MacMahon v. Stepney Spare Wheel Agency — 140 A.D. 554

Majority

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Stephen A. MacMahon, Appellant, v. Stepney Spare Wheel Agency and Others, Respondents.

First Department,

November 18, 1910.

Headnote

Judgment—res adjudicata — action to set aside transfer of stock — when decision in prior dissolution proceeding contested by plaintiff not res adjudicata — issues not necessarily involved.

A suit by a stockholder to set aside a transfer of stock alleged to have been induced by fraud is not barred on the theory that the issue is res adjudicata merely because after the transfer, which disqualified the plaintiff as a director, his transferee with the other directors instituted a proceeding for voluntary dissolution which was granted upon a finding that the plaintiff had transferred his shares for a valuable consideration so that he was disqualified as a director, even though in that proceeding the plaintiff appeared and denied that the assignee was a director or authorized to act as such, if in fact the issues tendered in the complaint to set aside the assignment were not actually litigated.

Such issues were not necessarily involved in the dissolution proceedings, where the transfers were regular upon their face and the transferee had been elected a director when he signed the petition for dissolution so as to be a defacto director, for in that case the court had jurisdiction to entertain the proceeding.

The order dissolving the 'corporation was an adjudication only in so far as it established that the transferee was a defacto director.

Appeal by the plaintiff, Stephen A. MacMahon, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the' clerk of the county of New York on the 17th day of March, 1909, upon the decision of the court, rendered after a

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trial at the New York Special Term, dismissing the complaint upon the merits.

Alexander Thain, for the appellant.

Charles F. Brown, for the respondents.

Plaintiff appeals from a judgment dismissing his complaint at Special Term.

The plaintiff was a stockholder in and a director of the Stepney Spare Wheel Agency, the defendant corporation, holding five shares of the capital stock, of which four shares, together with stock belonging to other stockholders, was issued to and held by the defendant Maclay under a voting trust agreement.

On or about April 24, 1908, plaintiff executed a transfer of his stock to defendant Myers. On May 11, 1908, at a meeting of the directors of the corporation, Myers was elected a director of the corporation, upon the theory that plaintiff by transferring all of his stock had disqualified himself to be a director, and ipso faoto vacated his office. On May 'eighteenth Myers, having transferred his stock to one Malcolm J. A. Lissberger, resigned, and said Lissberger was elected in his place.

The purpose of the present action is to set aside the transfer of the stock from plaintiff to Myers on the general ground stated in detail in the complaint that Myers had fraudulently induced plaintiff to make the transfer. After Lissberger had become a director a voluntary proceeding for the dissolution of the corporation was initiated by said Lissberger and two others describing themselves as and claiming to be directors. Plaintiff was made a party to the proceeding and participated in it. He and one Riley, claiming to be the president, appeared and answered, denying that said Malcolm J. A. Lissberger was a director, and alleging that both plaintiff and Riley were directors, and had never resigned or been removed. The matter was sent to a referee to take proof of the facts alleged in the petition. He reported that the company was insolvent, and that the material allegations of the petition were true. In the course of his report he found that plaintiff had sold, assigned and transferred his said shares of stock to defendant Myers for a

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good, valuable and present consideration, and had thereupon become, by operation of law, ipso facto disqualified as a director of the corporation. Upon the coming in of this report the court, without in terms confirming the report, found that the company was insolvent, ordered that it should be dissolved, and appointed, a receiver of its assets. Upon the trial of the present cause the defendants were permitted, apparently without opposition, to interpose a supplemental answer, setting up the foregoing dissolution proceedings, whereupon the court refused to hear any evidence in support of the allegations of the complaint, holding that the validity of the assignment of, the stock from plaintiff to Myers had been conclusively established by the dissolution proceedings, and was res adjudícala. It is now contended in support of this ruling that the statute^[1] permits a petition for a voluntary dissolution to be made only by directors; that the petition alleged that Lissberger was a director; that this allegation was denied and directly put in issue by the answer; that the order granting the prayer of the petition must be held to have adjudged that Lissberger was a director, as otherwise the court would have been without jurisdiction to proceed, and that this involved an adjudication that the transfer of the stock by plaintiff to Myers, and from him to Lissberger, was unassailable. An adjudication between the same parties is conclusive, speaking generally, as to all matters necessarily involved which were actually litigated, and also as to all matters, whether actually litigated or not, which were necessarily involved and might have been litigated. The record of the dissolution proceedings shows that the issues tendered by the complaint herein as to the matters which it is claimed rendered the assignment from plaintiff to Myers voidable, were not actually litigated, and, in our opinion, they were not necessarily involved. The transfers of stock from plaintiff to Myers and from Myers to Lissberger were regular upon their faces, and by virtue of such transfers and his election in succession to Myers, Lissberger was, when he signed the petition for dissolution, an apparent and a defacto director. This was sufficient to warrant his joining in the petition and to confer jurisdiction upon the court to entertain the proceedings. (Matter of Manoca Temple Assn., 128

* See Code Civ. Proc. § 2419 et seq.; now Gen. Corp. Law (Consol. Laws, chap. 23; Laws of 1909, chap. 28), § 170 et seq., as amd.— [Rep.

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App. Div. 796 .) The order assuming jurisdiction and dissolving the corporation went no further, as an adjudication, than to establish the fact that Lissberger was a de facto director. The issue as to whether or not plaintiff’s transfer to Myers was voidable was not involved and was not passed upon.

It follows that the judgment appealed from must be reversed and a new trial granted, with costs to appellant to abide the event.

Ingraham, P. J., Laughlin, Clarke and Miller, JJ., concurred.

Judgment reversed, new trial ordered, costs to appellant to abide event.