Dennis v. Kennedy

Clerke, J. In incorporated companies, in order to he a proprietor, a person must be a stockholder; in unincorporated companies or copartnerships, it is only necessary that he should subscribe the articles of association, to entitle him to the rights, or make him subject to the liabilities, of a proprietor. As we have already shown in a recent case,(a) companies or societies, which are not incorporated by the competent public authority, are in fact nothing more than ordinary partnerships or co-ownerships, however numerous the members of whom they are composed; and all laws pertaining to the one are applicable to the other. The one is a private, the other may be called a public copartnership. This association of owners of the barque Griffin, made for the purpose of prosecuting an adventure to California, was merely a co-ownership, at most a copartnership, composed of about fifty persons ; and although they called themselves, in their articles of association, stockholders, it was not necessary that certificates of stock or scrip should be issued, or that a person should be formally declared a stockholder, to entitle him to redress against any persons, who committed a breach of trust, or who fraudulently concealed the property of the concern, or injured or destroyed it, by negligence or intentional fraud. If they were members of the association by originally subscribing to the articles, whether certificates of stock were issued to them or not, they are proper parties to this action. The idea that it is necessary that a person should be a stockholder, in the sense in which one becomes a member of an incorporated company, to enable him to be a party plaintiff in an action of this kind, is a mistake pervading the whole argument in favor of the demurrer; and this alone, I think, could have caused any serious doubt, that all the plaintiffs are proper parties to the action. Enough is set forth in the complaint, to show that they possessed a proprietary interest in the vessel. [527] It does not follow, because the articles of association provide that the government and management of the concern should be subject to rules and regulations, .adopted by a majority of the stockholders, (as they are called,) that any individual member or members should be debarred from resorting to a court of justice for redress. And this is nothing more than the plaintiffs have done in the present instance. All parties interested, undoubtedly, must be joined in the action, either as plaintiffs or defendants ; and this is expressly provided in the code. (§ 119.) The same section, however, declares, “ when the question is one of a general or common interest of many persons, dr where the parties are very numerous, and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of the whole." But the defendants say that'the complaint does not show a compliance with this section, as it states that the action is brought “ for such as may come in and contribute." The language of the complaint is, that the plaintiffs sue “ on behalf of themselves and the other stockholders of the association, who may come in and contribute to the expenses of the suit.” Now this is certainly in substance the same as saying that they sue “ for the benefit of the whole,” only that it was to be restricted to those “who may come in and contribute to the expenses of the suit.” Suppose that the precise words of the code, “ for the benefit of the whole,” had been employed, would this addition have rendered it objectionable'? If not, why should it have that effect when it is an addition to the same affirmation precisely, only in different words 1 But it may be said that the restriction conveys a different idea, and defeats the intention expressed in the code. If the plaintiffs could have required from all other parties interested, who may come in and avail themselves of the benefit of the action, to contribute to the expense, stating this condition in the complaint cannot affect their rights in this particular, or prevent them from prosecuting the action. The liability to share the expense was the practice in the court of chancery; it has not been abolished, or in any way affected, by the recent legislative changes in our practice; and I can see [528] nothing which would justify this court in establishing a different rule upon the subject. One or more parties, therefore, of a numerous class, have a right to state that they sue for the benefit of the whole, or of those interested who may come in “ and contribute to the expenses.” It is objected by the sixth cause of demurrer that, because some of the defendants are trustees under the articles of association, set forth in the complaint, no other defandants can be joined with them. Undoubtedly, plaintiffs can unite several causes of action, only when they arise out of one of the seven divisions mentioned in the code, relative to the joinder of several causes of action in the same complaint; and as “ claims against a trustee by virtue of a contract, or by operation of law,” constitute one division, relief against some in their capacity of trustees, and against others in their individual capacity, or against the same persons in both capacities, cannot be sought in the same action. The complaint alleges, that John Kennedy, Samuel Smith, and Oliver S. Halsted, jun. were selected by the stockholders to take and receive, in their names as trustees, a bill of sale of the vessel from Zipsey & Weyman, from whom the association had purchased it, in order to close the business with the said Zipsey & Weyman, and that they accordingly received the bill of sale as such trustees, in their names. It further alleges, that the trustees transcended their authority, and, in fraud of the rights of the plaintiffs, borrowed $4500 from Wright, and agreed to pay it, with 20 per cent, within three months after the arrival of the vessel in California, contrary to an express resolution of the associates, that the loan should be obtained on a credit, of two years ; and this was the only authority ever given them, to borrow any money, or to execute any security or lien upon the vessel. In the latter act they were simply agents, and no more. When they were selected as trustees, they were merely authorized to receive the bill of sale in their names, “ in order to close the business with Zipsey & Weyman;” and when they executed the lien, they concealed [529] the fact, a most important fact, that the loan was payable in three months after the arrival of the vessel in California. By reason of this first deception, Oliver S. Halsted, jun. was enabled to consummate the fraud, in connection with Robert M. Halsted, by the pretended sale of the vessel at San Francisco; and after the sale, all of the defendants took possession of her, and converted her to their own use. This, then, is not a claim against the trustees by virtue of the contract, so as to confine it to the 7th division of § 167 of the code, relating to the joinder of causes of action. It is a claim for an injury to property and for “ tortious conversion? of it; for which they are not liable to respond in their capacity of trustees alone, under the first resolution of the associates, authorizing them to take the vessel in their names, (which was the only contract of trust;) but they are liable, precisely as Robert M. Halsted is liable, in their individual capacity, for the perpetration of a fraud, by which the plaintiffs have been deprived of their property. The 7th division of § 167 of the code was intended, no doubt, to confine all claims against trustees, as such, to what were always deemed breaches of the trust; which were considered in equity, simple contract debts. It was, in fact, what would have been considered, at common law, an action of assumpsit, if the jurisdiction had not been confined to courts of equity; and, although it is stated that Lord Hobart said that a cestui que trust may bring an action on the case against his trustee, and recover for a breach of trust, in damages, and that Lord Jeffreys appeared to have countenanced this doctrine, I believe that it has never been sanctioned since his time. This action 0 is not for a breach of the trust, which although, perhaps, involving greater moral turpitude, is identical, legally, with the breach of any other contract. When trustees commit any act not inseparable from their liabilities as such, they are amenable like other individuals in an action of tort; and although the plaintiffs aver that the defendants have not faithfully discharged théir trust, and pray that they may be required to account, this does not change the real aspect of the action, which is substantially a claim for the value of the vessel. [530] [New York General Term, November 6, 1854. Mitchell, Morris and Clevke, Justices.] The seventh and eighth causes of demurrer are disposed of by the observations which I have made in relation to the sixth. The judgment upon the demurrer should be affirmed with costs. Footnotes [(a)] Wells and Webb v. Gates, 18 Barb. 554.