Travis v. Knox Terpezone Co.

• Decision Date: 08 June 1915
• Citation: 109 N.E. 250,215 N.Y. 259
• Parties: TRAVIS, v. KNOX TERPEZONE CO., et al.
• Court: New York Court of Appeals Court of Appeals

215 N.Y. 259

109 N.E. 250

TRAVIS,

v.KNOX TERPEZONE CO., et al.

Court of Appeals of New York.

June 8, 1915.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Frank H. Travis against the Knox Terpezone Company and others. An order overruling a demurrer to the complaint was affirmed by the Appellate Division (165 App.Div. 156, 150 N.Y.Supp. 621), and defendants by permission, appeal on certified questions. Order affirmed, and questions answered.

See, also, 151 N.Y. Supp. 1148.

The following questions were certified:

(1) Does the complaint state facts sufficient to constitute a cause of action?

(2)Has the court jurisdiction of the subject matter of the action?

(3) Are two causes of action improperly united?

Lewis Hopkins Rogers and Henry M.V. Connelly, both of New York City, for appellants.

Robert Sharp Fletcher, of New York City, for respondent.

CARDOZO.

The defendant Knox Terpezone company is a New Jersey corporation. It has an office for the regular transaction of business in New York. It issued certificates of its stock to one Knox, who assigned them to the plaintiff, a resident of this state. The certificates state that they are transferable, when surrendered, upon the books of the company. The plaintiff surrendered them to the defendant Schelling, who was the vice president and the duly registered transfer agent of the defendant corporation. Schelling acknowledged in writing the receipt of the certificates in behalf of the corporation, and stated in writing that they would be transferred as requested. Later the defendant corporation gave notice that it “claimed some right, title, or interest in or against the stocks,” and, while retaining the certificates, refused to make the transfer. The defendants Rogers and Skinner, who are respectively the president and the treasurer of the corporation, joined in this refusal. Both are residents of this state. They, together, with Schelling, are the sole persons authorized to sign certificates of stock. The charge is made that their refusal to make the transfer was without just cause, and that the purpose was to defraud the plaintiff of his rights. The complaint prays that the plaintiff be adjudged to be the owner of the shares, and that the corporation and its officers be directed to make the transfer and to issue new certificates; that the plaintiff recover judgment against the defendants for $1,000, the loss suffered by the plaintiff through the refusal to transfer the shares, and, if the defendants have made it possible to complete the transfer, that they be directed to pay an additional sum of money sufficient to compensate for the value of the stock; and that an election of directors at a stockholders' meeting, at which the plaintiff was prevented from voting, be declared illegal and void. To this complaint the defendants demur upon the grounds: (1) That it does not state facts sufficient to constitute a cause of action; (2) that the court has not jurisdiction of the subject of the action; and (3) that, for reasons stated in the demurrer, two causes of action have been improperly united.

[1][2][3] The question of jurisdiction is the most important one. The defendants urge that, in assuming jurisdiction of this action, the court is assuming to regulate the internal management of a foreign corporation. We think the criticism is unwarranted. The question before us at this time is not whether the plaintiff is entitled to all the relief demanded. The question is whether he is entitled to any relief. We think it is true that the courts of this state will not annul the election of directors by the stockholders of a corporation chartered in another state. Wasson v. Buzzell, 181 Mass. 338, 63 N.E. 909;Butler v. Standard Milk Flour Co., 146 App.Div. 735, 131 N.Y.Supp. 451. It is not material to inquire now to what extent the refusal to adjudicate such controversies is due to the absence of jurisdiction in the strict sense, or to the inability to make a decree effective, or to considerations of policy and discretion. Beard v. Beard, Or. 512, 517, 133 Pac. 797, 134 Pac. 1196; Kimball v. St. Louis, etc., Ry., 157 Mass. 7, 8, 31 N.E. 697, 34 Am.St.Rep. 250;Wineburgh v. U.S. Steam, etc., Co., 173 Mass. 60, 61, 62, 53 N.E. 145, 73 Am.St.Rep. 261;Westminster Bank v. Electrical Works, 73 N.H. 465, 476, 62 Atl. 971, 3 L.R.A. (N.S.) 551, 111 Am.St.Rep. 637;Smith v. Mutual Life Ins. Co. (Mass.) 14 Allen, 336, 343;Ernst v. Rutherford & B.S. Gas Co., 38 App.Div. 388, 392, 56 N.Y.Supp. 403;Miller v. Quincy, 179 N.Y. 294, 301, 72 N.E. 116. But the failure of that relief leaves untouched the primary purpose of this action. The primary purpose is to compel the transfer of the shares on the corporate books and the delivery of new certificates. That is relief which the courts of this state are competent to grant. It has been so held by other courts ( Westminster Bank v. Electrical Works, supra;Guilford v. Western U.T. Co., 59 Minn. 332, 61 N.W. 324, 50 Am.St.Rep. 407;London Bank v. Aronstein, 117 Fed. 601, 609, 54 C.C.A. 663), and we are in accord with their ruling. The same point was also involved, through perhaps not fully considered, in Lockwood v. U.S. Steel Corp., 209 N.Y. 375, 103 N.E. 697. If North State Copper & Gold Mining Co. v. Field, 64 Md. 151, 20 Atl. 1039, is to the contrary, we cannot follow it. In that case, however, the excluded stockholder invoked the remedy of mandamus. To what extent control of foreign corporations may be exerted through mandamus is perhaps an open question. It has arisen where stockholders have attempted to inspect the corporate records. On the one side is Matter of Rappleye, 43 App.Div. 84, 59 N.Y.Supp. 338; on the other, Andrews v. Mines Corporation, 205 Mass. 121, 123, 91 N.E. 122, 137 Am.St.Rep. 428. Even against domestic corporations, mandamus is not the proper remedy to compel a transfer of shares. Kortright v. Buffalo Com'l Bank, 20 Wend. 91;Cushman v. Thayer Mfg. Jewelry Co., 76 N.Y. 365, 32 Am.Rep. 315. The plaintiff makes an appeal to a very different jurisdiction. His forum is a court of equity, and his grievance a breach of contract. We are satisfied that in such a forum, and with such a grievance, he is entitled to relief.

To trace in advance the precise line of demarcation between the controversies affecting a foreign corporation in which jurisdiction will be assumed and those in which jurisdiction will be declined would be a difficult and hazardous venture. A litigant is not, however, to be excluded because he is a stockholder, unless considerations of convenience or of efficiency or of justice point to the courts of the domicile of the corporation as the appropriate...