Summary
In Davidoff v. Seidenberg (275 A.D. 784) also relied upon by defendant, the actual holding was that the complaint did not set forth a sufficient cause of action to compel the declaration of a dividend, and the court's characterization of the action as "a stockholder's derivative action" necessarily related to other allegations of a different cause of action.
Summary of this case from Swinton v. Bush Co.Opinion
April 18, 1949.
In a stockholder's derivative action, plaintiff appeals and defendants-respondents-appellants cross appeal, respectively, from portions of an order entered after reargument of a motion originally made by all the defendants to dismiss the complaint for insufficiency (Rules Civ. Prac., rule 106, subd. 5); in the alternative, to strike certain allegations from the complaint (rule 103); and, further in the alternative, to direct plaintiff separately to state and number causes of action (rule 90). On the appeal by said defendants, order modified on the law by striking from the fourth ordering paragraph the words "in all respects denied" and by substituting in lieu thereof the following: "granted to the extent of striking out paragraphs 7 and 8 of the complaint." On the appeal by plaintiff, order modified on the law by inserting the following paragraph immediately following the fifth ordering paragraph: "Ordered that plaintiff may serve an amended complaint upon all the defendants, including defendant William Davidoff, in which may be set forth a cause of action to compel the declaration of a dividend, as a separate cause of action, if plaintiff be so advised, and it is further". As so modified, the order, insofar as appealed from, is affirmed, without costs, with leave to plaintiff to serve the aforesaid amended complaint within ten days from the entry of the order hereon. In our opinion, the complaint does not set forth a sufficient cause for the intervention of the court to compel the declaration of a dividend. It does not allege facts showing the financial condition of the defendant corporation, its assets and liabilities in addition to the naked assertion of a surplus in a stated amount, and why such surplus, together with any moneys which the defendant officers-directors may be required to repay to the corporation, is not needed in the business of the corporation. ( Nauss v. Nauss Bros. Co., 195 App. Div. 318, 325.) Paragraphs 7 and 8 of the complaint, which allege, respectively, that no dividend was declared during the five years in question, and that the corporation has an earned surplus in excess of $107,000, admittedly relate only to the claim with regard to the failure to declare dividends. They have no relevancy to the cause of action for alleged misappropriation of corporate earnings. It is our further opinion that plaintiff should have the opportunity of pleading properly his claim with regard to the failure of the officers-directors to declare dividends, as to which cause of action defendant William Davidoff, as a director, would be a proper party defendant. Carswell, Acting P.J., Johnston, Sneed, Wenzel and MacCrate, JJ., concur.