECEDENT.
A prior demand upon the corporation to sue is not a prerequisite to an action by the stockholders against the executive officers, who also constitute a majority of the acting board of directors.
(Ed. Note.-For cases in point, see vol. 12, Cent, Dig. Corporations, 792.] 4. SAME-DEFENSES.
Where the officers of a corporation have unlawfully credited themselves with amounts to which they were not entitled, and the stockholders bring an action against them therefo it is no defense that the net assets of the corporation have not been depleted but increased, and that the amounts taken as salaries were legitimate and commensurate with the increased business and resulting profit, . . . 5. SAME.
In an action by stockholders of a corporation against the officers for wrongfully occasion. ing a loss to the corporation, it is no defense nor a mitigating circumstance that, despite such illegal and wrongful acts, the corporation is still solvent, or that the stock has increased in value during the time when the alleged illegal and wrongful acts have been committed. 6. SAME-OFFICERS-INDIVIDUAL BENEFITS.
Officers of a corporation cannot, while act. ing in their fiduciary capacity, make an agreement with themselves individually and for their personal benefit.
[Ed. Note. For cases in point, see vol. 12, Cent, Dig. Corporations, 1340.)
entered dismissing the complaint of the plaintiffs. An appeal was taken from said judgment to the Appellate Division, where the judgment was unanimously affirmed, and from the judgment of affirmance an appeal is taken to this court.
The findings of fact contained in said de cision are disconnected and not sufficiently complete to present fully the appellants' contention, and plaintiffs insist that, notwithstanding the unanimous decision of the Appellate Division, this court should consider not only the facts as found in the decision, but also the facts which are admitted by the pleadings and the facts established on the trial by uncontroverted-evidence. This ac tion was decided after September 1, 1903, when the last amendment to section 1022 of the Code of Civil Procedure (chapter 85, p. 237, Laws 1903) took effect, but before the re-enactment of section 1023 of the Code of Civil Procedure (chapter 491, p. 1252, Laws 1904). The plaintiffs claim to be at some disadvantage because they did not have an opportunity to present to the court at Special Term a statement of the facts which they deemed established by the evidence and the rulings on questions 'of law which they de sired the court to make, and they urge that there are therefore special reasons in this case why the court should examine the evi. dence to see whether there are facts not found in the decision, but which were established by uncontroverted evidence. It is provided by section 9 of article 6 of the Constitution of the state of New York as follows: “After the last day of December, one thousand eight hundred and ninety-five, the jurisdiction of the Court of Appeals, except where the judg. ment is of death, shall be limited to the review of questions of law. No unanimous decision of the Appellate Division of the Supreme Court that there is evidence support. ing or tending to sustain a finding of fact or a verdict not directed by the court shall be reviewed by the Court of Appeals.
" Section 191, Code Civ, Proc. This court, in Hilton y. Ernst, 161 N. Y. 226, 55 N. E. 1056, say: "The facts as found are absolutely conclusive here. The appellants can neither add to them nor take from them by urging that, as a question of law, there are facts not found which rest on undisputed evidence, and facts found which are unsupported by any evidence." The court was then considering a case where a judgment had been entered upon a report of a referee, which stated separately his findings of fact and conclusions of law, and in which the judgment so entered had been unanimously affirmed in the Appellate Division. In Sweet v. Henry, 175 N. Y. 268, 67 N. E. 574, the court say: "This court is confined to the findings of fact and is not permitted to look into the record for additional facts. ** See, also, Rodgers v. Clement, 162 N. Y. 422 56 N. E. 901, 76 Am. St. Rep. 342, and Nation.
Appeal from Supreme Court, Appellate Di. vision, Second Department,
Action by Morris Jacobson and others against the Brooklyn Lumber Company and others. From a judgment for defendants (92 N. Y. Supp. 1130, 101 App. Div. 609), plaintiffs appeal. Reversed..
. Joseph M. Gazzam, Jr., for appellants. George C. Case, for respondents.
CHASE. J. The plaintiffs are minority stockholders of the defendant corporation. This action is brought by them on behalf of themselves and all other stockholders similarly situated to recover for the corporation from the individual defendants the amounts received by them for salaries, as officers of the corporation from the year 1892, and to cancel any and all alleged resolutions on the books of the corporation purporting to authorize said individual defendants to credit themselves with certain amounts for accumulated or deferred salaries, and also to redress other alleged wrongs to the corporation. The issues were tried at Special Term, and a decision was rendered stating separately certain findings of fact and conclusions of law, upon wbich. judgment was
al Harrow Co. v. Bement & Sons, 163 N. Y. , a part of the judgment roll, and the admis. 505,.57 N. E. 764.
