Opinion
April 5, 1907.
De Lancey Nicoll [ Courtland V. Anable with him on the brief], for the appellant.
Joseph H. Choate [ James McKeen and Joseph H. Choate, Jr., with him on the brief], for the respondent.
The excellent opinion of the learned justice who presided on the hearing of this motion at Special Term meets with our approval and renders further discussion of many points argued on the appeal unnecessary, excepting to emphasize views already briefly outlined by him.
This is an action at law. The complaint contains nine counts. In the first six paragraphs of the first count, which are repeated by reference in each of the others, it is alleged in substance that plaintiff is a domestic life insurance corporation, with by-laws duly adopted; that pursuant to its charter and by-laws defendant was on the 4th day of June, 1866, duly elected trustee of plaintiff for the term of four years; that he accepted and thereafter, by virtue of successive re-elections, continued to hold the office and act as such trustee until the 3d day of January, 1906; that he was duly elected president of the company for the term of one year on the 3d day of June, 1885, and annually thereafter was re-elected and continued to hold the office and to act as president until the 29th day of November, 1905; that he was expressly authorized by the by-laws to suspend or remove agents at pleasure, to preside at meetings of the trustees and of standing committees, except the auditing committee and committee on expenditures, and was ex officio a member of all standing committees with the exception of those two, was given the "general direction and superintendence of the affairs and of the officers of the company," and it was made his duty to establish "rules and regulations for the conduct of the business of the company and for the direction of its officers."
For its first cause of action plaintiff further alleges that defendant, in the year 1896, " made or authorized to be made, or knowingly or negligently permitted to be made," an unauthorized and unlawful payment of $15,000 of plaintiff's funds for political purposes, and negligently failed to establish proper or adequate rules to prevent such payment, to its damage in the sum of $15,000. It is quite clear that there is but one cause of action here alleged, and it is to recover the damages sustained by the company through this unauthorized and unlawful appropriation of its funds. It is not definitely charged whether defendant expressly authorized and personally participated in the payment or whether it was made by others through his neglect to properly supervise the affairs of the company and perform the duties of the office which he held and assumed. Plaintiff knows that it was one or the other, or both, but not which. In either event defendant would be liable. In such case an alternative allegation is permissible, and plaintiff should not be required to elect in advance and stake the result of the issue on its ability to prove to the satisfaction of a jury the one to the exclusion of the other. ( Everitt v. Conklin, 90 N.Y. 645; Stern v. Ladew, 51 N.Y. St. Repr. 456; Mann v. Cook, 24 Abb. N.C. 314; Hasberg v. Moses, 81 App. Div. 199; Garrett Co. v. Astor, 67 App. Div. 595. See, also, Smith v. Rathbun, 22 Hun, 150.) It is analogous to an allegation in an action to reform an instrument in writing where it has frequently been held that an allegation that a clause was inserted or omitted through mutual mistake or through fraud on the part of the defendant was good pleading, and proof of either alternative would sustain the action. ( Christopher Tenth St. R.R. Co. v. Twenty-third St. R. Co., 78 Hun, 462.)
The additional allegations in the second, third and fourth causes of action relate to single political contributions in the years 1900 and 1904 respectively. They are otherwise in all respects similar to those contained in the first, and the observations already made render further discussion thereof unnecessary.
The further allegations in the fifth cause of action relate to political contributions, aggregating not less than $200,000, at divers times subsequent to the 1st day of January, 1885, it being alleged that the precise times are unknown to plaintiff; but otherwise the allegations are the same as those contained in the first cause of action. These disbursements were all without authority and are alleged to have been made in the execution of a single scheme and policy to deplete the funds of the company. The additional questions are here presented as to whether each of the negligent acts of the defendant which resulted in a loss to plaintiff and his negligent acts during each term of office as trustee and president constitute a separate cause of action. We are of opinion that they do not. He held the positions continuously, and the action is to recover the damages sustained by the company for the direct injury caused by his general wrongful acts or negligence in the performance of or in failing to perform his duties as agent of the company throughout the entire period. Although the action is at law and appears to be classified as in tort ( Hun v. Cary, 82 N.Y. 66), the wrong or neglect is not disconnected with the office, but consists of a breach of duty, express or implied, to exercise proper care and faithfulness in the discharge of the duties of the office; and is not to recover specific sums lost to the company by reason of the wrongful acts or negligence, but general unliquidated damages, the items of which it is not necessary to plead, nor is the nature of the action changed by the fact that in some instances they have been pleaded. ( Hun v. Cary, supra; O'Brien v. Fitzgerald, 143 N.Y. 377, 383; S.C., 6 App. Div. 509; affd. on opinion of INGRAHAM, J., 150 N.Y. 572; Mabon v. Miller, 81 App. Div. 10; Dykman v. Keeney, 154 N.Y. 483; Bosworth v. Allen, 168 id. 157; Higgins v. Tefft, 4 App. Div. 62; Mason v. Henry, 152 N.Y. 529; Hanna v. Lyon, 179 id. 107; Bowers v. Male, 186 id. 28, 34.)
