enjoined from creating the proposed issue of second-mortgage bonds, or from appropriating the avails of the bonds, if issued, to the purposes intended by the directors. If the directors in the past have diverted the funds or property of the corporation into illegitimate channels, whether for purposes that are beyond the corporate powers, or for purposes within these powers, but contrary to their duties as trustees, all of which it is proper to say is emphatically denied by them, it may nevertheless be true that what they now propose to do is not only expedient, but essential and vital in the interests of the corporation and stockholders. If, as is insisted for the plaintiff, the corporation has no power to create the mortgage proposed, it must be held that the plaintiff is entitled to the injunction asked for.

An action by a shareholder against a corporation to restrain it from a contemplated transaction which is ultra vires may be maintained by the stockholder, and must be sanctioned by the court, although all the other stockholders of the corporation are willing to assent to and affirm the proposed course of action. In such a case the question is not one of discretion or expediency. The right of the stockholder to maintain the action and enjoin the transaction is personal to himself and independent of any right or interest of the corporation, and must be recognized, although all the other members are arrayed against him. Upon this branch of the controversy the contention for the plaintiff is that the joint resolution of Congress was a privilege to the original corporation only, and did not pass to the present corporation upon the reorganization, and that, further, in any event, it only permitted a single mortgage to be created, and the power was spent upon the creation of the first mortgage. This seems to be an astute rather than a reasonable interpretation of the language of the joint resolution. The purpose of including the right to mortgage the franchises of the corporation in the consent of Congress was palpably in order that a purchaser under a foreclosure might succeed to all the rights and privileges of the original corporation. As there was no restriction in that consent respecting the amount for which a mortgage might be created by the corporation, or relating to the scope or character of the mortgage, the implication seems not only fair, but irresistible, that Congress intended to leave all this to the discretion of the corporation itself, to be exercised in view of the exigencies of the undertaking. Obviously, Congress was quite indifferent whether the mortgage should be a large one or a small one, whether it should cover the whole or a part of the property of the company, or whether all the bonds to be secured should be issued at one time or in one series or class. The power conferred is limited only by the purpose expressed, that the bonds are to be issued to aid in the construction and equipment of the road, and are to be secured by mortgage.

The conclusion being reached that the corporation may lawfully create the proposed mortgage, the question then arises whether, under the particular circumstances of the case, the directors should be restrained from exercising their discretion in that behalf. All the allegations of the bill respecting the past misconduct of the directors are fully met and denied by the answer of the defendant, and it is asserted by them unequivocally that the avails of the mortgage are to be, and must of necessity be, applied to discharge the liabilities of the corporation for the construction and equipment of the road, and that bonds to a moderate amount are not to be negotiated at present, but are to be retained to provide against contingencies. While it is true, as alleged by the plaintiff, that three of the directors are members of the syndicate to whom it is proposed to sell the bonds, it is not alleged that the price for which they are to be sold is inadequate or less than could be obtained elsewhere. If it should be assumed that the plaintiff may ultimately sustain the allegations of the bill respecting the past transactions which he assails, the fact cannot be gainsaid that the corporation is now largely indebted, that it has no resources practically available, and must raise the means to meet its liabilities and complete the construction and equipment of its road. The directors propose to take such action only as shall be sanctioned by the requisite vote of the preferred stockholders. By the agreement of reorganization, to which every stockholder is a consenting party, the power to represent all, when it is proposed to create a second mortgage, is lodged in the preferred stockholders. It is delegated to them, and to them alone, to determine whether, in view of all the circumstances of the situation, the interests of the corporation will be best subserved by the creation of such a security. If their consent is fairly obtained it is conclusive. The plaintiff cannot be heard to complain if they are satisfied.

It may be proper to state in conclusion that a court of equity will not be swift to grant the stringent relief of a preliminary injunction to an officious plaintiff who seems to have acquired his interests as a stockholder with a view of assailing transactions in the corporate affairs of which existing stockholders do not seem to have complained. The purchaser of a law suit is entitled to what he has bought, and may insist that his rights shall be recognized and enforced according to the settled principles of law and the rules of procedure which obtain, irrespective of the motive of the litigant; but he can only insist that such preliminary relief be granted as is absolutely indispensable to preserve rights that cannot be adequately protected at the ultimate decision of the case.

The restraining order is vacated and a preliminary injunction refused.

