Lewis v. St. Albans Iron & Steel Works

The opinion of the court was delivered by Dunton, J. The only cause óf demurrer insisted upon in the argument is the alleged multifariousness of the bill. It is stated in the bill, that all the persons made defendants therein, except one, are directors of the defendant corporation, and that he is the treasurer thereof; that said corporation has been from its organization, and still is, under the management and control of said directors ; and that said treasurer has had, since the first year of its business, and still has, the entire custody and control of its books, papers and records. The directors of a corporation are trustees of its shareholders; and if the allegations in this bill are true, there is no question but that the directors of the defendant corporation have been guilty of the most flagrant breaches of trust, and such as it is the peculiar province of a court of equity to remedy, the corporation still being under their control. The directors of a corporation are responsible for its management, and personally liable, to make good the loss for willful breaches of trust, or misappropriation of the trust or corporate funds and property. They are also equally liable for all losses of corporate funds and property caused by their willful failure to exercise such care and attention as the acceptance of such a trust imposes upon them. Robinson v. Smith, 3 Paige, 222. [482] It is also a clearly established principle of equity jurisprudence that whenever the trustee has been guilty of a breach of trust and -has transferred the trust property by sale or otherwise, to any third party, the cestui que trust has a full right to follow such property into the hands of such third party, unless he stands in the situation of a bona fide purchaser for value, without notice. This is in effect what the orator is seeking to do by his bill of complaint, although he will not have to go beyond certain of the directors themselves and the treasurer, it being charged that the misapplied funds and property have, by one fraudulents cheme and another, gone into the hands of certain ones of these parties. As is stated in Mitford’s Chancery Pleadings, 181, and repeated by Wild, J., in Dimmock v. Bixby, 20 Pick. 377: “ A demurrer for multifariousness will hold only when the plaintiff claims several matters of a different nature ; and not when one general right is claimed by the plaintiff, although the defendant may have several and distinct rights.” The claims sought to be enforced by the bill all grow out of the alleged misconduct of the defendant directors in the management of the affairs of the defendant corporation; and the fact that all the defendants are not jointly interested in the fruits of such misconduct, but some are claiming one portion, and others another, under different fraudulent contracts or schemes, does not make the bill multifarious. Gaines v. Chew, 2 How. 619; New York New Haven Railroad Co. v. Schuyler, 17 N. Y. 592; Brinkerhoff v. Brown, 6 Johns. Ch. 139. As is said by McLean, J., in Gaines v. Chew, supra: “ It is well remarked by Lord Cottenham in Campbell v. McKay, in 1 Myl. & Craig, 603, ‘ to lay down any rule applicable universally, or to say what constitutes multifariousness, as an abstract proportion, is, upon the authorities, utterly impossible.’ Every case must be governed by its own circumstances ; and as these are as diversified as the names of the parties, the court must exercise a sound discretion on the subject. Whilst parties should not be subject to expense and inconvenience in litigating matters in which they have no interest, multiplicity of suit should be avoided by uniting jn one bill all who have an interest in the principal matter in [483] controversy, though the interest may have arisen under different contracts.” It has been repeatedly held that the officers of a corporation may be made parties to a bill for the purposes of discovery, to enable the complainant to obtain a knowledge of facts which he could not from the answer of the corporation under its corporate seal, without oath. Therefore, the treasurer of defendant corporation, even if he had had no complicity with'the directors in the alleged fraudulent transaction, would be a proper party to the suit, in aid of the discovery sought by the bill. Masters v. Rokie Lead Minina Co. 2 Sandf. Ch. 333; Vermillyea v. Fulton Bank, 1 Paige, 37. The decree of the Court of Chancery is reversed, the demurrer overruled, and cause remanded.