Norman v. General American Transportation Corp.

181 Misc. 233, 47 N.Y.S.2d 390, 1943 N.Y. Misc. LEXIS 2828
CourtNew York Supreme Court
DecidedJuly 29, 1943
StatusPublished
Cited by6 cases

This text of 181 Misc. 233 (Norman v. General American Transportation Corp.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Norman v. General American Transportation Corp., 181 Misc. 233, 47 N.Y.S.2d 390, 1943 N.Y. Misc. LEXIS 2828 (N.Y. Super. Ct. 1943).

Opinion

Walter, J.

This action, begun on August 12,1942, is brought by a stockholder in the right and on behalf and for the benefit of Barkley-Grow Aircraft Corporation, which the complaint alleges was ” a Michigan- corporation which ceased to exist as an active corporation when it disposed of its assets in May, 1940, and which is named as a defendant but has not been served with process or appeared. After joinder of issue by the service of answers of certain other defendants, plaintiff moved for an examination of certain defendants before trial. Such defendants thereupon moved to stay proceedings until Barkley-Grow Aircraft Corporation shall have been made a party hereto ”, and plaintiff then moved for an order dis-. pensing with service of the summons and complaint upon that corporation. Those are the three motions now before the court.

It is not claimed that Barkley-Grow ever did business in New York. It ceased active business in May, 1940, when it made the disposition of its assets which forms the subject of complaint in this action. There is some assertion that such disposition automatically dissolved ” the corporation, but the Michigan Corporation and Securities Commission certifies that the corporate charter “ became void ” as of August 31, 1942, for failure to file annual reports and pay the fees in connection therewith. A statute of Michigan provides that corporations whose charters “ become void ” nevertheless continue to be bodies corporate for the further term of three years for the purpose of prosecuting and defending suits for or against them and of enabling them gradually to settle and close their affairs and to dispose of and convey their property and to divide their assets. Whether or not the directors or officers in office at the time the charter becomes void are made trustees in liquidation does not appear. Of the seven persons who were last elected as such directors and officers, six are named as defendants in this action, but they are named only as individuals and not as liquidating trustees or in any official or fiduciary capacity, and none of the six has been served herein or appeared. All six are alleged to be designees of defendant General American Transportation Corporation, [235]*235which, as controlling stockholder of Barkley-Grow, is charged with the alleged wrongful acts here complained of, and failure to demand that Barkley-Grow bring the suit to redress the alleged wrong is excused in the complaint upon the allegation that such demand would be an idle gesture -because of the control so alleged to be exercised by General American Transportation Corporation.

The situation thus is that a stockholder seeks to prosecute an action in the right and on behalf and for the benefit of a corporation which has not been brought before the court by process or appearance.

That the corporation in whose right and on whose behalf a stockholder’s suit is brought is a necessary party to such suit has been specifically held by the Court of Appeals and by the Appellate Division of this department (Greaves v. Gouge, 69 N. Y. 154; Brady v. Meenan, 204 App. Div. 390; Whalen v. General Mining, Milling & Power Co., 249 App. Div. 601) and has been specifically stated in numerous cases, early and late, State and Federal. (New York & N. H. R. R. Co. v. Schuyler, 17 N. Y. 592, 596; Brinckerhoff v. Bostwick, 88 N. Y. 52, 61; Flynn v. Brooklyn City R. R. Co., 158 N. Y. 493, 508; Niles v. N. Y. C. & H. R. R. R. Co., 176 N. Y. 119, 124, 125; Kavanaugh v. Commonwealth Trust Co., 181 N. Y. 121, 124; Continental Securities Co. v. Belmont, 150 App. Div. 298, 300; Planten v. National Nassau Bank, 174 App. Div. 254, 259; Corning v. Barrett, 22 Misc. 241; Harris v. State Bank, 177 N. Y. S. 545, 547; Davenport v. Dows, 18 Wall. 626, 627; Porter v. Sabin, 149 U. S. 473, 478; Baltimore & Ohio R. R. v. Parkersburg, 268 U. S. 35, 38; Lawrence v. Southern Pacific Co., 180 F. 822.) In such an action it is the right of the corporation which is being adjudicated ; the remedy sought is for wrong done to the corporation; the primary cause of action belongs to the corporation; recovery must enure to the benefit of the corporation; and as courts do not, and cannot, adjudicate the rights of .parties not before them, a judgment rendered without its presence would not be binding upon it and there would be no way of enforcing the rule that there can be only a single recovery for a single wrong. (Isaac v. Marcus, 258 N. Y. 257, 264, 266.) Nevertheless, in a recent stockholder’s action, in which the corporation had been dissolved, the Court of Appeals, in reversing a judgment dismissing the action because the corporation could not be served within this jurisdiction, declared that it did not pass upon whether the corporation was a necessary and indispensable party to the litigation and stated that the plaintiff should have an opportunity to show that under the circumstances of that [236]*236case the corporation was not an indispensable party. (Cohen v. Dana, 287 N. Y. 405, 410, 411.) I am thus forced to assunie, at least hypothetically, that circumstances conceivably may exist under which the corporation’s presence may be dispensed with, but to regard mere inability to reach both the corporation and the wrongdoers in the same forum as such a circumstance would be contrary to all settled rules and equivalent to saying that whenever a creditor cannot reach his debtor he may proceed to judgment without reaching him by getting an order of the court dispensing with service upon him. Statute and decision alike, to say nothing of the fundamental conception of justice embodied in the requirement of due process of law, command that no court can adjudicate upon a person’s rights without that person’s actual or constructive presence, and that when a controversy cannot be determined without the presence of certain parties, the court must not dispense with their presence, but direct them to be brought in. (Civ. Prac. Act, § 193, subd. 1; Mahr v. Norwich Union Fire Ins. Society, 127 N. Y. 452, 459, 461; Bogart v. Southern Pac. Co., 228 U. S. 137, 146, 147.)

Plaintiff strongly urges, however, and some admitted facto rather indicate, that one of the appearing defendants, General American Transportation Corporation, which is a defendant charged with the alleged wrongful acts complained of, not only owns more than fifty per cent of the stock of Barkley-Grow but also assumed actual control of its business and affairs and of its directorate and management, and dominates and controls its last elected officers and directors, and easily could, if it would, secure an appearance of Barkley-Grow in this action. And upon the basis of that alleged situation plaintiff urges, in effect, that, just as courts of equity invented the stockholder’s suit itself in order to prevent control of a corporation by wrongdoers from operating as a bar to any remedy for the wrong through the absence of a willing and efficient plaintiff (Isaac v. Marcus, 258 N. Y. 257, supra; Koral v. Savory, Inc., 276 N. Y.

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Bluebook (online)
181 Misc. 233, 47 N.Y.S.2d 390, 1943 N.Y. Misc. LEXIS 2828, Counsel Stack Legal Research, https://law.counselstack.com/opinion/norman-v-general-american-transportation-corp-nysupct-1943.