sions therein can always be read in connec., The reasons why the court will not look tion with the decision of the court or the reinto the record for additional facts have been port of the referee upon the issues, and they heretofore fully stated, and such reasons do should be so read by this court to ascertain not permit of any exception to the rule by whether the facts so admitted and found susreason of the fact that the plaintiffs have tain the judgment. This court has substannot had an opportunity to obtain at Special i tially so held in Rodgers v. Clement, supra, Term a ruling upon additional facts which and we find no expression of the court that they deemed established by the evidence. must necessarily be considered to the conThe evidence, therefore, cannot be examined trary. It is the evidence and the proceedfor the purpose of ascertaining whether there ings on the trial that the court will not exare facts established by uncontroverted evi amine to ascertain whether there are facts dence not included in the findings contained not found which rest on undisputed evidence in the decision. The Constitution does not or facts found which are unsupported by in terms or otherwise prohibit an examina any evidence. tion of the pleadings to ascertain what facts It is admitted by the pleadings that the deare admitted thereby. It is provided by | fendant corporation was organized October section 522 of the Code of Civil Procedure 29, 1891 ; that the defendant Verity has at that "Each material allegation of the com all times been its president, and the defendplaint, not controverted by the answer, , ant Robertson its vice president; that since and each material allegation of new mat December 1, 1894, said Robertson has also ter in the answer, not controverted by been its treasurer; that said defendants Verthe reply, where a reply is required, must, ity and Robertson have ever since the orfor the purposes of the action, be taken asganization of the company been the owners true.” The decision of the court or the re- l of a majority of its stock and members of port of a referee is required "upon the trial its board of directors; that there were oriof the whole issues of fact.” Code Civ. Proc. ginally five stockholders, all of whom were § 1022. It is commendable practice for the made directors of the company for the first purpose of preserving a continuity of state year ; that the plaintiff Arthur C. Jacobson ment to include in the findings of fact al was elected the first secretary and treasurer complete story of the transaction, so far as thereof; that the capital stock of the corporathe same is material and can be given from tion is $50,000, and $44,400 thereof has been the facts admitted in the pleadings or de issued; that the stock is now all owned by termined upon the trial of the whole issues the two plaintiffs and the two individual deof fact, but the statutes do not require find fendants, except five sbares which are ownings of fact, except upon the issues tried. ed by a brother of the defendant Robertson;
It was held by this court, in Wiltsie V. that on the 27th day of October, 1892, at a Laddie, 4 Abb. Prac. (N. S.) 393, that an ex special meeting of the board of directors, a ception does not lie to the report of a referee resolution was adopted removing the defendupon the ground that he has refused to find ant Arthur C. Jacobson from his office as upon a question of fact other than one aris- secretary and treasurer; that on the 7th ing from the issues in the cause. Upon the day of November, 1892, a resolution was facts alleged in the complaint which have passed at a stockholders' meeting reducing not been controverted by the answer there the number of directors from five to three, is no issue. Findings are not necessary as and thereafter from year to year three perto such facts in the determination of the is. sons were elected directors of the company ; sue. Bram v. Bram, 34 Hun, 487. In Eaton that since 1894 the brother of said defendant v. Wells, 82 N. Y. 576, this court, in consider. Robertson has been annually elected a directing an action brought for the foreclosure of or with said defendants Verity and Roberta mortgage, say: "There was no need of son; that during the first year after the orproof of the amount of the debt aside from ganization of the corporation the board of the averments of the pleadings. There was directors paid to the president, vice president, then no trial of an issue of fact. No find and treasurer each a salary of $2,500; that ings of fact were needed, for there were no for each of the years 1893 and 1894 the defacts to be found. The pleadings contain: fendant Verity as president was paid $3,500, ed them.” When a complaint is dismissed and the defendant Robertson as vice presibefore the introduction of testimony, it is a dent $2,500; that for the year 1895 the dedetermination that the complaint does not fendant Verity as president was paid $3,500, state facts sufficient to constitute a cause of and the defendant Robertson as vice presiaction, and in such case findings are not | dent and treasurer $3,500; that for each of required. Neither does a case where judg. the years 1896 to 1898, inclusive, the defendment is rendered on the pleadings. Wood v. / ant Verity as president was paid $5,000, and Lary, 124 N. Y. 83, 26 N. E. 338. It would the defendant Robertson as vice president seem therefore that there is no statutory and treasurer was paid $5,000; that in the provision requiring that findings be made by fall of 1898 and during each year thereafter a court or referee to include the facts ad until the commencement of this action a mitted by the pleadings. The pleadings are resolution was entered in the minutes of the
directors that the defendant Verity be paid , mitigating circumstance that despite such il. a yearly salary of $8,000, and the defendant legal and wrongful acts the corporation is Robertson as vice president and treasurer still solvent, or that the stock has increased a yearly salary of $8,000, but such resolution in value during the time when the alleged further provided that each of said officers illegal and wrongful acts bave been commitshould draw on account of his salary butted. Kavanaugh v. Commonwealth Trust $5,000 each year, and that the balance of the Co., 181 N. Y. 121, 73 N. E. 562. salary, namely, $3,000, should be allowed to | Neither the good faith, honesty nor legali. "accumulate until such time as the come ty of the acts of officers of a corporation can pany could, in the judgment of the directors, be determined by ascertaining whether the afford to have it withdrawn from the busi- | market value of the capital stock of the corness"; that a statement of the assets and poration has increased or diminished during liabilities of the corporation was furnished the time when said acts were performed. A by the treasurer on January 22, 1903, which corporation may lose money notwithstanding shows a credit to the defendant Robertson good, faithful, honest endeavor by its officers, of $35,992.49, and to the defendant Verity of and it may increase its assets notwithstand$32,097.59; that said credits to the individual ing selfish and illegal acts by them. The redefendants amounted to more than 50 per sults of transactions are considered in detercent. of the total assets of the corporation i mining the value of services performed for at that time.
