Bloom v. Nat'l United Benefit Sav. & Loan Co.

• Decision Date: 02 March 1897
• Citation: 152 N.Y. 114,46 N.E. 166
• Court: New York Court of Appeals Court of Appeals
• Parties: BLOOM et al. v. NATIONAL UNITED BENEFIT SAVINGS & LOAN CO. et al.

152 N.Y. 114

46 N.E. 166

BLOOM et al.

v.NATIONAL UNITED BENEFIT SAVINGS & LOAN CO. et al.

Court of Appeals of New York.

March 2, 1897.

Appeal from supreme court, general term, Fifth department.

Action by Hymon Bloom, suing in his own behalf, and others, against the National United Benefit Savings & Loan Company and others. From the reversal of a judgment in favor of plaintiffs (30 N. Y. Supp. 700), plaintiffs appeal. Affirmed.

John B. M. Stephens, for appellants.

John H. Hopkins and H. J. Sullivan, for respondents.

O'BRIEN, J.

We think that the judgment in this case was properly reversed by the court below. Without dealing with all the questions so fully covered by the opinion in the supreme court, it will be sufficient to refer to one or two features of the action, after stating the theory of the plaintiff's case, and the nature of the claims that were sanctioned by the judgment of the trial court. The plaintiff, as a shareholder of the defendant company, brought the action in his own behalf and in behalf and for the benefit of all other shareholders who might elect to join with him in the action, to recover the loss and damage sustained by them in consequence of the negligence of the directors of the company, who were made the principal defendants, and who alone answered the complaint. The substance of the charge against the directors and individual defendants is that they so managed the affairs of the corporation that the shares of stock were lost, or became worthless, and debts were contracted, for which the shareholders are personally liable. The company was in business only about one month from the time of its organization to the time when it was found to be financially wrecked. The business was transacted by three persons, who are not parties to this action, but who were officers of the company; that is, president, secretary, and treasurer, respectively. Whatever of fraud, dishonesty, or mismanagement with respect to the affairs of the company appears in the record, resultingin loss to any one, is directly chargeable to those officers, or to some one of them. The complaint against the directors is that they did not exercise proper care and vigilance in the discharge of their trust, in that they failed to detect the wrongdoings of the officers, or to remove them, as they had the power to do, when they either knew, or ought to have known, the facts in regard to their official acts and conduct. During the progress of the cause several of the other shareholders joined with the plaintiff in the prosecution of the action, and the judgment provides for relief by way of damages to all of them. There is no proof and no charge of any personal dishonesty against any of the directors, and the negligence found consisted entirely in acts of omission; that is, in failing to remove the delinquent officers, or in want of proper diligence in ascertaining their unfitness for the positions before they were appointed. The court below was of the opinion that the evidence before the learned referee did not justify the finding of negligence, and when we consider that the burden of proof on this issue was with the plaintiff, that the business operations of the company extended over a period of but one month, and the other facts and circumstances disclosed by the record, we are inclined to agree with this conclusion. The facts found by the court, without a jury, or by a referee, are open to review in the general term; and this court will not interfere with its judgment of reversal when it can fairly be said that the findings were...