Opinion
Argued June 4, 1952
Decided July 15, 1952
Appeal from the Supreme Court, Appellate Division, First Department, HECHT, J.
Jonas J. Shapiro and Janet Perlman for appellant. Isidor J. Kresel, Harold I. Meyerson and Irving L. Weinberger for respondent.
Plaintiff, an Ohio corporation, by amendments to its charter and by-laws, created in its favor a prior right of purchase of, and a lien against, shares of its stock outstanding and in the hands of stockholders. A resolution of its board of directors, adopted in accordance with the corporate charter and by-laws and pursuant to Ohio law, directed all stockholders to surrender their certificates of stock in exchange for new certificates bearing legends referring to the purchase and lien rights. Defendant, a New York corporation and a stockholder of plaintiff, having failed to comply with that resolution, plaintiff commenced this action to compel it to submit its certificates for the appropriate indorsements. Defendant, challenging the validity of the by-law amendment, made a motion, under rule 106 of the Rules of Civil Practice, to dismiss the complaint for insufficiency. The Appellate Division, reversing the court at Special Term, dismissed the complaint, but solely upon the ground that the issue of validity should more appropriately be determined by the courts of Ohio.
Addressing itself to the disposition made below, plaintiff asserts, first, that defendant is not amenable to service of process in Ohio and, unless it appears voluntarily in that state, cannot be sued there and, second, that the transfer meanwhile of the stock certificates held by defendant to a third person would render the charter and by-law amendments ineffectual against the transferee and would defeat or impair plaintiff's rights. Defendant, although it has indicated that it would not appear voluntarily in Ohio or accept the jurisdiction of its courts even if plaintiff were to institute proceedings in that state, still insists that the validity or invalidity of the amendments in question should be decided by the Ohio courts.
While a court may on its own motion decline jurisdiction in a proper case upon the ground of forum non conveniens or upon the ground that the determination of the rights of the litigants involves the regulation and management of the internal affairs of a foreign corporation (see Weiss v. Routh, 149 F.2d 193; cf. Robinson v. Oceanic Steam Nav. Co., 112 N.Y. 315, 324; Massachusetts Nat. Bank v. Shinn, 163 N.Y. 360, 363), we do not regard the present as such a case. Quite apart from the fact that the internal affairs rule is designed primarily for the protection of the foreign corporation, rendering dubious its availability to a resident defendant as a defense to a suit brought by the foreign corporation (see Beard v. Beard, 66 Or. 512; 17 Fletcher's Cyclopedia Corporations [Perm. ed.], § 8427, p. 382; cf. Langfelder v. Universal Laboratories, 293 N.Y. 200; Travis v. Knox Terpezone Co., 215 N.Y. 259, 264), it would, under the circumstances here present, be unfair and unjust to close our courts to plaintiff and to relegate it to a forum wherein defendant cannot be served with process.
In our view, therefore, the courts of this state should not decline jurisdiction. We do not at this time consider the validity of the charter and by-law amendments relating to plaintiff's purchase and lien rights, since the trial court may, in the exercise of its discretion, properly conclude, without passing upon their validity, that the indorsement of the stock certificates held by defendant are essential to preserve and protect any rights that may have accrued to plaintiff from those amendments. As indicated, the complaint, at least to the extent that it seeks a judgment requiring indorsements on defendant's stock certificates, is sufficient; accordingly, the motion to dismiss the complaint is denied, without prejudice, however, to the right of defendant to contest the validity of the amendments in the courts of Ohio, or in such other manner, consistent with the ends of justice, as the trial court, sitting in equity, may find appropriate.
The judgment of the Appellate Division should be reversed, with costs in this court and in the Appellate Division, and the motion to dismiss the complaint denied.
LOUGHRAN, Ch. J., LEWIS, CONWAY, DESMOND, DYE, FULD and FROESSEL, JJ., concur.
Judgment reversed, etc.