Summary
In Golding v Weissman (35 A.D.2d 941, app dsmd 29 N.Y.2d 913, supra), CPLR 3212 (subd [f]) was unavailable because of plaintiff's neglect to use it not because of forfeiture by calendaring.
Summary of this case from Connell v. City of N.YOpinion
December 17, 1970
Order, Supreme Court, New York County, entered on October 28, 1969, reversed, on the law, defendants-appellants' motion for summary judgment granted, the complaint dismissed and the action severed as to them. Defendants-appellants shall recover of plaintiff-respondent $50 costs and disbursements of this appeal. In this action brought derivatively on behalf of the corporate defendant, plaintiff in her amended complaint alleges that appellants dominated and controlled the corporate defendant and were guilty, among other things, of breaches of fiduciary duties. In moving for summary judgment, appellants asserted that the cause of action was barred by (1) a general release executed to them by the corporate defendant and (2) an assignment of any cause of action such as plaintiff's to a third party. Documentary evidence was submitted to establish both claims. In addition, proof was submitted that the general release was executed after the corporate defendant came under the control of new management and following arm's length negotiations between such management and appellants. Such a settlement, of course, would be binding on plaintiff in the absence of proof of fraud or bad faith on the part of the corporate defendant ( Mendelson Bros. Factors v. Sachs, 253 App. Div. 270, affd. 279 N.Y. 604). Plaintiff submitted no such proof. Her opposition consisted of conclusory allegations in the nature of surmise, conjecture and suspicion and repetition of the allegations in her amended complaint. Such are insufficient ( Bank for Sav. v. Rellim Constr. Co., 260 App. Div. 70, 71, affd. 285 N.Y. 708; Indig v. Finkelstein, 23 N.Y.2d 728, 729). Similarly, plaintiff submitted no proof to dispute the validity of the assignment by the provisions of which a third party undertook to assume all the obligations of the corporate defendant. Lastly, this action has been pending for several years and discovery proceedings were not diligently undertaken by plaintiff. There is no basis for the exercise by the court of the discretionary statutory relief vested in it (CPLR 3212, subd. [f]) to enable plaintiff to attempt to gather the requisite proof at this late date.
Had the moving defendants contented themselves with a simple denial of the allegations of the complaint, we would in all likelihood have concurred with the majority. The failure of the plaintiff to come forward with evidentiary facts and the undue accommodation afforded defendants on plaintiff's application to examine defendants before trial provide little excuse for this failure. However, the explanations vouchsafed by the defendants in their pleadings and affidavits give support to the otherwise unsubstantiated allegations of the complaint and provide reason to believe that the decision of the majority is not really one that no issue exists but that the claim should be barred by the dilatory way in which it has been prosecuted. As this is not the ground asserted for judgment, no further discussion on this point is in order, but something more to substantiate the view of the dissenters would be proper. The suit is a stockholder's derivative action against the directors and the principal stockholder of a closely held corporation. The main charge is that corporate business was diverted to other organizations to the benefit of the defendants and that corporate assets and credit were used for their private gain. In reply the defendants allege that all the corporate assets, including claims which the corporation had, were sold to a third party following arm's length negotiations. It is argued that the claims sold included the claim asserted by the plaintiff and, as the corporation no longer owns it, plaintiff cannot advance it on behalf of the corporation. It is further claimed that the corporation, through a new board of directors, specifically released the moving defendants from this claim. The record is not clear as to how this new board of directors, which authorized the release, came into office, nor is the chronology of the sale and the release set out. Consequently the defense is not that the facts alleged in the complaint lack substance but that there are bars to their prosecution. As to the defenses themselves, which are what movants rely on, it must be patent that they reveal a situation malodorous with the scent of bad faith, and should be aired at a trial. It is true that the plaintiff has set out no facts which challenge the bona fides of the release. However, such facts would be peculiarly within the knowledge of defendants. The majority recognizes this in its reference to the failure to proceed diligently with the examination before trial. As pointed out above, however, failure to prosecute is not the ground of the motion. We would affirm the denial of summary judgment.