Cathedral Estates, Limited v. Purdy
| Decision Date | 01 March 1960 |
| Citation | 207 N.Y.S.2d 770 |
| Parties | CATHEDRAL ESTATES, LTD., 57 West 57th St. Corp., Forth Realty Corp., Allenhurst Realty Corp., Two East 27th Corp., Rhinelander Improvement Co., Inc., Chas. & Milton Kimmelman, a partnership, suing individually and as stockholders on behalf of themselves and other stockholders of Fifth Madison Corporation similarly situated, and in the right of Fifth Madison Corporation, Plaintiffs, v. Frederick A. PURDY, Fifth Madison Corporation, Guy Parkhurst Estate, Betby Corporation, Three Forty Madison Avenue Corporation, Herbert McLean Purdy Management Corporation, Frances Miller Purdy and Joan Gilman Purdy, individually and as Executrices under the Last Will and Testament of Herbert McLean Purdy, deceased, Defendants. |
| Court | New York Supreme Court |
McLaughlin & Stern, New York City (Stephen S. Bernstein and James H. Powell, New York City, of counsel), for plaintiffs.
Delafield, Hope, Rich, Linker & Blanc, New York City (Eugene Blanc, Jr., and Dorothy S. McCrea, New York City, of counsel), for defendants Frederick A. Purdy, Fifth Madison Corp., Guy Parkhurst Estes, Betby Corp., Three Forty Madison Avenue Corp. and Herbert McLean Purdy Mgt. Corp.
Bijur & Herts, New York City (Harry Bijur, New York City, of counsel), for defendants Frances Miller Purdy and Joan Gilman Purdy, individually and as Executrices under Last Will and Testament of Herbert McLean Purdy, deceased.
The individual defendant Frederick A. Purdy (hereinafter referred to as 'Frederick') and the corporate defendants have served a notice of motion 'for an order granting to the defendant summary judgment dismissing the complaint in its entirety and cancelling the lis pendens heretofore filed herein; dismissing such parts or all of the complaint as may be shown to be illegally [sic] insufficient by briefs of counsel * * * and granting to the defendants herein' other and further appropriate relief. In the principal moving affidavit, it is stated that the motion is made for an order '(a) granting summary judgment dismissing the complaint on the merits; (b) dismissing the complaint for legal insufficiency; or (c) in the alternative, requiring plaintiffs to separately state and number their causes of action.'
The plaintiffs, six corporations and one partnership, are stockholders of the defendant Fifth Madison Corporation (hereinafter sometimes referred to as 'Fifth Madison'). They own a substantial number of Class A shares of the capital stock of Fifth Madison and sue on behalf of themselves and all other stockholders of Fifth Madison similarly situated, alleging mismanagement, waste and breach of fiduciary duties. The prayer for relief contains ten different items, including an accounting, the impressing of a trust, the dissolution of Fifth Madison, and a direction for the conveyance of certain adjacent premises to Fifth Madison. Four of the eight defendants are corporations, including Fifth Madison. The individual defendants are Frederick, Frances Miller Purdy (hereinafter referred to as 'Frances') and Joan Gilman Purdy (hereinafter referred to as 'Joan') individually and as Executrices of the Estate of Herbert McLean Purdy, deceased (hereinafter referred to as 'Herbert'), and Guy Parkhurst Estes, who died in March 1958, prior to the service of process upon him. From 1945 to January 2, 1957, the directorate of Fifth Madison consisted of Frederick and Herbert (sometimes hereinafter referred to jointly as 'the Purdys') and Wallace Greene Arnold. Arnold died on January 2, 1957. Immediately thereafter, the defendant Estes was elected a director. After the death of Herbert in April 1957, the defendant Frances was elected a director in his stead.
The following allegations are in substance set forth in the complaint:
The defendant Fifth Madison could have availed itself of the opportunity to purchase the land and buildings at 336 and 340 Madison Avenue, New York City, which would have enhanced the value of its own property, the Canadian Pacific Building, at 342 Madison Avenue, but the defendant Frederick and his brother Herbert, now deceased (and whose estate is a defendant), violated their duties as directors of the corporation by taking advantage of this opportunity for their own personal profit (pars. 13-17). Herbert and Frederick caused Fifth Madison to pay brokerage commissions of $45,000 for the services alleged to have been rendered by the defendant Herbert McLean Purdy Management Corporation (hereinafter referred to as 'Management'; and of which company the Purdys were the sole stockholders) for refinancing the existing first and second mortgages, and the amount paid for such services was excessive. The Purdys caused Fifth Madison to pay them $50,000 per annum continuously since 1953 as purported salaries for their services to Fifth Madison, which salaries were excessive, in that the services were not worth more than $6,000 per annum. Fifth Madison paid excessive and unreasonable management fees to Management. This company collected all the rents, issues and profits from the Canadian Pacific Building owned by Fifth Madison. Management and the Purdys converted these collections to their own use to the extent of at least $500,000. The real estate of Fifth Madison and the defendant Three Forty Madison Avenue Corporation was sold and conveyed to the defendant Frances, the wife (now widow), and the defendant Joan, the daughter, of Herbert, without adequate consideration (pars. 20-25). The continuance of the corporate existence of Fifth Madison constitutes a fraud upon its Class A stockholders. It is necessary to dissolve that corporation and liquidate its assets in order to prevent further loss, waste and impairment of its capital. The directors of Fifth Madison who have the right to cause the dissolution thereof have fraudulently and in bad faith refused to do so for the purpose of obtaining pecuniary benefits to themselves and to avoid an accounting (pars. 26-30). A demand upon the board of directors of Fifth Madison under the circumstances would be a futile and idle gesture, but the plaintiffs have nevertheless made demand upon the corporation and its directors for restitution of the wrongs committed upon Fifth Madison and the demand has been refused (par. 32).
The defendants contend that the complaint is legally insufficient for the reason that it sets forth general allegations only of fraud, waste, mismanagement and breach of fiduciary duty. The complaint in this stockholders' action, based as it is, upon the alleged dereliction, misappropriation and bad faith of the directors of the subject corporation, adequately sets forth the allegations necessary to obtain much of the relief prayed for. In the circumstances, '[t]he complaint will be deemed to be sufficient [since] the requisite allegations can be fairly gathered from all the averments, though the statement of them may be argumentative, and the pleading deficient in logical order and in technical language.' (Sage v. Culver, 147 N.Y. 241 ,245, 41 N.E. 513), I find that the complaint on its face states a cause of action. In so ruling, I take into account, of course, that, on a motion directed to the legal sufficiency of a pleading, I must examine the pleading with a friendly eye in an endeavor to sustain it (Russell v. Marboro Books, 18 Misc.2d 166, 183, 183 N.Y.S.2d 8, 28). That branch of the motion, therefore, which seeks to dismiss the complaint on the ground of legal insufficiency is denied.
As to the attack upon the legal sufficiency of separate parts of the complaint in that they do not state causes of action on their face, I know of no such permissible procedure. Parts of a complaint (as distinct from the...
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Werfel v. Fitzgerald
...N.Y.2d 268, 271, 238 N.Y.S.2d 949, 950, 189 N.E.2d 487, 488; Keller v. Levy, 265 App.Div. 723, 40 N.Y.S.2d 580; Cathedral Estates, Ltd. v. Purdy, Sup., 207 N.Y.S.2d 770, 774). But, in view of the basic question before us, we think that in doing so, we should be indulging in technicalities t......
- Cathedral Estates v. Purdy