Garfield v. Equitable Life Assur. Soc. of the U.S.
| Decision Date | 24 June 1956 |
| Citation | 7 Misc.2d 283,164 N.Y.S.2d 819 |
| Parties | Gustave B. GARFIELD, Plaintiff, v. EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, Raymond N. Ball, Robert E. Blum, Ralph Budd, H. Beach Carpenter, J. Reuben Clark, Jr., R. Stewart Kilborne, Jr., Fordyce B. St. John, Samuel A. Welldon, James B. Black, Bertram Cutler, M. Hartley Dodge, William J. Graham, William A. Keleher, Nicholas Kelley, W. W. Klingman, Russell B. Lowe, Jesse Slingluff, Henry M. Alexander, Francis B. Davis, Jr., Robert J. Dodds, Charles R. Hook, Charles W. Kellogg, Frank R. McCoy, Sterling Morton, Ray D. Murphy, John Lord O'Brian, Thomas I. Parkinson, Edward L. Shea, Samuel R. Walker, Arlie R. Barnes, Harry A. DeButts, Charles W. Dow, Manly Fleischman, Henry T. Heald, Harold H. Helm, Walter Klem, Elmer L. Lindseth, Richard H. Mansfield, Dean Mathey, John A. Sibley, Arthur B. Van Buskirk, Robert L. Hogg, and James F. Oates, Jr., Defendants. |
| Court | New York Supreme Court |
Charles Trynin and Gustave B. Garfield, New York City, for plaintiff.
Leo D. Fitzgerald, New York City (Theodore Kiendl, Edward J. McGratty, Jr., New York City, of counsel), for defendant Equitable Life Assur. Soc. of U. S.
Davis, Polk, Wardell, Sunderland & Kiendl, New York City (Theodore Kiendl, and Edward J. McGratty, New York City, of counsel), for defendants, Ray D. Murphy, Charles W. Dow, Walter Klem and Robert L. Hogg.
Motions 2260 and 2320 are consolidated and disposed of as follows.
In a derivative action, the defendants, Equitable Life Assurance Society of the United States, Murphy, Dow, Klem and Hogg, move to dismiss the complaint for legal insufficiency and plaintiff's incapacity to sue. Plaintiff since 1928 has been and is a policyholder of Equitable. The individual defendants are charged as directors of Equitable. The complaint alleges the making of investments in real property by the defendants in violation of provisions of the Insurance Law. In addition, the complaint alleges improvident leasing of portions of said real property and improvident expenditures in respect of said leased portions resulting in substantial losses. Plaintiff also alleges lack of appropriate care and prudence in the acquisition of certain real property resulting in substantial losses and deprivation of income.
Prior to the commencement of this action plaintiff petitioned this court for an order directing the Superintendent of Insurance and the Attorney General to bring this action. Said proceeding was finally determined by an order of the Appellate Division denying the relief sought by the plaintiff-petitioner. The per curiam opinion of the Appellate Division was as follows:
Garfield v. Holz, 150 N.Y.S.2d 160.
The petition for leave to commence this action was prompted by the holding in Lsaac v. Marcus, 258 N.Y. 257, 179 N.E. 487. There, the plaintiff, a stockholder of the Bank of United States, brought a derivative action for an accounting against the directors of the bank. The complaint was dismissed on motion of the Superintendent of Banks. As statutory receiver of the bank, the Superintendent of Banks was vested with authority to maintain any action vested in the bank, or its stockholders or creditors. The court held that right of the Superintendent of Banks to maintain the action to be paramount to plaintiff's and that plaintiff must first exhaust the available means to induce action by the Superintendent. The appropriate procedure indicated by the court was an order to show cause why the Superintendent should not bring the action or why the plaintiff should not be allowed to do so.
Defendants argue the determinations of the Superintendent of Insurance and the Attorney General affirmed by the Appellate Division preclude the prosecution of this action. It does not appear that the Superintendent contemplates proceedings under Article XVI of the Insurance Law. On the contrary, it is apparent that the affairs of Equitable are in such excellent condition that such proceedings would be baseless. In the absence of proceedings under Article XVI, or the likelihood thereof, there is no statutory provision vesting in the Superintendent the right to prosecute a derivative action. There is not present, therefore, any necessity for accommodating any vested right of the Superintendent to the right of the plaintiff to prosecute this action as was the case in Isaacs v. Marcus, supra.
The determination of the Attorney General refusing to institute this action, likewise affirmed by the Appellate Division, does not constitute a bar to its prosecution by the plaintiff. Chapter 400 of the Laws of 1890 (section 56 of Insurance Law of 1892) proscribed any accounting or injunction in respect of any...
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...appropriate derivative action comparable to that brought by a stockholder for similar relief. (See: Garfield v. Equitable Assur. Soc. of the United States, 7 Misc.2d 283, 164 N.Y.S.2d 819; but cf. Equitable Life Assur. Soc. of U. S. v. Brown, 213 U.S. 25, 29 S.Ct. 404, 53 L.Ed.2d The factua......
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