Miller v. Quincy

• Decision Date: 28 October 1904
• Citation: 72 N.E. 116,179 N.Y. 294
• Parties: MILLER v. QUINCY et al.
• Court: New York Court of Appeals Court of Appeals

179 N.Y. 294

72 N.E. 116

MILLER

v.QUINCY et al.

Court of Appeals of New York.

Oct. 28, 1904.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Theodore S. Miller against Josiah Quincy and others. From a judgment entered on an order of the Appellate Division (85 N. Y. Supp. 310) reversing an interlocutory judgment of the Special Term overruling a demurrer to the complaint, plaintiff appeals. Reversed.

Haight and Martin, JJ., dissenting.

Frank P. Ufford and Philip Carpenter, for appellant.

Sumner B. Stiles, for respondents.

O'BRIEN, J.

The question of law presented by this appeal is of considerable practical importance, and arises upon a demurrer by one of the defendants to the complaint. There are three grounds of demurrer specified in the pleading: (1) That it appears upon the face of the complaint that the court has not jurisdiction of the subject of the action; (2) that it appears upon the face of the complaint that it does not state facts sufficient to constitute a cause of action; (3) that upon the face of the complaint there is a defect of parties plaintiff. If the complaint is defective for any reason stated in the demurrer, the defect must appear upon the face of the complaint. Of course, there may be omissions in the pleading, or defenses in fact may exist to the cause of action. But, generally speaking, these are matters of defense, and the court, upon the decision of the demurrer, can look only to defects which appear upon the face of the complaint. All other defenses, if any, must be interposed by answer, and, if not so interposed, are deemed to be waived. Hence the review in this case must be confined entirely to what appears upon the face of the complaint, and, unless it can be demonstrated from the facts stated either that the court has no jurisdiction of the action or that the complaint does not state sufficient facts against the demurring defendant to constitute a cause of action, then the demurrer is bad. All the facts stated in the complaint are admitted by the demurrer, and the question is whether those facts constitute a cause of action in favor of the plaintiff and against the demurring defendant. It is therefore necessary to get a clear conception of the case which is made by the complaint. The plaintiff alleges that he is one of the directors of a business corporation created by the laws of West Virginia, and that the corporation now, and ever since its organization, has had its principal place of business and office for the transfer of stock in the city of New York, and that it is engaged in business in this state. It then alleges that prior to September 20, 1898, the defendants were elected directors of this corporation, and continued as such until May 16, 1899; that on or about the 15th of December, 1898, certain parties named paid to the corporation the sum of $25,000 as the consideration of a certain business transaction between those parties and the corporation; that subsequently these defendants, being then directors, wrongfully appropriated the said money to their own use, or wasted and misapplied it with other funds of the corporation. The relief demanded is that the defendants, and each of them individually, be required to account for their official conduct in the management and disposition of the funds and property of the corporation; that the defendants, and each of them, be compelled to pay to the corporation, or to the receiver thereof that may be appointed in the action, such sum as may be found to be due from them upon such accounting, and any money and the value of any property which the defendants have acquired by themselves or transferred to others, or lost or used in violation of their duties as such directors and officers or otherwise, including the said sum of $25,000. It should be noted here that the corporation itself is made a party defendant in the action, although, so far as the record discloses, it does not appear or make any defense to the charges contained in the complaint.

It may be observed here, in order to clear away some things that create confusion in the discussion, that this is not an action by or against either a foreign or a domestic corporation, except so far as the corporation in question is made a nominal defendant upon the record. It is an action by an individual director against individuals who were formerly directors to recover from the latter money belonging to the corporation which they had misappropriated or wasted in violation of their duties as directors, and the sole question is whether the plaintiff is entitled to sue the defendants in the courts of this state to compel them to restore to the corporate treasury the funds that they have received and retained or wasted, contrary to the duties of their trust. We do not know from the complaint itself where either the plaintiff or the individual defendants reside. I am not aware that that question is of any importance. The complaint does show that the business of the defendant is in this state, that its principal place of business is here, and that it has an office in this state for the transfer of its stock. If the residence or citizenship of any of the defendants is of any importance in the case, then the defect, if any, in that respect, is not disclosed by the complaint, but is matter of defense. It is not even suggested in the demurrer, or in the argument at the bar, that that question enters into the case at all, or is of any consequence, and it seems to me that it is not.

Although the demurrer is based upon the three grounds stated, no question has been discussed at the bar in support of the judgment, or in the court below, except the right of the plaintiff to maintain the action. That proposition is made very plain by a paragraph in the pravailing opinion of the learned court below, as follows: ‘The question here presented relates solely to the right of the plaintiff to maintain this action. The right of a foreign corporation to sue its defaulting directors or officers, or the right of a stockholder suing on behalf of himself and all other stockholders to enforrce such a right on behalf of the corporation when it neglects and refuses to enforce it, is not presented.’ So it will be seen that the question in this case is a narrow one, and it is desirable that it should be confined within the limits which the inquiry naturally suggests. The learned judge at Special Term overruled the demurrer, but his decision was reversed at the Appellate Division by a divided court, and the demurrer was sustained. The learned court thereupon certified to us the single question whether the complaint stated facts sufficient to constitute a cause of action. It is plain, therefore, from the history of the case and the condition of the pleadings, that the question involved is simply this: Has the laintiff stated facts sufficient to enable him to procure from the courts in this state the relief demanded, or any relief whatever? It is admitted that the plaintiff is a director of the corporation; that the defendants are former directors who have gone out of office, but while in office wrongfully appropriated the corporate funds, and still retain them. It would seem to be quite plain that these facts would constitute a cause of action against the defendants in favor of...