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been held to be the only necessary party defendant. Where, for instance, the majority were about to divert corporate funds to purposes not authorized by the charter, or the agents were attempting to use the corporate name for unauthorized purposes, restraining process directed against the corporation would be binding upon all parties professing to act in its behalf. But in all these cases, though the immediate wrongdoers be not necessary, they are, at least, proper parties defendant.1

But in an action by minority stockholders of a corporation for relief against certain transactions by the company with the majority stockholders, where the directors of the corporation were only defendants' implements and representatives," and it was not shown that they received or had any interest in the fruits of defendants' transactions, it was held not necessary to join them as defendants. 2

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Where the corporation is in the hands of a receiver, he should be made a party defendant; and where he has refused to bring the suit upon the request of plaintiff, the latter may dismiss the action without his consent. And in all cases involving acts by agents on

for bringing a suit in the name of some of the stockholders in behalf of a corporation to recover its property that the corporation is extinguished by limitation in its charter where by the laws of the state its existence was continued thereafter for the purpose of winding up its business; nor that many of its directors are dead where part of them have survived, and no application has been made to them to bring the suit, and no effort been made to call the stockholders together to elect directors or to obtain united action. Taylor v. Holmes, 127 U. S. 489.

1 Winch v. Birkenhead, etc., Ry. Co., 5 De G. & Sm. 562; Hatch v. Chicago, etc., R. R. Co., 6 Blatchf. 105; Heath v. Erie Ry. Co., 8 Id. 412; People v. Sturtevant, 9 N. Y. 263, affirming Davis v. Mayor, 1 Duer, 451, 484.

2 Woodroof v. Howes (Cal.), 26 P. 111.

* Beadleston v. Alley, 7 N. Y. S. 747; 59 Hun, 605. A stockholder in an insolvent national bank for which a receiver has been appointed cannot sue its directors to make them personally liable for the mismanagement of the bank, as the right of action is in the receiver, and not in the individual stockholder. Howe v. Barney, 45 F. 668.

their own behalf, whether past, present or contemplated, with which it is sought to charge them, they are necessary parties to the suit.

§ 631. Equitable owner may sue.-One having the beneficial interest in shares standing in the name of a trustee can maintain an action to protect such interest, but the trustee is a necessary party to the proceeding.1 If, in such case, the consent of the trustee cannot be obtained, he may be made a party defendant; the reason of his non-joinder as plaintiff being alleged.

Any party entitled to a transfer of shares on the books of the corporation may sue if in a position to enforce specific performance of his contract.2

A trustee would undoubtedly have a right to resort to an action to protect the interest of his cestui que trust in shares held by the former. It seems that a mere pledgee of stock cannot maintain a suit against delinquent directors in the name of the corporation, but may sue them in their fiduciary character as such for any breach of trust affecting his interest.

1 Baldwin v. Canfield, 26 Minn. 43; 1 N. W. 261; Gt. West. Ry. Co. v. Rushout, 5 De G. & S. 290. Compare Mayer v. Denver T. & Ft. W. R. Co., 38 Fed. Rep.

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2 Bagshaw v. Eastern Un. Ry. Co., 7 Hare, 130; Baldwin v. Canfield, 26 Minn. 43; 1 N. W. 261. But see Walker v. Devereaux, 4 Paige, 229; Busey v. Hooper, 35 Md. 15; Mills v. North. Ry. Co., L. R. 5 Ch. 621.

3 In Baldwin v. Canfield, 26 Minn. 43; 1 N. W. 261, a certificate to shares of stock in a corporation had been assigned to plaintiff by a shareholder as security for a loan. No transfer was made upon the books of the corporation at the time or subsequently. He brought his action against the directors, the corporation and the grantee in the deed, jointly, but failed to obtain service on the corporation. It was alleged in the complaint and proven on the trial to the satisfaction of the court that the defendant directors had in the nature of the corporation fraudulently deeded away certain real estate of the corporation. He sought to have the conveyance set aside and the deed cancelled. It appeared that at the time that the conveyance was made, the parties making it were the owners of all the stock. BERRY, J., said: "It is also contended by defendants' counsel that the plaintiffs have no standing in court, because a stockholder as such could not sustain an action of this kind. It is an answer to this to say, that the plaintiffs, though they hold the stock, are not stockholders

§ 632. Summary of principles governing the suits of shareholders. It may be stated as a general rule, deducible from what has proceeded, that a court of equity will entertain jurisdiction at the suit of a stockholder in a corporation, to restrain the corporation and those who have the control and management thereof from acts tending to a destruction of its franchises, from violations of the charter, from misuse or misappropriation of the corporate powers or property, and from other acts prejudicial to the stockholders amounting to a breach of trust.

