Gerdes v. Reynolds

30 N.Y.S.2d 755 (Sup. Ct. 1941)

 

RULE:

A wrongdoer is liable for the ultimate result of his conduct, i.e., the consequences which actually ensue therefrom, even though they were not foreseeable and were novel or extraordinary. That liability stops only at the point where the sequence of events is broken by the intervention of a new and independent cause as distinguished from a connected or contributing or concurrent cause.

FACTS:

The defendants, Reynolds et al., owned the majority of the voting stock of Reynolds Investing Company, Inc., an investment trust, and constituted its board of directors. They sold their stock to a group composed in part of the Defendants. A motion was made to confirm a referee's report, which found that Reynolds et al. were liable to Gerdes et al. for turning over control of practically negotiable assets to strangers who had not completed payment of the purchase price of the majority stock being bought.

ISSUE:

Were Reynolds et al. liable to the corporation for turning over control of almost negotiable assets to strangers who had not finished paying for the majority stock?

ANSWER:

Yes.

CONCLUSION:

The Court confirmed the referee's report holding Reynolds et al.  liable to the corporation for turning over control of almost negotiable assets to strangers who had not finished paying for the majority stock. The Court added to the report that Reynolds et al. were liable for the ultimate results of their conduct, regardless of whether they were foreseeable. The Court then found that, in determining liability, it was unnecessary to decide whether consequences harmful to the corporation from turning over the assets were reasonably foreseeable because there was an additional basis for liability, an illegal sale of corporate offices, and as liability because of violation of duty had already been found, the question of what consequences were reasonably foreseeable were immaterial.

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