Citation Numbers: 15 Misc. 2d 80
Judges: Baker, Edward
Filed Date: 10/14/1958
Status: Precedential
Modified Date: 2/5/2022
Defendants Crocker, Bastís and Sea Fare Restaurant, Inc., move to dismiss plaintiffs’ complaint upon the ground that said complaint fails to state a cause of action.
Each of the plaintiffs is the owner of 25% of the outstanding stock of Avon Restaurant Inc. Crocker, one of the moving defendants, and the defendant Lianides own the remaining 50%.
The complaint alleges a conspiracy among the defendants and certain wrongful acts of the conspirators in furtherance thereof which were calculated to and did, in fact, result in the insolvency and bankruptcy of the corporation, with consequent loss of value of plaintiffs’ stock. The action is at law to recover damages which plaintiffs claim to have sustained as stockholders. It is not brought for or on behalf of the corporation or its stockholders.
It seems clear that the wrongs alleged in the complaint are wrongs to the corporation, actionable by the corporation, or by any stockholder in its behalf and for its benefit. The wrongs alleged do not give rise to a personal right of action in the individual stockholders, notwithstanding the fact that the result of the wrongs may have been a diminution in value of the stock held by them.
The case of Greenfield v. Denner (6 A D 2d 263) cited by plaintiffs, is not to the contrary. There, the complaint contained two causes of action, the first an action at law for damages allegedly suffered by plaintiff individually; the second a derivative action on behalf of the corporation. In reversing Special Term which had dismissed the first cause of action as legally insufficient, the Appellate Division, First Department, noted at page 264: “ In the first cause of action it is alleged that plaintiff owned 30% of the stock of Clermont, and defendants Denner and Nitchnn owned the remaining 70%. A stockholders’ agreement contained provisions restricting the alienation of the capital stock, setting forth that any salary or compensation paid by Clermont to the parties for services should be in proportion to their stockholdings, and giving plaintiff other rights not ordinarily available to a stockholder as such [emphasis supplied] . * * * With no proper business reason for liquidation, and while business was flourishing, the afore-mentioned defendants combined to bring about the dissolution of Clermont, the elimination of plaintiff’s stock interest and the consequent destruction of the stockholders’ agreement — all over the protests of plaintiff” (emphasis supplied), and the court then held (pp. 266-267): 11 Plaintiff, a 30% stockholder in a three-
Nowhere in the complaint in the instant case do the plaintiffs allege wrongs for wMch recovery may not be had through the channels of a derivative action.
Motions granted, with leave to plaintiffs to serve an amended complaint if so advised.