Fifty States Management Corp. v. Niagara Permanent Sav. and Loan Assn.

• Decision Date: 12 July 1977
• Parties: FIFTY STATES MANAGEMENT CORPORATION, Frank J. Bona, Nancy J. Bona, Nancy J. Bona, as Trustee for Miss Nancy J. Bona, as Trustee for John R. Bona, as Trustee for Frank J. Bona, Jr., as Trustee for Bonita Sandy Coral Bona, Respondents v. NIAGARA PERMANENT SAVINGS AND LOAN ASSOCIATION, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 925

396 N.Y.S.2d 925

58 A.D.2d 177

FIFTY STATES MANAGEMENT CORPORATION, Frank J. Bona, Nancy J Bona, Nancy J. Bona, as Trustee for Miss Nancy J. Bona, as Trustee for John R. Bona, as Trustee for Frank J. Bona, Jr. as Trustee for Bonita Sandy Coral Bona, Respondents v. NIAGARA PERMANENT SAVINGS AND LOAN ASSOCIATION, Appellant.

Supreme Court, Appellate Division, Fourth Department.

July 12, 1977.

Rice, Rice, Hustleby & Chace, Niagara Falls (William H. Broderick, Niagara Falls, of counsel), for appellant.

Frank J. Bona, Buffalo (Francis X. Murphy, Buffalo, of counsel), for respondents.

Before CARDAMONE, J. P., and HANCOCK, DENMAN, GOLDMAN and WITMER, JJ.

CARDAMONE, Justice Presiding:

Niagara Permanent Savings and Loan Association (Bank) appeals from a denial of its motion made under CPLR 3211(a)(7) to dismiss the six causes of action alleged in the complaint of Fifty States Management Corp. (Fifty States) and its president and treasurer Frank G. and Nancy J. Bona.

The suit was instituted following the Bank's cancellation of its previous commitment to loan Fifty States $325,000 on a mortgage for premises at 437 Washington Street in Buffalo.

In the complaint Fifty States and the Bonas alleged in the second cause of action damages of $500,000 because plaintiffs had to abandon other commitments; the third cause of action claimed $500,000 damages to Fifty States' reputation because the mortgage loan was not closed; the fourth and fifth causes of action each allege $500,000 damages on behalf of Frank and Nancy Bona, proposed personal guarantors of the mortgage, for injury to their reputation and standing in the business community. As we had occasion to state recently with respect to similar allegations contained in a complaint: " plaintiff may recover as damages for the breaches of contract only such as 'would naturally arise from the breach itself, or those that might reasonably be supposed to have been contemplated by the parties when the contract was made' (Orester v. Dayton Rubber Mfg. Co., 228 N.Y. 134, 137, 126 N.E. 510, 511)" (Motif Construction Corporation v. Buffalo Savings Bank, 50 A.D.2d 718, 719, 374 N.Y.S.2d 868, 870). We held in Motif that, as a matter of law, damages arising from abandonment of other commitments and injury to reputation "were not contemplated at the time of the contract as naturally to arise in the event of a breach thereof" (id. at 719, 374 N.Y.S.2d at 870). We further concluded that regardless of whether there was a breach of contract, there is no tort liability absent a duty independent of the contract obligation (id at 719, 374 N.Y.S.2d at 870; Friedman v. Roseth Corp., 270 App.Div. 988, 62 N.Y.S.2d 663, affd., 297 N.Y. 495, 74 N.E.2d 192; 59 N.Y. Jur., Torts § 17). No such duty is alleged in plaintiffs' pleadings or answering affidavits to the motion to dismiss (Shapiro v. Health Ins. Plan of Greater N. Y., 7 N.Y.2d 56, 194 N.Y.S.2d 509, 163 N.E.2d 333). Further, in view of the fact that plaintiffs concede that the Bank had a profit motive in cancelling the commitment, the element of intentionally seeking to injure plaintiffs essential to stating a cause of action for prima facie tort is lacking (Advance Music Corp. v. American Tobacco Co., 296 N.Y. 79, 84, 70 N.E.2d 401, 403). Thus, the allegations of the second, third, fourth and fifth causes of action in plaintiffs' complaint fail to state any valid cause of action and must be dismissed.

Plaintiffs' sixth cause of action must also be dismissed. In plaintiffs' first cause of action, it is alleged that defendant's unlawful, oppressive, tortious, willful and wanton cancellation and breach of contract caused plaintiff Fifty States to incur financing expenses of $230,484.30 and loss of profit of $600,000. Plaintiffs' sixth cause of action seeks identical damages on behalf of plaintiff, Nancy J. Bona, individually and as trustee of other stockholders. The liability to Nancy Bona, individually and as trustee, is claimed to derive from the fact that in order to reacquire clear title to the property the stockholders must bear the expenses if Fifth States is unable to do so, and, were the stockholders to lose ownership of the stock, they will incur a loss of profit of $600,000 as a result of defendant's breach of contract. We disagree. The sixth cause of action should be dismissed because the stockholders do not have a right to damages that is separate and apart from the right of the corporation. An individual shareholder has no right to bring an action in his own name and in his own behalf for a wrong committed against the corporation (Bonneau v. Bonneau, 21 Misc.2d 879, 195 N.Y.S.2d 443), even though the particular wrong may have resulted in a depreciation or destruction of the value of his corporate stock (Kavanaugh v. Commonwealth Trust Co., 181 N.Y. 121, 73 N.E. 526, 11 N.Y.Jur. Corporations § 364). An election by a stockholder to sue in his own right or in the right of the corporation exists only where the facts constitute a wrong to the stockholder individually as well as a wrong to the corporation. Where the injury to the stockholder results from a violation of a duty owing to the stockholder from the wrongdoer, having its origin in circumstances independent of and extrinsic to the corporate entity, the stockholder has a personal right of action against the wrongdoer (Shapolsky v. Shapolsky, 53 Misc.2d 830, 279 N.Y.S.2d 747, affd., 28 A.D.2d 513, 282 N.Y.S.2d 163). Absent such independent duty, however, the wrong suffered by the shareholder is deemed to be the same as the wrong suffered by the corporation and there is no shareholder right of action separate and apart from the corporate right of action (Shapolsky v. Shapolsky, supra). The stockholders of Fifty States have not stated facts which would entitle them to recover from the Bank separate and apart from the corporate plaintiff. The...