Grant v. Greene Consolidated Copper Co.

Appellate Division of the Supreme Court of New York, First Department · Corporations

CorporationsStockholder derivative actionsJurisdictionRes judicataderivative suitrepresentative actionresident plaintiffforeign corporations

Facts

Plaintiffs, stockholders of the Cobre Grande Copper Company of Arizona, brought a representative action seeking to have the Cananea Company declared a trustee of certain Mexican mining properties for Cobre and to compel Greene, Cananea, and Greene Consolidated to account for profits from those properties. The complaint alleged that Greene had held title to the mines for Cobre's benefit and later transferred them to Cananea, which accepted them with knowledge of Cobre's rights, while Greene Consolidated later obtained control and benefited from the mines' profits. The action was originally commenced by James A. Grant, whom the trial court found was not a New York resident when suit began; later, Nettie L. Grant, a New York resident and also a Cobre stockholder, was permitted to intervene as a plaintiff. Defendants also relied on several earlier judgments, especially a prior stockholder action brought by Hallenborg involving the same mining transactions and parties, to argue that the present suit was barred.

Issue

Whether the court had jurisdiction over this representative stockholder action once a resident stockholder was allowed to intervene, despite the original plaintiff's nonresidence, and whether a prior derivative judgment involving the same underlying mining transactions barred this suit even though plaintiffs framed the trust theory differently. More specifically, the court had to decide whether intervention cured the jurisdictional defect and whether the Hallenborg judgment was res judicata.

Rule

In a representative stockholder action, where the cause of action is not jointly vested in the named plaintiffs and any stockholder similarly situated may sue, an intervening stockholder admitted as a party proceeds in her own separate right as if an original party, and her residence is sufficient to support jurisdiction. Also, because a stockholder's action is derivative and necessarily representative, a judgment in a similar action in which the corporation is a party binds all stockholders; a later action is barred when it rests on the same substantial and determinative facts, even if it advances a different legal theory such as express trust rather than constructive trust.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Evan Torres, a Nevada resident, filed a stockholder derivative action in New York against three foreign corporations over transactions involving oil leases in Alberta. Two months later, Maya Levin, a New York resident who owned shares in the same corporation, was granted leave to intervene as a plaintiff, with the order stating the case would proceed as though she had been an original party.

If the defendants argue the court still lacks jurisdiction because Evan was not a New York resident when the suit began, how should the court rule under the majority's reasoning?

Explanation. In a representative stockholder action, the cause is not jointly vested in the named plaintiffs; any similarly situated stockholder may sue derivatively. Once the resident stockholder is admitted, she proceeds in her own separate right as if an original party, and her residence can support jurisdiction. The majority distinguished cases involving jointly vested claims or necessary original parties. (Derived from Grant v. Greene Consolidated Copper Co. (n.d.).)