Tuesday, February 26, 2013

Clarke v. Greenberg case brief

Clarke v. Greenberg case brief summary
296 N.Y. 146

SYNOPSIS: Plaintiff corporation appealed from a judgment of the Appellate Division of the Supreme Court in the First Judicial Department (New York) granting defendant stockholders' motion for a dismissal of plaintiff's complaint upon the ground that it did not state facts sufficient to constitute a cause of action.

FACTS: Defendants in this action were stockholders who commenced a derivative action in which they alleged that the officers and directors of plaintiff corporation had mismanaged its affairs so that the company and stockholders were damaged. In the underlying action, the stockholders asked the court for an accounting and the imposition of a trust in favor of the corporation for all secret profits obtained by any of the directors. The suit was discontinued by stipulation and defendants in this action received a settlement for the use of, and in trust for the corporation, but failed to account to the corporation or its trustee, and were unjustly enriched.

The court here determined that the proceeds belonged primarily to plaintiff corporation, the real party in interest, and any judgment so obtained, including the proceeds of a settlement with court approval, belonged to plaintiff corporation and not to defendant stockholders.

OUTCOME: The court reversed the motion for dismissal of plaintiff corporation's complaint, finding that the complaint stated a cause of action.

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