which a person or corporation is liable, but The court, among others, found the follow the value cannot be determined by any rule ing as facts:
of proportion, nor can the amount to be “(8) Defendants Verity and Robertson paid therefor be intentionally so gauged as have been officers and directors of the com to absorb substantially all the profits of a pany from its organization. They have de corporation that have accrued or that the voted all their time to the business of the corporation may at some future time be able corporation, they have extended its business, to pay and have withdrawn from the business. placed it on a sound basis, and through their The trial court has not found that the de efforts the stock, part of which is held by the fendant corporation ever promised to pay the plaintiff, has been rendered valuable, so that defendants the salaries stated, or that the it is conceded to be worth considerably more defendants ever rendered services of a value than par. The company is now in a pros equal to the amount of such salaries. The perous condition as a result of their manage finding, in substance, is that the defendants ment, and there are undivided profits in the helped themselves to the several amounts treasury.
received by them and credited themselves "(9) Defendants Verity and Robertson with said amounts now appearing on the have voted themselves increase in salary. books of the corporation; the exact language The increases in salary are legitimate and of the finding being: “Defendants Verity commensurate with the increase in business and Robertson have voted themselves inand resulting profit."
crease in salary." The findings which it is “(14) Plaintiffs had the right to inspect claimed justify their acts in so taking and the books and to be present and vote at stock crediting to themselves increased salaries are, holders' meetings. They have made no effort in substance, that the net assets of the corto assert their alleged rights, either in the poration have not been depleted, but increasmeetings of directors or stockholders. They ed, and that the salaries are legitimate and stood aloof, unfriendly, critical, for 10 years, commensurate with the increased business and resort to a court of equity.
and resulting profit. The relation of an “(15) Plaintiffs' property has advanced officer of a corporation to it is fiduciary, and in value so that it is worth double what it he must at all times act in good faith and unwas at the outset. They have failed to show selfishly towards the corporation. The reloss or damage."
lation is such that an officer of a corporation As a conclusion of law it found that de cannot make an agreement with himself actfendants are entitled to judgment dismissing ing on the one part individually and for his the complaint on the merits.
own benefit, and on the other part in his A demand upon the defendant corporation fiduciary capacity as an officer of the corto bring this action was unnecessary, as the poration. It is said in 10' Am. & Eng. Csc. individual defendants against whom the of Law, 790: “A director cannot with propriwrong is charged are the executive officers ety vote in the board of directors upon a of the corporation, and they also constitute matter affecting his own private interest any a majority of the acting board of directors more than a judge can sit in his own case, thereof. Hanna v. Lyon, 179 N. Y. 107, 71 and any resolution passed at a meeting of the N. E. 778; Niles v. N. Y. C. & H. R. R. R. 1 directors at which a director having a perCo., 176 N. Y. 124, 68 N E 142; Sage v. sonal interest in the matter voted will be Culver, 147 N. Y. 241, 41 N. E. 513; Helli voidable at the instance of the corporation, well on Stock & Stockholders, $ 405. If the or the shareholders, without regard to its individual defendants have illegally and fairness, provided the vote of such director wrongfully occasioned a loss to the defendant was necessary to the result.” The courts in corporation, it is neither a defense nor a l this state have frequently asserted the voidability of acts and votes of corporate officers, 1 ing a judgment for defendant entered on a when they are affected by private interests. verdict, plaintiff appeals. Affirmed. Butts V. Wood, 37 N. Y. 317; Kelsey V.
