Gottfried v. Gottfried

269 A.D. 413, 56 N.Y.S.2d 50, 1945 N.Y. App. Div. LEXIS 3000
CourtAppellate Division of the Supreme Court of the State of New York
DecidedJune 15, 1945
StatusPublished
Cited by39 cases

This text of 269 A.D. 413 (Gottfried v. Gottfried) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gottfried v. Gottfried, 269 A.D. 413, 56 N.Y.S.2d 50, 1945 N.Y. App. Div. LEXIS 3000 (N.Y. Ct. App. 1945).

Opinion

Callahan, J.

In this stockholders’ derivative action defendants have attacked the complaint on three grounds, viz.: (1) that [416]*416plaintiffs do not have the legal capacity to sue; (2) that'the claims sued on have been released; and (3) that some of the causes of action are barred by the Statute of Limitations.

We affirm the denial by Special Term of the relief sought under the first two branches of the motion. We find that there are preliminary issues of fact required to be disposed of before the legal questions raised upon these branches of the motion may be determined.

We deem, however, that the remaining branch of the motion involving the claim that certain subdivisions of the Third, Fourth and Sixth causes of action are barred by the Statute of Limitations, may in large part be disposed of at this time, and upon the present record.

The complaint sets forth ten causes of action. The Third, Fourth and Sixth causes are subdivided so that numerous sepa-, rate transactions are alleged therein, each designated by a distinguishing letter.

Defendants moved to dismiss the following designated causes of action as barred by the Statute of Limitations:

Third, paragraphs B(1)-B(9); paragraphs C(1)-C(8), insofar as they relate to a transaction concerning $8,838.61; paragraphs D(1)-D(15); paragraphs E(1)-E(4); paragraphs F(1)-F(2); paragraphs H(1)-H(6); paragraphs I(1)-I(6).

Fourth, paragraphs A(1)-A(6); paragraphs B(1)-B(6); paragraphs D(1)-D(8); paragraphs E(1)-E(7); paragraphs F(1)-F(6); paragraphs G(1)-G(6); paragraphs I(1) — I(7); paragraphs J(1)-J(7); paragraphs K(1)-K(8); paragraphs 0(1)-0(5).

Sixth, paragraphs A(1)-A(7); paragraphs B(1)-B(4).

In outline, the transactions attacked by defendants as barre 1 by the Statute of Limitations, consist of complaints such as: that the defendant directors and officers wrote off as worthless claims owned by the corporation which in fact were collectible; that they used corporate funds to pay the debts of, or to settle claims against, the individual defendants, or corporations controlled by them; that they caused the cancelation of a lease, an asset of the corporation, or the payment of corporate moneys as gifts or without adequate consideration, or the loan or advancement of corporate moneys without attempting to collect same; that they voted salaries for which no services had been rendered to the corporation, or the payment of dividends to persons not owners of stock of the corporation. Some of the [417]*417defendants, bnt not all of them, are directors, officers and stockholders. As to some of the claims plaintiffs allege that one or more of the defendant directors directly or indirectly profited by the transactions; as to others it is merely charged that they breached their fiduciary duty as directors or were guilty of negligence.

The moving defendants contend that, as these causes of action are based on events occurring more than three years before the commencement of this suit, and as they set forth claims of waste or injury to property, they are barred by the three-year Statute of Limitations found in subdivision 8 of section 48 and (by reference) subdivision 7 of section 49 of the Civil Practice Act. Plaintiffs’ contention, on the other hand, is either that the transactions attacked are controlled by a six-year Statute of Limitations (Civ. Prac. Act, § 48, subd. 1) in that they are for money had and received; by a like limitation applicable under subdivision 5 of section 48, in that they are actions for fraud; or lastly, that, in some instances, as an accounting is sought, the general equitable ten-year Statute of Limitations found in section 53 of the Civil Practice Act applies.

The contention that some of the causes of action are controlled by subdivision 5 of section 48, may be summarily disposed of by the statement that it is quite clear from the pleading, and under the authorities, that none of the transactions attacked constitute causes of action based on actual fraud. (See Brick v. Cohn-Hall-Marx Co., 276 N. Y. 259; Teich v. Lawrence. 291 N. Y. 245; Gobel, Inc., v. Hammerslough, 263 App. Div. 1, affd. 288 N. Y. 653.)

The further contention that some of the causes of action are controlled by the general equitable ten-year Statute of Limitations may likewise be readily disposed of. In the first place as to defendant directors, subdivision 8 of section 48 of the Civil Practice Act, added by chapter 851 of the Laws of 1942, has eliminated any ten-year statute where an accounting is sought in an action of this nature, and has substituted six or three-year statutes, the latter period being applicable when the accounting relates to a claim of waste or injury to property. We shall discuss subdivision 8 of section 48 in detail later. Furthermore, even as to the defendants who are not officers, directors or stockholders, it is clear that the amount of gains, if any, obtained from the transactions complained of (with a single exception noted below), did not exceed the corelated corporate losses. [418]*418Therefore, the ten-year statute applicable to actions for accounting would not control, but rather the statute applicable to such adequate legal remedy as would be available to the corporation represented. (Dunlop’s Sons, Inc., v. Spurr, 285 N. Y. 333.)

Of the nineteen transactions attacked, there seems but one as to which the tiorporation represented would not have an adequate remedy at law. That exception is the transaction set forth in paragraphs designated H(1) to H(6) of the.third cause of action. The complaint, as to this transaction, states that in 1939 Benjamin Gottfried caused the Gottfried Company (the corporation represented) to advance to defendant Kilroy various sums of money for the purpose of making an investment for the corporation, which moneys were treated by the parties as a loan, thus depriving the corporation of the profits of a subsequent sale of property purchased with the funds.

It may well be that the gravamen of this claim is one for an accounting to trace the corporate funds invested and the profits derived therefrom, and under such circumstances an equitable action for accounting would afford the only adequate remedy available to the corporation represented. This cause of action does not appear to-be one solely for an accounting in connection with a claim of waste, or for an injury to property, therefore the six-year statute found in subdivision 8 of section 48 of the Civil Practice Act would seem to apply to the defendant Benjamin Gottfried, a director. The general equitable Statute of Limitations of ten years found in section 53 of the Civil Practice Act would apply as to defendant Kilroy, who does not appear to be a director, officer or stockholder.

As to each of the remaining causes of action attacked, it becomes necessary to consider whether the claim is one for money had and received, as to which a six-year statute would apply, or one for waste or injury to property, as to which a three-year statute applies.

Money had and received is a form of remedy resting on the theory of implied contract. It arises upon “ * * * an obligation which the law creates, in the absence of any agreement, when and because the acts of the parties or others have placed in'the possession of one person money, or its equivalent, under such circumstances that in equity and good conscience he ought not to retain it, and which ex aequo et tono belongs to another. * * * ''

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Bluebook (online)
269 A.D. 413, 56 N.Y.S.2d 50, 1945 N.Y. App. Div. LEXIS 3000, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gottfried-v-gottfried-nyappdiv-1945.