People v. Milk Exchange (Ltd.) — 44 N.Y. St. Rep. 500

Majority

p. 500

The People, Resp’ts, v. The Milk Exchange (Limited), App’lt.^[1]

(Court of Appeals,

Filed April 19, 1892.)

Headnote

.Pleading—Corporation—Dissolution tor nonuser.

The complaint in an action to dissolve the defendant corporation stated that it had been formed for the purpose of “buying and selling milk at wholesale and retail, the purchase of dairies of milk, when deemed advisable, and the sale of the same to milk dealers; ” that it had done none of these things, and was fraudulently and unlawfully incorporated for purposes other than those named in the said certificate and that it was formed in pursuance of a fraudulent, unlawful and corrupt combination and scheme on'the part of ninety dealers in milk to control the market price of such commodity; that by their bylaws if any stockholder failed to abide by the price fixed he forfeited his stock; that defendant had no capital and had declared no dividend, and that it existed solely as an unlawful combination and conspiracy to control the price of milk; that it had done so and had unlawfully employed agents for such purposes, etc. Held, that the complaint stated facts sufficient to constitute a cause of action for dissolution of defendant on the ground that it had never exercised its powers or franchises since it was incorporated and that such failure or non-user was wilful and without justification.

Appeal from judgment of the supreme court, general term, fourth department, affirming interlocutory judgment overruling demurrer to the complaint.

This was an action brought by the attorney general to dissolve the defendant corporation.

The complaint after stating the due incorporation of defendant for the “ buying and selling of milk at wholesale and retail, "the purchase of dairies of" milk when deemed advisable, and the .sale of the same to milk dealers,” alleged on information and belief that defendant had up to the present time neglected to act as a cor

p. 501

poration for the purpose set forth in its charter and set forth in its .statement in the original certificate filed or for any lawful purpose; that it had not bought or sold milk at wholesale or retail, nor had it purchased dairies and that it was fraudulently and unlawfully incorporated for purposes other than that named in its said certificate; that the persons signing the original certificate and the stockholders and directors never intended or designed that it should engage in the buying -or selling of milk in any manner or quantity or form whatever, and that it was not incorporated for that purpose; but such incorporation was had in pursuance of a fraudulent, unlawful and corrupt combination and scheme on the part of the dealers of milk in the city of New York to control the market price of milk in said city and other parts of the state of New York.

That there were ninety stockholders who had enacted by-laws "by which the board of directors were authorized to fix the market price at which milk should be purchased by the individual stockholders, and if any stockholder failed to abide thereby the ■directors were given power to declare his stock forfeited. That ■the said,board of directors had so controlled the price. That the defendant had engaged in no business authorized by its in•corporation, had declared no dividend, and that its sole business had been to wrongfully and unlawfully control and fix the ■market price at which milk should be purchased; that the capital stock represented no actual capital, and that defendant existed solely as an unlawful combination and conspiracy by the .stockholders to control the market price of milk and to strangle and prevent general competition in the purchase and sale thereof .and enhance the price thereof to the consumer, and that it had -so fixed and controlled the price of milk as to increase the price thereof to the consumer and decrease the price paid to the pro■ducer, and had unlawfully employed agents to carry out its said purposes, etc.

The second cause of action repeated the allegations of the first ■and named certain dates upon which defendant had assumed to .so fix the market price of milk; alleged that it had by so doing violated the laws of the state of New York and had become a public menace and, of great injury and hurt to the people of the .state; that leave had been granted to the attorney-general to bring the action under §§ 1798 and 1799 of the Code of Civil Procedure, and asked judgment that the defendant be dissolved, .its charter vacated, its corporate existence annulled, and that it be enjoined from, acting as a corporation, and that a receiver be .appointed.

Alfred Ely, for app’lt; S. W. Rosendale, att'y-gen’I, for resp’ts.

The defendant demurs to the entire complaint on the ground that it does not state facts sufficient to constitute a -cause of action. A separate demurrer is also interposed to both the first and the second counts on the ground that neither ¡states facts sufficient to constitute a cause of action.

I think the complaint states with sufficient fullness and cer

p. 502

tainty that the corporation has never exercised its powers or franchises since it was' incorporated, and that such failure or non-user was wilful and without justification. Upon this point the general allegations of conspiracy to do other and alleged illegal acts under cover of the corporation are sufficient to show that the failure to exercise its privileges, or to do the business, for which it was formally incorporated, was not such a failure by defendant as might be harmless, or overlooked by the state, but constituted within all decisions a proper ground of action by the attorney-general, under leave of the court, for the purpose of obtaining a decree dissolving the company. Although it is a private corporation, where a non-user of the character-alleged in this complaint is shown, it is to the public interest that the corporation should be dissolved. This would lead to the affirmance of the judgment overruling the demurrer to the whole complaint. There is enough stated in each of the separate causes of action to make it necessary to overrule the demurrer thereto on the same ground as is taken in disposing of the demurrer to the whole complaint.

The second cause of action re-states all that is contained in the first, and adds something more, and claims the whole to constitute a separate ground of forfeiture.

The second count shows the same non-user as the first, but. there are added certain other allegations as to unlawfully fixing the price of milk and unlawfully limiting the supply thereof, which would furnish additional reasons for the forfeiture under the non-user clause in the statute. These might be set up in a. separate count, although not probably necessary in order to permit of proof being given in regard thereto if set up in the first, count.

It is claimed, however, that these allegations of unlawfully fixing the price and limiting the supply of milk are of such a nature-as to warrant a forfeiture and dissolution in and of themselves. It might be said that if these acts were unlawful, as alleged, then the defendant had no right to perform them. But the allegation-as to illegality is in such a case a conclusion of law, and not admitted by the demurrer. Under the charter of defendant they might be claimed to be unauthorized, and hence proper to be-all eged as acts which showed the character of the non-user of the-actual franchises given by the charter, and that such non-usqr was wilful and wrong, and, therefore, it was good ground for-enforcing the forfeiture.

Whether an agreement in regard to the price or one.looking towards the limiting, to some extent, of the supply of an article, must necessarily be illegal under any and all circumstances, we-do not decide upon this demurrer. The proper determination of such a question will be the more easily arrived at after a trial, when the evidence is in and the facts and inferences therefrom duly found, and after opportunity for full discussion thereon has, been given to all sides.

It is one of great importance, involving the right to agree as to price or as to the limitation of the supply of an article under any

p. 503

circumstances, and we think it better to leave such question untouched by this decision.

As each count in the complaint states a good cause the judgment must be affirmed, with costs, with leave'to defendant to answer on payment of costs, etc.

All concur, except Maynard, J., not sitting.