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plaintiffdefendanttrialcorporation
plaintiffdefendantattorneytrialcorporationrespondent

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Lawyers’ Advertising Co. v. Consolidated Ry. Lighting & Refrigerating Co., 25 Bedell 395, 187 N.Y. 395, 80 N.E. 199

Facts

The plaintiff, engaged in procuring advertisements, sought recovery for expenses related to the publication of notices concerning a dispute between the majority of the board of directors of the defendant corporation and its president. The first notice was authorized by a board resolution, while the subsequent notices were not formally authorized and were deemed to be part of a factional contest for control of the corporation. The board's informal discussions led to the publication of the first notice, but no resolutions were passed for the others.

The event which directly led up to the advertisement of the notices was a meeting of the board of directors of the defendant. At this meeting the directors adopted a resolution which, in substance, gave their version of the dispute with the president, and called, as properly might be done, a special meeting of the stockholders to pass upon various propositions. Said resolution instructed the secretary ‘to call such meeting.’ After the meeting in an informal discussion a majority of the board authorized the secretary to consult with an attorney who was present with reference to preparing and giving the notice, and these persons united in preparing in proper form a notice of the meeting, and which, in accordance with the instructions of the attorney, the plaintiff caused to be published and advertised.

Issue

Whether the expenses incurred for the publication of the notices were authorized by the board of directors and thus chargeable to the corporation.

Whether the expenses incurred for the publication of the notices were authorized by the board of directors and thus chargeable to the corporation.

Rule

The court held that expenses incurred for the publication of notices must be authorized by the board of directors and must be legitimate charges against the corporation.

The court held that expenses incurred for the publication of notices must be authorized by the board of directors and must be legitimate charges against the corporation.

Analysis

The court determined that the first notice was properly authorized by the board's resolution and was a legitimate expense for the corporation, as it served to inform stockholders of a special meeting regarding significant corporate issues. However, the subsequent notices were not authorized and were seen as efforts by one faction to gain control, thus not justifying the expenses being charged to the corporation.

The court determined that the first notice was properly authorized by the board's resolution and was a legitimate expense for the corporation, as it served to inform stockholders of a special meeting regarding significant corporate issues. However, the subsequent notices were not authorized and were seen as efforts by one faction to gain control, thus not justifying the expenses being charged to the corporation.

Conclusion

The court conditionally reversed the judgment, allowing for a new trial unless the plaintiff agreed to modify the judgment by excluding certain expenses related to the unauthorized notices.

In accordance with these views, the judgment should be reversed, and a new trial granted, with costs to abide event, unless the respondent consents that the same be modified by striking out the items, respectively, of $277.70, $173.65, and $208.70, with interest thereon from February 7, 1902, and in which case the judgment is affirmed, without costs in this court to either party.

Who won?

The defendant prevailed in part, as the court ruled that only the expenses for the first notice were legitimate and chargeable to the corporation, while the expenses for the subsequent notices were not.

The remaining notices were not legally authorized and were not legitimately incidental to the meeting or necessary for the protection of the stockholders. They rather were proceedings by one faction in its contest with another for the control of the corporation, and the expense thereof, as such, is not properly chargeable to the latter.

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