In People v. Tweed ( 63 N.Y. 194) it was held that a complaint in an action to recover various sums of money obtained from the city by the defendants at divers times by fraudulent acts, in procuring fictitious bills to be presented and audited in formal compliance with the law, pursuant to a preconceived conspiracy on their part to loot the treasury, constituted but a single cause of action, not for the negligence of the defendants in the performance of public duty, but for fraudulently obtaining the money. In the decision of that case no special importance was attached to the allegations with respect to the conspiracy; and it is well settled that conspiracy does not constitute the gravamen of an action for damages, but that the effect of the allegation merely is to connect the acts and parties with one another. If the separate fraudulent acts by which money was wrongfully obtained at different times do not constitute separate causes of action, it would seem that separate wrongful or negligent acts would not necessarily constitute separate causes of action. It is clear that in a suit in equity for an accounting, which is authorized as to property coming into the hands of a director or trustee of a corporation, or for his breach of trust which may consist of "culpable acts and omissions," the facts may be alleged in a single count, although the acts resulting in the damage to the corporation may have been many and disconnected and separated by long periods of time. ( Bosworth v. Allen, supra; Mabon v. Miller, supra; Mason v. Henry, 152 N.Y. 529.)
In Smith v. Rathbun ( supra) it was held that an action against directors of a bank to recover damages sustained by the corporation through their neglect to perform their duties, the negligence consisting in both malfeasance and nonfeasance, constituted but a single cause of action. That decision although not cited appears to be directly in point.
Neither the validity of the defendant's election nor the term for which he was elected is material. It is precisely the same as if he assumed the functions of the office and was suffered to exercise them continuously by acquiescence of the company. As a de facto officer, having assumed and exercised the functions of the offices, he became chargeable with all of the responsibilities of the positions which he occupied, and he owed a duty of diligence and fidelity to the company to neither direct unauthorized or unlawful disbursements nor negligently suffer them to be made. Plaintiff at most will only be required to show his first election or assumption of the duties of the respective positions, and that he continuously thereafter held the offices and assumed to exercise their functions, and his failure to perform the duties incident thereto and the resulting damages.
The motion does not involve the sixth cause of action.
The additional allegations of the seventh count are that defendant directly or negligently permitted certain officers, trustees and employees of plaintiff to establish and maintain with funds of the company, without authority, during the period from the 1st day of January, 1900, until the close of the year 1905, a "Confidential Fund," and to expend and disburse the same for unauthorized and unlawful purposes to its damage in the sum of $600,000. The diversion of the money to the fund and the disbursement thereof are all charged to have been without authority and unlawful. That this is but a single cause of action, stated with sufficient definiteness, is shown by the views already expressed.
The eighth cause of action relates to knowingly or negligently making unauthorized and improvident agency contracts annually from the year 1893 to the year 1905, inclusive, with Charles H. Raymond Co., of which firm defendant's son-in-law was a member, and agreeing to pay and paying thereunder unnecessarily high and grossly excessive and exorbitant rates and commissions, and to knowingly or negligently permitting payments aggregating not less than $500,000, not embraced in the agency contracts or authorized to be made to said firm during said term, in all to plaintiff's damage in the sum of $1,250,000. These allegations do not require special comment. They state a cause of action for general damages sustained by unauthorized payments to a particular firm during the period of defendant's administration of the offices, knowingly or negligently permitted by him, in part under unauthorized and fraudulent contracts, and in part without authority or consideration, and the amount in excess of what would have been reasonable and proper is stated.
In the ninth count defendant is charged with having induced plaintiff to create the "office of Superintendent of the Foreign Department" in the month of January, 1886, to enable him to appoint his son Robert H. McCurdy thereto, and with having thereupon made or authorized, or knowingly or negligently permitted the making of, a pretended contract between plaintiff and his son at an exorbitant rate of commission, which position defendant's son held, enjoying the fruits of the contract until June, 1903, when he resigned and was, on July first thereafter, appointed general manager of plaintiff at an annual salary of $20,000, which was subsequently increased to $30,000. This count states but a single cause of action and with sufficient definiteness.
The motion to strike out paragraphs 36 and 38 was also properly denied.
It follows that the order should be affirmed, with ten dollars costs and disbursements.
PATTERSON, P.J., CLARKE and SCOTT, JJ., concurred; INGRAHAM, J., dissented in part.
I concur with Mr. Justice LAUGHLIN in the conclusion at which he has arrived, except as to the fifth cause of action. The action is at law, to recover for moneys of the plaintiff which the defendant, as its president, has caused to be paid for purposes other than corporate purposes. The first four causes of action are to recover for certain specific payments made for political purposes or contributions to political parties. The fifth cause of action is upon an allegation that "at various times subsequent to the first day of January, 1885, and to the plaintiff unknown, the defendant made, or authorized to be made, or knowingly or negligently permitted to be made, in furtherance of a single policy or design, certain payments aggregating not less than two hundred thousand dollars ($200,000), out of the plaintiff's moneys, for certain political purposes, to wit, to defray the expenses of the annual campaigns conducted by a political party in furtherance of the election of the nominees of the said party for political offices." Each payment would be a wrongful act for which the defendant would be liable if the payment made was for an illegal purpose, or without authority from the corporation. While the officers of a corporation may be called to account for their illegal acts, or for an illegal disposition of the money or property of the corporation, in an action at law I think that each illegal disposition of a corporation's property is a separate cause of action. The distinction between an action in equity to call an officer of a corporation to account and an action at law against an officer of a corporation to recover for an illegal or unauthorized disposition of the moneys of the corporation that the officer has made is clear; for when a trustee or person holding money or property in a fiduciary relation is called upon to account, he can in one action be required to account for all the money or property of the corporation that he has received and for which he is accountable; but in an action at law to recover from an officer of a corporation for money of the corporation that he has illegally or improperly paid out, each payment thus illegally or improperly made is a separate cause of action which must be separately pleaded.
This is not an action to recover damages sustained by the corporation for negligence or wrongdoing which has caused the corporation damage, but to recover specific money of the corporation paid by the president for illegal or unauthorized purposes.
I think, therefore, that the plaintiff should be required to separately number the various causes of action alleged as a fifth cause of action.
Order affirmed, with ten dollars costs and disbursements.