Lait v. Leon
| Decision Date | 25 July 1963 |
| Citation | 40 Misc.2d 60,242 N.Y.S.2d 776 |
| Parties | Victor S. LAIT, Rosalind Wagreich and Robert Yanover, individually and as stockholders of Data-Guide, Inc., suing on behalf of themselves and all other stockholders of Data-Guide, Inc., similarly situated and in the right of Data- Guide, Inc., Plaintiffs, v. Joseph L. LEON, Masha Leon, Data-Guide, Inc. and Data-Guide Distributing Corp., Defendants. |
| Court | New York Supreme Court |
Robert B. Marcus, Brooklyn, for plaintiffs.
Halpern & Rothman, New York City, for defendants.
In a stockholders' derivative suit, the defendants move to strike paragraphs 10 through 18 of the complaint and the complaint in its entirety for legal insufficiency. The plaintiffs cross-move to dismiss the primary motion on the ground that the defendants are stayed in all proceedings pursuant to section 1520 of the Civil Practice Act.
The cross motion is denied inasmuch as the costs imposed by the Appellate Division were paid prior to the return day of this motion.
That branch of the defendants' motion wherein the dismissal of the complaint in its entirety is sought is denied. A prior motion for the same relief was denied by Mr. Justice Pette of this court. (Lait v. Leon, 37 Misc.2d 800, 236 N.Y.S.2d 998, affd. 19 A.D.2d 540, 240 N.Y.S.2d 509.) No prior motion has been made to strike paragraphs 10 through 18, however, and the court will consider this branch on the merits. Initially, it should be noted that portions of causes of action may be dismissed where (as in the case at bar) allegations as to distinct transactions are readily separable. (Myer v. Myer, 271 App.Div. 465, 476, 66 N.Y.S.2d 83, 93-94.)
The plaintiffs contend that Justice Pette's decision (Lait v. Leon, supra) upheld the sufficiency of the separate cause of action pleaded in these paragraphs. They err on this point. The portion of Mr. Justice Pette's decision quoted in the plaintiffs' brief is taken out of context. When it is read in context, it is obvious that it is merely a statement or paraphrase of the plaintiffs' contentions and arguments. In no way does it constitute a holding or even dicta on the part of Justice Pette. The defendants also err, however, when they state that the Appellate Division has expressed doubts as to the validity of the cause. The Appellate Division merely stated that it did not pass on the question. (Lait v. Leon, 19 A.D.2d 540, at p. 541, 240 N.Y.S.2d 509, at p. 510.)
The instant motion raises the question squarely and this court must now pass on it. The question which was stated concisely by the Appellate Division is 'whether a cause of action is sufficiently pleaded on behalf of the corporation as a third-party beneficiary upon an alleged agreement between the plaintiff stockholders and the individual defendants limiting the salaries to be paid to the latter.'
The first nine paragraphs of the further amended complaint are common to each cause of action set forth therein. The court will read these paragraphs in conjunction with paragraphs 10 through 18 to determine if the cause of action new under consideration has been sufficiently pleaded.
In paragraphs 1 through 9, plaintiffs allege that they bring the action as stockholders of defendant Data-Guide, Inc. on behalf of plaintiffs themselves and all other similarly situated stockholders and in the right of the said corporation; that the said defendant was organized with an authorized capital stock of 1,000 shares having no par value and with voting rights, which shares are denominated 'Class A'; that after the corporation's organization, the certificate of incorporation was amended by the addition of another class of stock denominated 'Class B' in the amount of 2,000 shares having no voting rights and bearing no par value; that the plaintiff Victor S. Lait, M.D., is the owner of 109 out of 1,000 shares of Class A stock; plaintiff Rosalind Wagreich was and now is the owner of 5 shares of Class A stock and plaintiff Robert R. Yanover, M.D., is the owner of 50 shares out of the total of 246 issued shares of Class B stock; that the individual defendants are married to each other and together own 63.95% of the voting stock of the corporation; that the individual defendants are president and vice-president of each of the defendant corporations, are two of the three members of the board of directors of the said corporations and that they have had and maintain unto themselves complete and absolute control of the affairs of the defendant corporations and that the defendant Data Guide Distributing Corp. is a wholly-owned subsidiary of defendant Data-Guide, Inc.
In paragraphs 10 through 18 plaintiffs allege that they were solicited and induced by the individual defendants to purchase stock in the defendant Data-Guide, Inc.; that the individual defendants represented to plaintiffs and those similarly situated that they desired to retain control of the corporations and would therefore cause to be created a new class of stock having no vote; that such class of stock was thereafter created; that as an inducement to plaintiffs and others similarly situated to purchase the stock, the individual defendants stated orally and in writing that in order to assure plaintiffs a fair share of the corporate defendants' earnings and to preserve the corporation's assets, the compensation of the officers would be limited in accordance with a certain schedule delivered in writing, which set forth the conditions precedent which would have to occur before the corporate officers could receive increases in salaries; that in reliance on the aforesaid representations, solicitations and inducements the plaintiffs and others specified in the complaint accepted the offer and purchased various shares of stock; that it was the intention of the parties to the agreement so arrived at that the corporations should benefit...
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United States v. Ogden Technology Laboratories, Inc., 71-C-1432.
... ... 4 Corbin on Contracts § 787 at 97-98 (1951). See Lait v. Leon, 40 Misc.2d 60, 242 N.Y.S.2d 776 (Sup.Ct. Queens Co. 1963). It is immaterial whether the duty of the promisee to the third-party beneficiary ... ...