Chalmers v. Eaton Corp.

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: Before GREENBLOTT
• Citation: Chalmers v. Eaton Corp., 71 A.D.2d 721, 419 N.Y.S.2d 217 (N.Y. App. Div. 1979)
• Decision Date: 12 July 1979
• Parties: , 1979-2 Trade Cases P 62,942 John J. CHALMERS et al., Respondents, v. EATON CORPORATION, Appellant.

Page 217

419 N.Y.S.2d 217

71 A.D.2d 721, 1979-2 Trade Cases P 62,942

John J. CHALMERS et al., Respondents, v. EATON CORPORATION, Appellant.

Supreme Court, Appellate Division, Third Department.

July 12, 1979.

Parisi, De Lorenzo, Gordon & Pasquariello, Schenectady (Richard H. Weiskopf, Schenectady, of counsel), for appellant.

McKee & Moore, Amsterdam (William E. Moore, Amsterdam, of counsel), for respondents.

Before GREENBLOTT, J. P., and SWEENEY, STALEY, MIKOLL and HERLIHY, JJ.

MEMORANDUM DECISION.

Appeal from an order of the Supreme Court at Special Term, entered December 2, 1977 in Saratoga County which denied defendant's motion to dismiss the complaint.

This is an appeal from the denial of defendant's motion to dismiss the first cause of action of plaintiff's second amended complaint. It is alleged in the complaint that, in 1955, plaintiff John J. Chalmers and defendant entered into a joint venture to advertise and promote the sales and service of Yale fork-lift trucks manufactured by defendant. Plaintiff, during 1952, organized the Schenectady Materials Handling Company to operate the business. It is also alleged that defendant granted a specific territory in which to conduct such business, and agreed to "limit sales of such Yale fork-lift trucks by others or share the profits of such sales with plaintiff, John J. Chalmers."

In 1956, plaintiff created, with defendant's knowledge and consent, the Schenectady Materials Handling Company, Inc., a corporation whose purpose was to carry out the business operations previously conducted by plaintiff as sole proprietor of the company with the same name.

It is further alleged that, at the time of the incorporation, it was understood and agreed between plaintiff and defendant that the corporation would be the transferee of the business theretofore operated by him, and that he would control and manage the new corporation to carry out the purposes of the joint venture agreement and other agreements entered into by him and the defendant.

Plaintiff, continuously from the year 1955 through the month of November, 1974, directly and indirectly as a stockholder, officer, director, or as a sales manager of the Schenectady Materials Handling Co., Inc., controlled, managed and directed the corporation promoting, selling, distributing, leasing and repairing Yale fork-lift trucks in the territory agreed upon, for the benefit of himself and the defendant.

It is further alleged that defendant often extended credit to the corporation, and that, in 1968, the stockholders thereof agreed to enter into a financing arrangement whereby defendant could become a stockholder of the corporation, and that on numerous occasions, defendant encouraged an expansion of that credit, oftentimes waiving its rights under the agreement when plaintiff was technically in default. This arrangement continued until 1974, when plaintiff was forced to enter the hospital for serious surgical procedures, at which time he notified defendant that he would not be able to personally continue to manage the corporation for some period of time. In October, 1974, after plaintiff's entry into the hospital, defendant demanded that the defaults of the corporation, under the terms of the financing agreement, be cured immediately. It is contended that defendant made such demand when it knew that plaintiff could not comply therewith for the purpose of terminating the joint venture. As compliance was impossible under the circumstances, defendant took possession of the property, inventory, offices, books, records and assets of said corporation, thereby terminating the joint venture. As a result of this action, plaintiff maintains that defendant has breached its fiduciary duty to plaintiff to his detriment and damage.

Defendant's first contention is that plaintiff, individually, is not the real party in interest, and may not maintain a cause of action since, if any does exist, it belongs to the corporation, formerly Schenectady Materials Handling Company, Inc., now Yale Industrial Trucks-Mohawk Valley, Inc. Plaintiff, however, asserts that he formed the corporation to act as his agent for the purpose of carrying out the joint venture, that he was the principal, and that the law permits a corporation to act as an agent on behalf of an individual principal (2 N.Y.Jur., Agency, § 15). The test for determining the real party in interest is whether payment to the plaintiff will protect the defendant from having to defend against the same claim a second...