Kavanaugh v. Commonwealth Trust Co. of New York

• Decision Date: 07 March 1905
• Citation: 73 N.E. 562,181 N.Y. 121
• Parties: KAVANAUGH v. COMMONWEALTH TRUST CO. OF NEW YORK et al.
• Court: New York Court of Appeals Court of Appeals

181 N.Y. 121

73 N.E. 562

KAVANAUGH

v.COMMONWEALTH TRUST CO. OF NEW YORK et al.

Court of Appeals of New York.

March 7, 1905.

Appeal from Supreme Court, Appellate Division, Third Department.

Action by Charles H. Kavanaugh, suing for himself and other stockholders of the Commonwealth Trust Company of New York, against the Commonwealth Trust Company of New York and others. From an order of the Appellate Division (91 N. Y. Supp. 1099) affirming an order of the Special Term striking out certain allegations of the complaint, plaintiff appeals by permission. Affirmed.

Bartlett, Haight, and Werner, JJ., dissenting.

Edgar T. Brackett, for appellant.

J. Langdon Ward, for respondent.

CULLEN, C. J.

The complaint alleges that the plaintiff was a stockholder in the Commonwealth Trust Company (formerlythe Trust Company of the Republic), owning a hundred shares of the capital stock thereof; that he purchased said stock on April 2, 1892, for the sum of $16,600, which the stock at that time was worth; that the respondent and the other individual defendants were the directors of said company; that said defendants so negligently failed to discharge their duties as directors that large losses were sustained by the company through the illegal and wrongful acts of its executive officers, and its assets wasted; that thereby the value of the plaintiff's stock was reduced to $30 a share, by reason of which he suffered damage to the amount of $13,600. Judgment is demanded that the loss sustained by the trust company by reason of the wrongful acts and negligence of the defendants be ascertained, and the said defendants be directed to pay said sum to the defendant the trust company. The Special Term struck out the statement of the amount paid by the plaintiff for his stock, and the further statement that the value of said stock had been reduced, whereby the plaintiff lost the sum above mentioned.

Motions, under section 545 of the Code of Civil Procedure, to strike from a pleading irrelevant matter, are in one direction addressed in no small degree to the discretion of the court of original jurisdiction; that is to say, the Supreme Court, if it should be of opinion that the matter complained of could in no way prejudice the adverse party, might well refuse to strike it out, although the court deemed the allegations irrelevant and unnecessary. That discretion, however, has been exercised in the courts below, and the sole question before us is whether the allegations which by the orders appealed from have been stricken from the complaint were, in any view, relevant or material to the cause of action declared on. We think they were not relevant. The loss of the corporate funds, resulting from the misconduct of the individual defendants, primarily gave a cause of action to the corporation, not to its stockholders, and no stockholder could maintain an action for the loss he had individually suffered in the depreciation of the value of the share stock held by him. Niles v. N. Y. Central & H. R. R. Co., 176 N. Y. 119, 68 N. E. 142. As said by Judge Vann in Flynn v....