Ace Tackless Corp. v. Fuhrman

• Court: New York Supreme Court
• Writing for the Court: BENJAMIN BRENNER
• Citation: Ace Tackless Corp. v. Fuhrman, 193 N.Y.S.2d 691, 22 Misc.2d 38 (N.Y. Sup. Ct. 1959)
• Decision Date: 20 October 1959
• Parties: ACE TACKLESS CORPORATION, and Lionel H. Rosenhaft, bringing this representative derivative action as stockholder and director of Ace Tackless Corporation, on its behalf and for its benefit, Plaintiffs, v. William FUHRMAN and Judith Fuhrman, Defendants.

Page 691

193 N.Y.S.2d 691

22 Misc.2d 38

ACE TACKLESS CORPORATION, and Lionel H. Rosenhaft, bringing this representative derivative action as stockholder and director of Ace Tackless Corporation, on its behalf and for its benefit, Plaintiffs, v. William FUHRMAN and Judith Fuhrman, Defendants.

Supreme Court, Special Term, Kings County, Part I.

Oct. 20, 1959.

Irving J. Applebaum, New York City, for plaintiffs.

Markewich, Rosenhaus & Beck, New York City, for defendants.

BENJAMIN BRENNER, Justice.

The two defendants comprise two-thirds of the board of directors of the plaintiff close corporation and control 60% of its stock. They move pursuant to Rule 107 of the Rules of Civil Practice to dismiss the first cause of action upon the ground that Ace Tackless Corporation is named as a party plaintiff without the consent of that corporation.

The action is for a declaratory judgment defining the executive powers and functions of the corporation's president and for an injunction. The cause under attack was instituted by the president in the name of the corporation. An alternative second cause, a derivative stockholder's suit, brought by the president individually as a minority stockholder and director, is not involved in the present motion.

The suit concerns itself with the effect to be given to a stockholders' agreement entered into between this closely held corporation and the principal owners of its stock. That agreement was the subject of another and similar suit brought in this court approximately two years ago by the plaintiff corporation and the plaintiff individual against the same two defendants to compel enforcement of the terms of the agreement which resulted in a declaratory judgment against the defendants. The purpose of this suit apparently is to prevent defendants from circumventing both the terms of the stockholders' agreement and the purport of the judgment.

Defendants contend that as majority of the board, they would never authorize 'the bringing of any action against us,' and it is admitted that the president did not make an attempt, concededly futile, to obtain their prior authorization. Apparently, the board of directors as such never actually prohibited the suit. Ordinarily, the management of the corporate property and affairs is vested in its board of directors Sterling Industries, Inc. v. Ball Bearing Pen Corp., 298 N.Y. 483, 84 N.E.2d 790, 10 A.L.R.2d 694.

Defendants make the bare statement that 'the court lacks jurisdiction over the subject of this action,' obviously an attempt to bring the motion under subdivision 1 of Rule 107 where no limitation of time exists for bringing the motion. There is no substance to this contention. It is not nor can it be controverted that the court does have jurisdiction over the 'subject of the action,' to-wit, the granting of a declaratory judgment. Furthermore, that the court has jurisdiction over the action brought in the name of the corporation cannot be questioned in view of the recent holding by the Court of Appeals in a somewhat analogous situation that 'the president of the plaintiff corporation, at the time the action was originally instituted, had the power, as president, to institute the action on behalf of the corporation.' West View Hills v. Lizau Realty Corp., 6 N.Y.2d 344, 346, 189 N.Y.S.2d 863, 864.

The finding here made that the court does have jurisdiction is made solely for the purpose of reaching a determination upon the question of the time limitation imposed by Rule 107 and is not intended thereby to preclude the trial court from determining whether the president, under all the circumstances,...