Rothmiller v. Stein

Giegerich, J. Judgment for $5,500 is demanded, which is the amount plaintiff lost by reason of the fact that a dividend of ten per cent was not declared. This amount could be recovered only upon the theory that the action is for mi;> management and not for deceit. Upon the latter ground the difference between $8,800 (the amount he would have realized upon a sale of the • 110 shares at eighty dollars each) and $5,500, the amount actually received, measures the extent of his possible recovery. [139] So far as the action is for mismanagement the demurrer is good. Greaves v. Gouge, 69 N. Y. 154, was an action for misappropriation of funds and property, and for depreciation in market value of stock. The rule was laid down as follows: “ A stockholder may bring an action for the benefit of himself and others similarly situated, and in such an action the corporation must" necessarily be made a party defendant. When a stockholder brings such an action, the complaint should allege that the corporation, on being applied to, refuses to prosecute; and as this averment constitutes an essential element of the cause of action, the complaint is defective and insufficient without it.” See, also, Ang. & A. Corp. § 312, p. 325, and cases cited; Brinckerhoff v. Bostwick, 88 N. Y. 52, 56. Regarding the complaint as in deceit, there is some doubt as to whether damage is sufficiently alleged. The defendants argue that no loss resulted from the deceit because, had the truth been told and the alleged insolvency disclosed, the plaintiff could not, without fraud on his part, have sold to Moore for the eighty dollars per share offered or even for the fifty dollars received. This is by no means clear. It does not appear that the plaintiff would have been under any legal obligation to reveal to Moore the facts concerning the company’s condition, had the officers correctly stated them. Moore was a fellow-stockholder, had equal means of knowledge and sustained no peculiar or fiduciary relation to the plaintiff. Bench v. Sheldon, 14 Barb. 66; Story’s Eq. Juris. 205-208. The allegation of insolvency must be taken in connection with other parts of the complaint; for example, the averments that defendants had failed to pay in $10,000 as they ought to have done, and that the company had acquired patents and a business already existing. "Wliat Moore’s object may have been in desiring plaintiff’s stock cannot be told. It may have been to obtain control of the company for the purpose of changing the management and enforcing the payment of the [140] $10,000 subscribed and other obligations, or because he believed the patents would ultimately be more valuable. The question is not the condition of the company at the time of the sale, or even the market value or the true worth of its stock, but what Moore was willing to pay for plaintiff’s holding. His offer is prima faoie proof upon this point. What his motive may have been should not be conjectured to defeat the complaint, so long as the facts alleged do not show that he would not have made the same or substantially as good an offer had defendants’ false statements never been made. The demurrer is overruled, with costs, with leave to the defendants to answer within twenty days upon payment of the costs of the demurrer.