
    Atlantis Films, Inc., Plaintiff, v. Maubice B. Kesten, Defendant.
    Supreme Court, Special Term, New York County,
    October 30, 1959.
    
    
      
      Wilkes & Kennedy for plaintiff.
    
      Fitelson & Mayers (Harold J. Sherman and Howard Gotbetter of counsel), for defendant.
   Henry Clay Greenberg, J.

The defendant moves, pursuant to subdivision 4 of rule 106 of the Rules of Civil Practice, for dismissal of the complaint and each cause of action therein stated for legal insufficiency. Plaintiff submits no brief in opposition to the motion but has moved independently for leave to serve an amended complaint (see disposition on that motion on companion decision). Involved in this lawsuit are two contracts; one made by the promoter's who organized the plaintiff corporation and which involved the transfer of a license which plaintiff alleges was used as a device to evade the provisions of section 69 of the Stock Corporation Law, which prohibits the issuance of stock in consideration of future services and upon an employment contract.

Relying upon contract and affirming it, and in the absence of any demand for money damage, the plaintiff, cannot, on a claim of fraud, seek to alter the agreement. The plaintiff corporation is seeking the cancellation of the stock issued as partial result of the transaction in which the sole remaining stockholders participated and through whom the transaction was ratified by the plaintiff corporation, carrying out the agreement. Cancellation of the stock, moreover, will not benefit the plaintiff corporation bnt solely the remaining stockholders who had thus participated in and ratified the transaction. Through the common promoters and stockholders the corporation assented to the original allegedly voidable stock issuance and distribution.

In the second cause of action there is no allegations of ultimate fact as to scienter, falsity and reliance. As to the latter, the alleged representations were not made to the plaintiff and were made before its organization. Nor is there damage to the corporation or any allegation of assignment of the cause of action in fraud to the plaintiff. Similarly, a third cause relating to the employment agreement rests on representations not made to the plaintiff but to its promoters prior to organization. There is lacking allegation of discovery, time thereof, and disaffirmance, apart from the fact that it appears the agreement whose rescission is sought has expired.

The motion is accordingly granted dismissing each of the three causes with leave to plaintiff to serve an amended complaint within 20 days from service of a copy of this order with notice of entry.  