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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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