Cravath, Swaine & Moore for Webb Wilson and another, defendants.
Abraham Marcus for plaintiff.
was not available to the other officer and director defendants except in reduction and diminution of damages. And in
Braswell v. Morrow (195 N. C. 127, 132) the court in reviewing the problem presented in
Besseliew v. Brown (
supra) said: "Certainly, joint
tort-feasors [directors] cannot relieve themselves from liability by making a settlement with or releasing one of their own number." Here we have an action pending against the entire board of directors for a misapplication of funds of the corporation in a substantially large amount. To hold that a board of directors could obtain immunity for themselves by releasing another director against whom the same charge of misapplication of funds is made would make a travesty of the law and of the responsibility of corporate directors. Such a conclusion would stultify the right of any stockholder to maintain a proceeding on behalf of his corporation and would further stultify the right and power of the court in passing upon the adequacy and fairness of the settlement of any such claim. If this is true, unscrupulous directors may circumvent the rules and checks which have been set up as a watch upon their activities. The old and the new director defendants are charged in substance with the same type of wrongs, that of unlawful and wrongful expenditures of corporate funds in connection with a proxy contest. All of the defendants comprising both the old and new board, specifically deny liability. Since the members of the new board unequivocally deny any liability which is charged to them they are not proper persons to settle any action against those charged with the same breach of trust. The complaint in this action specifically alleges that a demand on a corporation to take action in the premises would be futile in view of the charges made and the liability of the present board to the corporation for the wrongs committed. It would be against the personal interests of the members of the board of directors to diligently prosecute such an action and reach a determination holding the old directors liable. In such a case, they are disqualified from acting in the premises in attempting to release their codefendant in liability. The motion to dismiss the complaint and for summary judgment for defendants under rule 113 of the Rules of Civil Practice is denied.