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Butts v. Wood

Court of Appeals of the State of New York
Sep 1, 1867
37 N.Y. 317 (N.Y. 1867)

Summary

In Butts v. Wood, 38 Barb. 181 — S.C., 37 N.Y. 317 — the action of the majority of two in a board of three, passing upon the claim of a third director, who also voted, was set aside at the instance of one of the stockholders.

Summary of this case from Pearson v. Railroad

Opinion

September Term, 1867

Daniel Wood, for the appellants.

W.F. Cogswell, for the respondents.


The bill of the defendant, Daniel Wood, was presented, audited and ordered to be paid at a meeting of the board of directors of the company, on the 5th day of July, 1859, when but three of the five directors who composed the board were present, the defendant, Daniel Wood, being one of those present, and his father, William Wood, and John Cornwall, another kinsman, being the other two. This board, as thus constituted, had no authority to entertain the bill in question, or to do any thing in relation to it. Daniel Wood, being the claimant, was disqualified from acting, because he could not deal with himself, and without him, there was no quorum of the directors, and they had no authority to transact business.

The relation existing between Daniel Wood and the corporation, was that of trustee and cestui que trust. ( Robinson v. Smith, 3 Paige, 322; Angell and Ames, 258, 260; Cumberland Coal Company v. Sherman, 1 Macq. 461; Aberdeen Railway Company v. Blaikie Bros., 30 Barb. 571.) This being the case, I am disposed, on this ground alone, to think that the action of these directors was void. The rule that one holding a position of trust cannot use it to promote his individual interests by buying, selling, or in any way disposing of the trust property, is now rigidly administered in every enlightened nation, and its usefulness and necessity become more and more apparent. A careful examination of the testimony in this case shows that Wood could not have enforced this claim against the company; and the circumstances under which it was allowed and paid were a fraud upon its stockholders. To permit such a transaction to stand would be a reproach to the administration of justice. The authorities maintaining the invalidity of any act of a trustee in violation of his trust, are numerous. It is sufficient to refer to the learned and exhaustive opinion of DAVIES, Ch. J., in Gardner v. Ogden ( 22 N.Y. 332), where the whole subject is ably discussed, and the leading authorities collected. No principle of law is better settled and understood, and there is none of more frequent application, or more useful in its results.

The payment of this bill being a fraud upon the stockholders, the action was properly brought against the three trustees to recover the damages they had caused, and the judgment rendered seems, in every way, calculated to promote the ends of justice. It should be affirmed, with costs.

All the judges concurring,

Judgment affirmed.


Summaries of

Butts v. Wood

Court of Appeals of the State of New York
Sep 1, 1867
37 N.Y. 317 (N.Y. 1867)

In Butts v. Wood, 38 Barb. 181 — S.C., 37 N.Y. 317 — the action of the majority of two in a board of three, passing upon the claim of a third director, who also voted, was set aside at the instance of one of the stockholders.

Summary of this case from Pearson v. Railroad

In Butts v. Wood (37 N.Y. 318) and Gillet v. Moody (3 id. 479) the cause of action was a fraudulent transfer or appropriation of corporate property to or for the benefit of a director or trustee, and like Robinson v. Smith (3 Pai. 222) and Cunningham v. Pell (5 id. 607), involved a fraudulent breach of trust, bordering at least upon knavery, and waste of corporate funds.

Summary of this case from Van Dyck v. McQuade

In Butts v. Wood (37 N.Y. 317) the action was brought to set aside the proceedings of the defendants as directors in voting to the defendant Wood extraordinary compensation for his alleged services as secretary and otherwise.

Summary of this case from Carr v. Kimball
Case details for

Butts v. Wood

Case Details

Full title:ISAAC BUTTS, for himself and others, Respondent, v . WILLIAM WOOD and…

Court:Court of Appeals of the State of New York

Date published: Sep 1, 1867

Citations

37 N.Y. 317 (N.Y. 1867)

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