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11 B. Bull. B. Ass'n Erie Cnty. 1 (1948)

handle is hein.baecl/ericoubarb0011 and id is 1 raw text is: THE BAR BULLETIN OF THE BAR ASSOCIATION OF ERIE COUNTY o1. 11-No. 1 Hotel Statler, Buffalo, 2, N. Y. January, 1948 Foreword The new Bar Bulletin is a combination of notes and digests signed by students of the University of Buffalo Law School and unsigned digests of members of the Erie County Bar Association. We sincerely hope that it will lead to a more ambitious publication through the cooperation of the Association and the Law School. Construe- tive suggestions from all interested per- sons will be of great value and are earn- estly solicited. MICHAEL CATALANO, President. Constitutional Law; Taxpayer's Action Bull vs. Stichman Two important questions of interest to both the Bar and the public arose in Bull v. Stichman, 189 Misc. 590, 72 Supp. 2nd 202; 189 Misc. 597, 72 Supp. 2nd 488. One question, as yet undecided, is the constitu- tionality of an allocation of $128,000 of state funds to a college under the control of a religious denomination for the re- modelling of one of its buildings. The other question concerns the capacity of a mere taxpayer to contest the constitutionality of that grant of public funds and of any laws which purport to authorize it. The state legislature by the Laws of 1946 made funds available for emergency edu- cational facilities. Shortly after the State Housing Board had allocated funds to the denominational college, the plaintiff, a citi- zen and taxpayer, brought this action to obtain a judgment declaring the allocation to be in violation of the First Amendment of the Constitution of the United States and of Article XI, section 4, of the state constitution. The plaintiff moved under Civil Practice Act, Section 879, for a tem- porary injunction to restrain state officials from paying the contractor. Justice Book- stein, sitting in Albany County, denied the motion on the ground that the complaint did not state facts sufficient to constitute a cause of action, for the plaintiff's special, peculiar, personal rights were not affected and he could not maintain the action as a mere citizen and taxpayer. Later Justice Williams, sitting in Erie County, granted the defendants' motion to dismiss the com- plaint on the same reasoning. The plain- tiff's appeal was argued before four jus- tices of the Appellate Division in Septem- ber and a decision is expected soon. Both Justices Bookstein and Williams based their decisions on Schieffelin v. Kom- fort, 212 N. Y. 520, wherein Judge Chase thoroughly considered the history of the right of a taxpayer to bring an action CONSTITUTIONAL LAW (Continued on Page Two) Corporation-Individual Recovery By The Shareholder In the case of Tannenbaum v. Consoli- dated Edison Company of New York, 72 N. Y. Supp. 2nd 493, the plaintiffs were former stockholders of a corporation which had been merged with the defendant cor- poration. They charged the defendant cor- poration with deliberate mismanagement of the merged corporation prior to the merger. They alleged that the defendant pursued that course to induce the minor- ity stockholders to sell out at an inade- quate price, when, subsequent to their objections to a merger, their stock would be appraised and bought out pursuant to section twenty-one of the Stock Corpora- tion Law. Since the plaintiffs had lost their status as stockholders, they were unable to bring a derivative action which would have determined the rights of all the minority shareholders. In broad sweeping language the court pointed out that the gravamen of the complaint was an injury to the corporation, that the plaintiffs were in- jured only indirectly, and that since they lacked capacity to bring the suit, their complaint had to be dismissed. Less than two weeks later the case of Amella v. Consolidated Edison Co., 73 N. Y. Supp. 2nd 263, with substantially the same alle- gations was dismissed in the same manner in another court. The court further pointed out that the depreciated value of the plain- tiff's stock was not a permissible element of damage even if the plaintiff did have capacity to sue. This holding is in har- mony with long established authority in New York which forbids suit in an indi- vidual capacity against a corporation in the absence of special damages to the plaintiff. It would seem that while a tortious reduction of capital assets may be injurious to the shareholder, broad considerations of administrative conveni- ence make it impossible to allow each shareholder a separate right to sue. The instant case distinguished General Rubber Company v. Benedict, 215 N. Y. 18, where a corporation sued one of its own directors for having acquiesced in the waste of the assets of another corporation of which the plaintiff corporation was a stockholder. In that case the director was held liable, because of his fiduciary obli- gation to plaintiff, for the diminished value of the shares of the plaintiff, not for the amount of money taken from the subsi- diary; but since the plaintiff owned over 99% of the stock, it must be conceded that the measure of damages was equally as satisfactory to the plaintiff. And also Matter of Auditore, 249 N. Y. 335. Other CORPORATION (Continued on Page Three)

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