And it is equally plain that appropriate relief or redress will be granted in any case, whether it is asked against the management or others, for such acts, where it is shown that the corporation is, from any cause, unable or unwilling to proceed on its own behalf and that the collective interests of the shareholders are involved.1

To enumerate all the wrongs and abuses and shortcomings of corporate officers and agents, which will entitle a shareholder to invoke the exercise of equitable powers by courts, would be unnecessary even if possible. But it may be stated generally that equitable relief will be granted for any infringement of the equitable rights

but pledgees merely, and therefore they cannot exercise the control over the association which stockholders can. What the stockholders may compel the association to do, they cannot compel it to do. They cannot therefore be compelled to act through the association, but may bring an action on their own account and in their own names to protect their rights and interests as pledgees.” 1 See Underwood v. N. Y., etc., R. R. Co., 17 How. Pr. 537; Cent. R. R. Co. v. Collins, 40 Ga. 582, 617; Terwilliger v. Gt. West. Tel. Co., 59 Ill. 249; Hazard v. Durant, 11 R. I. 195; Dodge v. Woolsey, 18 How. 331; Chetlain v. Republic Life Ins. Co., 86 Ill. 220, 222; March v. Eastern R. R. Co., 40 N. H. 567; Ives v. Smith, 3 N. Y. S. 645; 19 N. Y. S. 556; 43 N. H. 532; Pratt v. Pratt, 33 Conn. 446; Brewer v. Boston Theatre Co., 104 Mass. 378; Plattville v. Galena, etc., R. R. Co., 43 Wis. 493; Kelley v. Mariposa Land Co., 4 Hun, 632; Tipton Fire Co. v. Barnheisel, 92 Ind. 88; Winch v. Birkenhead, etc., Ry. Co., 5 De G. & Sm. 562; Colman v. Eastern Counties Ry. Co., 10 Beav. 1; Pickering v. Stephenson, L. R. 11 Eq. 322.

or injuries to the collective beneficial interest of a member arising from or incident to his connection with the corporation, provided the conditions heretofore enumerated are shown to exist, and provided, further, there is no laches or acquiescence on his part, or some ulterior legal or equitable defence to his right to the remedy asked.1

§ 633. Defences-Acquiescence by the corporation.—A shareholder occupying the status of representative plaintiff in an action to protect the common corporate interest stands in the place and right of the corporation. It follows that whatever would constitute a bar to an action by the corporation, if suing for itself, will defeat the shareholder's claim for relief as against agents or others inimical to the aggregate corporate interests. And since the shareholder only has such right to sue as the corporation possesses, if the latter has barred itself by acquiescence in or ratification of the act complained of, the action by the shareholder must fail.2

1 See Neall v. Hill, 16 Cal. 145; Wright v. Oroville G. M. Co., 40 Cal. 20; Parrott v. Byers, 40 Id. 614; Cogswell v. Ball, 39 Cal. 320; Bacon v. Irwin, 70 Cal. 222; 11 P. 646. In a bill to charge all the managers of a bank for negligence in permitting acts on the part of some of the managers which resulted in loss, allegations that the managers had applied to a court of equity for aid, and had agreed to run on under the court's directions, and, contrary to such agreement, had repeatedly made illegal loans, which did not result in any loss, but of which all the managers ought to have had knowledge, and that thereafter an illegal loan was made which did result in loss, are pertinent to the cause, as tending to full knowledge of the situation. Dodd v. Wilkinson, 42 N. J. Eq. 647; 9 A. 685.

2 Scott v. De Peyster, 1 Edw. Ch. 513, 536; Kent v. Quicksilver Min. Co., 78 N. Y. 159, 184-186; Terry v. Eagle Lock Co., 47 Conn. 141; Watts' App., 78 Pa. St. 370; McDermot v. Harrison, 9 N. Y. S. 184; 30 N. Y. S. 324; Samuel v. Holladay, 1 Woolw. 416; Kitchen v. St. Louis, etc., Ry. Co., 69 Mo. 224, 264; Miner's Ditch Co. v. Zellerbach, 37 Cal. 543; Gray v. Chaplin, 2 Russ. 126; Zabriskie v. Hackensack, etc., R. R. Co., 18 N. J. Eq. 178, 194. The last is a clear and thoroughly discussed case in which a corporation was held to be barred by acquiescence. Stettawer v. N. Y. & S. Const. Co., 42 N. J. Eq. 46; 6 A. 303. It was held that where a corporation had ceased to do business, and its officers had wound up its affairs, and tendered the stockholders the respective amounts due

It is obvious that a defence of this nature would only be available in rare and exceptional cases. It would avail where the right of ratification rested with a bare majority, and no step had been taken to repudiate the unauthorized acts of the agents until the rights of third parties had become involved or the agent's position was altered to an extent entitling him or them to claim the benefit of an equitable estoppel.

If the act complained of were beyond the powers of the corporation, under any and all circumstances, or was in its nature a fraud upon the minority,' no ratification would validate the agent's act in favor of the agent, unless by unanimous vote; and if the complaining shareholder had voted to ratify it or had become barred by laches, the defence could not, in that case, be said to have been acquiescence by the corporation but by the plaintiff personally. Of course, if previous authority has proceeded from the whole body of shareholders, to transact business unauthorized by the charter, the defence would rest on principles too familiar to require their being stated.2

§ 634. Ratification must not have been induced by fraud. -Where previous authority or subsequent ratification by those having the right ordinarily to authorize or ratify, is set up as defence to the action, it will not avail the defendants if it appear that undue advantage was taken of the shareholder, or that fraud was perpetrated upon him in the transaction, either in violation of his rights as a shareholder, or in inducing him to take stock in the company. He will not be deprived of his remedy

them, equity has no jurisdiction to compel the officers to submit the books of the corporation to an expert accountant employed by a stockholder who alleges no fraud, but that the dividend set off to him is not correct.

1 Woodroof v. Howes (Cal.), 26 P. 111.

2 See Hotel Co. v. Wade, 97 U. S. 13.

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