remove officers and agents appointed by the corporation for the conduct and management of its business, that power being vested by law in the members; it can only hold them to a personal account to the complaining shareholder and his associates for breaches of trust and derelictions of duty. It will not appoint a receiver to take charge of the business and wind up the affairs of the corporation, except in certain cases elsewhere discussed, for that would be virtually dissolving the corporation indirectly, which the court cannot do at all in such action. Nor will a bill for an injunction be maintainable for the purpose of determining the question of a contested election for directors.2

§ 622. Motives for bringing the suit generally immaterial. -The motives for bringing the suit are immaterial provided the plaintiff has a real interest entitled to the protection of the court, and is not acting collusively as a mere figurehead for others having evil designs against the success of the corporate enterprises.3

I Neal v. Hill, 16 Cal. 145; French Bank Case, 53 Cal. 495; Leslie v. Lorillard, 110 N. Y. 519; 18 N. E. 363; Mills v. Hurd, 29 F. 410; Sawyer v. Printing Co., 77 Ia. 242; 42 N. W. 300.

New England, etc., Ins. Co. v. Philips, 141 Mass. 535; 6 N. E. 534. A railroad company in financial difficulties, with a view to compromise, placed creditors' securities and stockholders' certificates under control of a "reconstruction board" which was to act with the advice and consent of a body designated as a voting trust," this latter body consisting of four persons named by syndicates representing different interests. This "voting_trust" was to hold the legal title to the stock, and to give those who had surrendered their stock certificates that the beneficial interest was in them, devoid of the right to vote.

The holder of such a certificate sought an injunction to stay or regulate an election, on the ground that so much of the scheme as vested the legal title in the voting trust was void, as placing the railroad under the control of men having no interest in its fortunes, and not the real owners of the stock. It was held that a preliminary injunction which might prevent an election should not issue. Shelmerdine V. Welsh, 8 Pa. Co. Ct. Rep. 330.

Colman v. Eastern Counties Ry. Co., 10 Beav. 1; Forest v. Manchester, etc., Ry. Co., 4 De G. F. & J. 131; Ramsey v. Gould, 57 Barb. 398; Occum Co. v. Sprague Mfg. Co., 34 Conn. 529; Cent. R. R. Co. v. Collins, 40 Ga. 582; Cam

If the suit be brought to aid the schemes of others, desiring the failure rather than the success of the business in which the corporation is engaged, it is an imposition on the court and the action will be dismissed without regard to the rights of bona fide shareholders.1

§ 623. The exercise of discretionary powers cannot be interfered with.-Individual stockholders have no right to appeal to the courts to decide the line of policy to be pursued by the corporation, or to interfere with the management of the corporation so long as its regular agents are acting honestly, within the discretionary powers entrusted to them, and within the powers conferred in the charter.2

den, etc., R. R. Co. v. Elkins, 37 N. J. Eq. 273; Pender v. Lushington, L. R. 6 Ch. D. 70.

1 Belmont v. Erie Ry. Co., 52 Barb. 637; Waterbury v. Mer., etc., Exp. Co., 50 Barb. 168; Robson v. Dodds, L. R. 8 Eq. 301; Ffooks v. Southwestern Ry. Co., 1 Sm. & G. 142; Burt v. British, etc., Assur. Ass'n, 4 De G. & J. 158; Filder v. London, etc., Ry. Co., 1 H. & M. 489; Forest v. Manchester, etc., Ry. Co., 4 De G. F. & J. 126; Sparhawk v. Un. Pass. Ry. Co., 54 Pa. St. 401.

2 Lord v. Copper Miners' Co., 2 Phil. 751; People v. Chicago Board of Trade, 80 Ill. 134; Durfee v. Old Colony, etc., R. R. Co., 5 Allen, 231; Treadwell v. Salisbury Mfg. Co., 7 Gray, 393; Gernsheim v. Olcott, 56 Hun, 644; 10 N. Y. S. 438; Rogers v. Phelps, 56 Hun, 649; 9 N. Y. S. 886; Fareira v. Riter, 15 Phil. 58; East Tenn., etc., R. R. Co. v. Gammon, 5 Sneed. 567; Bailey v. Power Street, etc., Church, 6 R. I. 491. See also Teachout v. Ry. Co., 75 Ia. 722; 38 N. W. 145; Burnham v. Mfg. Co., 76 Cal. 24; 17 P. 940.

The fact that large amounts of assets were invested in realty, causing great losses from depreciation, is not a wrongful diversion, where it appears that the realty was bought in on sales under foreclosure of mortgages given to secure debts, to prevent a sacrifice. Wallace v. Lincoln Sav. Bank (Tenn.), 15 S. W. 448. A proposed reorganization of a railroad company, to be effected in connection with a foreclosure sale under certain mortgages, by which the bonded indebtedness is refunded on longer time and at reduced interest, and which allows each stockholder to retain his stock on the payment of his pro rata share of the floating debt, is not a fraud on the stockholders, and will not be enjoined at the suit of some of them, who do not suggest any other method by which the financial embarrassments of the company can be met. Carey v. Houston & T. C. Ry. Co., 45 F. 438.