Emanuel J. Myers, for appellant. Eugene Sargent, 40 Hun, 150; Copeland v. Johnson Mfg. Co., 47 Hun, 235; Barnes v. Brown, 80
G. Kremer, for respondent. N. Y. 527; Ziegler v. Hoagland, 52 Hun, 385, 5 N. Y. Supp. 305; Beers v. N. Y. Life Ins.
HISCOCK, J. The copartnership of which Co., 66 Hun, 75, 20 N. Y. Supp. 788; Dun
the present plaintiff is the surviving member comb v. N. Y., H. & N. R. R. Co., 84 N. Y.
brought an action to recover for services al. 190; Burden v. Burden, 8 App. Div. 160, 40
| leged to have been performed in procuring a N Y. Supp. 499; Munson v. Syracuse, G. &
tenant for defendant's property. The claim C. R. R. Co., 103 N. Y. 58, 8 N. E. 355; Sage
was disputed and we think that there was v. Culver, 147 N. Y. 241, 41 N. E. 513; Mar
sufficient evidence to sustain the verdict renshall v Industrial Federation of America
dered by the jury in favor of defendant upon (Sup.) 84 N. Y. Supp. 866. See American
this issue, and that the judgment thereon & English Ency. of Law (2d Ed.) vol. 21,
should be affirmed. 897-910; Cook on Stock and Stockholders
The complaint as originally served, amongst (3d Ed.) § 657; Taylor on Private Corpora
other things, alleged that plaintiffs "while entions (5th Ed.) $8 646, 647, 648.
gaged in business as real estate brokers aforeThe findings of the court, taken with the
said, inquired of the said defendant whether admissions in the pleadings, do not justify
the said defendant desired to rent and lease the conclusion of law that the plaintiffs' com
the premises on the southerly side of Fortyplaint should be dismissed.
Second street in the city of New York * The facts upon which the question of
for theatrical purposes, and upon receiving laches can be considered are not sufficiently
assenť thereto entered into negotiations with before us to require a statement of the opin
divers persons. * * • That thereafter and ion of this court in relation thereto, but it
on or about the 3d day of October, 1901, the seems reasonably clear, at least, that laches
said plaintiffs procured and obtained tenants cannot be urged against the plaintiffs as
for the said defendant's premises. * * * against their right to have considered and de
That in consideration of such services and the termined the question whether the defendants
procuring of such tenants the said defendant are entitled to the deferred or accumulated
promised and agreed to pay to the said plainsalaries credited to them on the books of the
tiffs the sum of three thousand dollars ($3,000) corporation.
as compensation for their services.” The The judgment of the Appellate Division
evidence introduced in behalf of the plaintiff and of the Special Term should be reversed,
tended to establish certain negotiations beand a new trial granted, with costs to abide
tween the parties hereto and other people for the final award of costs.
the leasing by the latter of only a portion of
the premises owned by defendant and referCULLEN, C. J., and GRAY, EDWARD T. red to in the complaint. This evidence coverBARTLETT, HAIGHT, and VANN, JJ., con
ing only a portion of the premises was regardcur. WILLARD BARTLETT, J., not sitting.
ed by plaintiff as so at variance with the
allegations of the original complaint which Judgment reversed, etc.
apparently set forth a contract predicated upon a leasing of the entire premises, that at the close of the case permission was asked
to have the complaint amended to conform to (184 N. Y. 163)
the proofs. This request was followed by a LEVY V. JAMES MCCREERY REALTY
discussion between the court and the counsel CORP.
upon the respective sides as to the identity (Court of Appeals of New York. Feb. 27, 1906.) of the portion of the premises for the leasing TRIAL-DISMISSAL-MATTER OF LAW.
of which plaintiff was to secure his commisWhere the Appellate Division affirms a sions. This discussion as contained in the judgment dismissing a complaint entered on a record does not very clearly or intelligibly verdict in an action to recover for services
distinguish and bound that portion of the in renting certain property for defendants, on the ground that defendant was entitled to dis
premises which supplies the ground work for missal as a matter of law, the judgment is too plaintiff's claim. Finally the court assumed broad if there is any evidence from which the
and stated that the premises involved were jury could find as a matter of fact that the
correctly shown and described upon a diaparties had never agreed on a lease.
gram in evidence as Exhibit 8. And thereAppeal from Supreme Court, Appellate Di. after the entire situation was cleared up and vision, First Department.
the issue between the parties definitely stated Action by Arthur S. Levy, surviving part and formulated by the court as a claim by ner of the firm of 1. K. Cohn & Co., against the plaintiff "that the defendant employed the James McCreery Realty Corporation. him to find a tenant for the premises shown From a judgment of the Appellate Division on the diagram, Exhibit 8, mentioning practi(92 N. Y. Supp. 143, 102 App. Div. 611), affirm- cally the metes and bounds. That is a short