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Behren v. Papworth

Appellate Division of the Supreme Court of New York, First Department
Nov 17, 1970
35 A.D.2d 798 (N.Y. App. Div. 1970)

Opinion

November 17, 1970


Order, Supreme Court, New York County entered on May 5, 1969, dismissing nine causes of action in the complaint modified, on the law, to reinstate causes of action numbered 1, 3 and 9, and otherwise affirmed, without costs and without disbursements. The complaint, containing nine causes of action, seeks relief based on a single set of facts. Briefly stated it is that plaintiffs conceived of the idea for a technical magazine directed toward tax accountants. An arrangement was made between plaintiffs and the individual defendant for publication, plaintiffs supplying the editorial services and defendant the publishing plant. It was further agreed that a corporation be formed to carry on the enterprise and that the stock be allocated to plaintiffs and defendant in certain specified proportions. The magazine is being published and the corporation was formed, but the individual defendant retained all the stock. A prior action between the parties went to judgment after trial. In that action plaintiffs sought relief on the ground that they had equitable rights to be stockholders. The court found that they were not stockholders and had no equitable rights to be declared stockholders. Special Term ruled that the findings in that action were either res judicata of the present action or presented an equitable estoppel. We agree as to the second and the fourth through the eighth causes of action pleaded. As to the first, third and ninth causes of action, we find that neither the relief demanded nor the facts necessary to establish liability would necessarily involve a finding that plaintiffs were de facto or de jure stockholders. Consequently plaintiffs would not be precluded from establishing those causes of action. As to the second cause of action, as to which there is dissent, the material allegations are that the individual defendant by fraud and deceit contrived to have all the stock issued to himself in breach of his agreement, and the plaintiffs seek the value of the stock allotted to them under the agreement. To sustain this cause of action, facts identical to those evidencing an equitable claim to a specific number of shares would have to be shown. These facts were therefore specifically adjudicated against plaintiffs in the prior action and cannot be relitigated.

Concur — Stevens, P.J., Nunez and Steuer, JJ.;


I concur in the determination of the majority except insofar as it dismisses the second cause of action upon the ground that the same is barred by the prior adjudication in the proceedings brought by plaintiffs under section 619 Bus. Corp. of the Business Corporation Law to vacate the election of the individual defendant as sole director and officer of the defendant corporation. The second cause of action is grounded upon an alleged agreement by the individual defendant to cause to be issued and to deliver to the plaintiffs shares of stock of the defendant corporation. As a cause of action to recover damages resulting from a breach of such agreement, it is not barred by the findings of the court, in support of the prior adjudication, that the plaintiffs "are not shareholders [of the corporation] and cannot claim status or rights as such". The dismissal of the prior proceeding and the essential findings supporting the same are res judicata merely as to those issues which were there decided between the parties. ( Ripley v. Storer, 309 N.Y. 506, 512; Zabriskie v. Zoloto, 22 A.D.2d 620.) However, inasmuch as the causes of action involved in the two proceedings are different, "The estoppel is limited in such circumstances to the point actually determined" ( Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N.Y. 304, 307). The inquiry, therefore, is, whether the issue before the court here was actually decided and determined by the prior adjudication. And, in this connection, certainty as to the precise points adjudicated is of the essence of the estoppel. (See City Bank Farmers Trust v. Macfadden, 13 A.D.2d 395, 400, affd. 12 N.Y.2d 1035.) The prior proceeding to set aside the election of a corporate director and officer presented the question of whether the plaintiffs had standing as shareholders to maintain the proceeding. Here, the plaintiffs are not asserting the rights of aggrieved shareholders, as in such proceeding, but rather rights arising out of an alleged joint venturer's agreement for the issuance of shares of stock to represent the respective interests in the venture. The dismissal of the prior proceeding was not based upon a finding that the individual defendant had not agreed to cause to be issued and to deliver to the plaintiffs shares of stock in the subject corporation. Although implicit in the dismissal is a determination that the agreement by the individual defendant, if it existed, was not binding on the corporation, the question of whether the alleged agreement was binding on the individual defendant was not actually litigated nor determined thereby.


Summaries of

Behren v. Papworth

Appellate Division of the Supreme Court of New York, First Department
Nov 17, 1970
35 A.D.2d 798 (N.Y. App. Div. 1970)
Case details for

Behren v. Papworth

Case Details

Full title:ROBERT A. BEHREN et al., Appellants, v. WILLIAM S. PAPWORTH et al.…

Court:Appellate Division of the Supreme Court of New York, First Department

Date published: Nov 17, 1970

Citations

35 A.D.2d 798 (N.Y. App. Div. 1970)

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