In 1866, the Cedar Falls Railroad Company leased its road to the Dubuque Company for the term of 40 years. A year later the Dubuque Company leased its own road to the Illinois Central Railroad Company for 20 years, with the option to retain it in perpetuity, and the latter company agreed to assume the

This discretion should be allowed to the management in determining the propriety of involving the corporation in litigation as in other matters. It is not always expedient for a corporation to seek redress in the courts for infringements of its rights any more than it would be for an individual to resort to lawsuits for trivial grievances. A shareholder will not be allowed to usurp this any more than other discretionary powers, and the mere fact that the managing agents of the corporation have, in good faith, refused to bring a suit in he name of the corporation will not alone justify an interference by the courts.1

lease made between the Dubuque and the Cedar Falls Railroads. Held, that the fact that the directors of the Dubuque Company failed to make the continuance of the lease of the Cedar Falls road dependent on construction of roads in Minnesota that would connect that road with St. Paul or Minneapolis, which was the expectation when the lease was executed, but which expectation was never realized, will not warrant the presumption that the directors of the Dubuque Company were guilty of actual fraud towards that company in executing the lease. Neither will the court indulge the presumption of fraud against the directors of the Dubuque Company because the rent stipulated for in the lease turned out to be larger than the business over the Cedar Falls road really justified, where such rent was fixed in accordance with the report of competent and disinterested experts, to whom that question had been referred. Jesup v. Illinois Cent. R. Co., 43 F. 483; Dubuque & S. C. R Co. v. Jesup, Id.

A board of directors which, in furtherance of the vote of the required majority, directs a total cessation of the business of the corporation and a liquidation of its affairs, acts within the sphere of its lawful authority, and is not chargeable with any loss which the measure, in its execution, may entail on the minority. Trisconi v. Winship (La.), 9 So. 29.

1 Samuel v. Holladay, 1 Woolw. (U. S. C. Ct.) 400. In this case Justice MILLER said: "It would be a doctrine attended with very serious consequences, if every individual shareholder, assuming the place of the corporation, could decide for it, when action should be brought to vindicate its supposed right. Each one of the shareholders might elect to claim a remedy, and resort to a tribunal different from those chosen by every other, and use the court of equity to enforce his views regardless of its duly constituted officers and all other parties having interests, rights and powers equal to his own. In such a struggle, the real interests of the corporation might be entirely sacrificed. If such a doctrine should obtain, it would be dangerous to deal with a corporation, for, whatever the understanding had with its lawful representatives, no one could be protected from the individual shareholders. If a stockholder is aggrieved by the refusal of the board of directors to accept his views, his remedy is to unite with other stockholders and change those directors."

But if irreparable mischief to his interests may ensue in the meantime, equity will administer preventive justice until such time as the will of the body of stockholders can be ascertained.

§ 624. Further limitations of the right.-When a suit by a shareholder is not based upon some breach of trust of the managing agents themselves, nor upon an act by them in excess of the powers conferred by the charter, it is open to the objection that the act complained of, though unauthorized, is subject to subsequent ratification. In such a case as that above supposed something more must be shown, in order to set the remedial powers of the court in motion, than the mere excess or abuse of authority by an agent and the refusal of the corporation to bring suit.

The additional facts which must be alleged and proven, fully appears from the language of the court in a leading case where the directors had purchased their own land. of themselves for the use of the company at an exorbitant price which they had taken to themselves out of the fund of the company.

The court held the transaction unauthorized; but as a reason for refusing to interfere and set it aside, said: "Whilst the court may be declaring the acts complained of to be void at the suit of the present plaintiffs, who, in fact, may be the only proprietors, they may defeat the decree by lawfully resolving upon the confirmation of the very acts which are the subject of the suit. The very fact that the governing body of proprietors, assembled at the special general meeting, may so bind even a reluctant minority, is decisive to show that the frame of this suit cannot be sustained whilst that body restrains its functions. In order, then, that this suit may be sustained, it must be shown, either that there is no such power as I have supposed remaining in the pro

prietors, or, at least, that all means have been resorted to and found ineffectual to set that body in motion." 1

But the rule of this case would never apply to acts the doing of which cannot be ratified by less than unanimity.

§ 625. Cases in which there should be no delay. It does not apply to any acts wholly unauthorized by the charter of the corporation, nor any misappropriation or diversion of funds to objects not contemplated in the agreement of association. All such transactions would be ultra vires in the extreme sense of that term, and incapable of ratification against the will of a single member. Indeed unanimity would not legalize such acts.2

Nor does the rule in the case of Foss v. Harbottle 3 apply to cases of threatened wrongs by the agents or other stockholders of the corporation. The mere fact that the injury about to be inflicted to the corporate interests may subsequently be adopted by the majority as its act will not stand in the way of the court furnishing a preventive remedy against the commission of the prejudicial act.4

§ 626. Sale of essential property will be enjoined.—A dissenting stockholder may prevent the sale, by the direc

1 Foss v. Harbottle, 2 Hare, 493, 494.

2 Heath v. Erie Ry. Co., 8 Blatchf. 406; Bagshaw v. Eastern Union Ry. Co., 7 Hare, 130; Salomons v. Laing, 12 Beav. 377; Atwool v. Merryweather, L. R. 5 Eq. 464, n., 468; Ives v. Smith, 3 N. Y. S. 645; Hoole v. Gt. West Ry. Co. L. R., 3 Ch. 274; Hazard v. Durant, 11 R. I. 207; Brewer v. Boston Theatre Co., 104 Mass. 394-397. Infra, § 774, 775.

3 Supra.

66

Ry. Co. v. Allerton, 18 Wall. 233; Exeter, etc., Ry. Co. v. Buller, 5 Eng. Ry. Cas. 211; Re London, etc., Discount Co., L. R. 1 Eq. 277. The owners of a majority of the stock of a corporation, who persuade their implements and representatives" on the board of directors to convey to them the property of the corporation for a grossly inadequate consideration, in fraud of the minority stockholders, must be held to have participated in the fraud of the directors. Woodroof v. Howes (Cal.), 26 P. 111.