Injunctions to Restrain Ultra Vires Corporate Acts.-A court of equity will interpose to prevent a board of directors of a corporation from misapply.

ing its funds or performing any other ultra vires act. Kean v. Johnson, 1 Stockt. 401; Simpson v. Westminster Palace Hotel Co., 8 H. L. Cas. 717; Ernest v. Nicholls, 6 Id. 401; Dodge v. Woolsey, 18 How. (U. S.) 331; Davenport v. Down, 18 Wall. 626; Hersey v. Veazie, 24 Me. 9; Smith v. Hurd, 12 Metc. 371; Allen v. Curtis, 26 Conn. 456; Western R. R. Co. v. Nolan, 48 N. Y. 513; March v. Eastern R. R. Co., 40 N. H. 548; Same v. Same, 43 N. H. 515; Lauman v. Lebanon, 30 Pa. St. 46; Samuel v. Holladay, 1 Woolw. 400; Heath . Erie R. R. Co., 8 Blatch. 347; Brewer, etc., v. Proprietors, 104 Mass. 378; Brown v. Vandyke, 4 Halst., 795; Butts v. Woods, 38 Barb. 181; s. c., 37 N. Y. 317; Burke v. Railroad Corp., 8 Am. & Eng. R. R. Cas. 552.

Will Lie at Suit of Stockholders.-Relief will be afforded at the instance and application of a single stockholder against any improper alienation of the corporate funds. Equity will in such case restrain the commission of acts which are contrary to law and tend to the destruction of the franchises, as well as the improper management of the business of the company or a wrongful diversion of its funds. High on Injunctions, § 767; Manderson . Commercial Bank, 28 Pa. St. 379; Sears v. Hotchkiss, 25 Conn. 171; Bagshaw o. Eastern, etc., Ry. Co., 7 Hare, 114; Coleman v. Same, 10 Beav. 1; Gifford v. N. J., etc., 2 Stockt. 171; Simpson v. Westminster, etc., 8 H. L. Cas. 317; Bissell v. Michigan, etc., Railroad Co., 22 N. Y. 258; Fisk v. Chicago, R. I. & P. R. R. Co., 53 Barb. 513.

The same principle applies wherever the directors threaten to perform acts or to enter into contracts which are clearly ultra vires. Balfour v. Ernest, 5 C. B. (N. S.) 601; Zabriskie v. Hackensack, etc., R. R. Co., 8 Id. 178; Black ⚫. Delaware, etc., R. R. Co., 7 C. E. Green, 120; Kean v. Johnson, 1 Stockt. Ch. 401; Bliss . Anderson, 31 Ala. (N. S.) 613; Belmont v. Erie R. R. Co., 52 Barb. 637; Memphis v. Dean, 8 Wall. 64; Zabriskie v. Cleveland, etc., R. R. Co., 23 How. 381; Attorney-Gen'l v. Eastlake, 11 Hare, 205; Greenwood v. Union Freight R. R. Co., 9 Am. & Eng. R. R. Cas. 526; Elkins v. Camden & Atlantic R. R. Co., 9 Am. & Eng. R. R. Cas. 590; Burke 1. Railroad Corp., 8 Am. & Eng. R. R. Cas. 542; Du Pont v. Northern Pac. R. Co. et al. and note supra.

But see Pond. Framingham, etc., R. Co., 9 Am. & Eng. R. R. Cas. 551; Matthews v. Murchison et al., 9 Am & Eng. R. R. Cas. 693.

DIMPFEL

v.

OHIO AND M. Rr. Co.

(Advance Case, Supreme Court of the United States.

January 21, 1884.) ·

A stockholder in a railroad corporation cannot set aside the transactions of its directors unless he held his interest at the time of the proceeding complained of, nor unless he has exhausted all the means within his reach to obtain redress without resort to a court of law.

APPEAL from the Circuit Court of the United States for the Southern District of Illinois.

C. W. Hassler and Thos. N. McCarter for appellants.
Edgar. M. Johnson and Benj. Harrison for appellees.

FIELD, J.-This suit was brought to set aside a contract by which the Ohio & Mississippi Ry. Co. became the owner of a portion of its road known as the Springfield Division, and to obtain a decree from the court declaring that the bonds issued by the company, and secured by a mortgage upon that division, are null and void. It was commenced by Dimpfel, an individual stockholder in the company, who stated in his bill that it was filed on behalf of himself and such other stockholders as might join him in the suit. Callaghan, another stockholder, is the only one who joined him. The two claim to be the owners of 1500 shares of the stock of the company. The whole number of shares is 240,000. The owners of the balance of this large number make no complaint of the transactions which the complainants seek to annul. And it does not appear that the complainants owned their shares when these transactions took place. For aught we can see to the contrary, they may have purchased the shares long afterwards, expressly to annoy and vex the company, in the hope that they might thereby extort, from its fears, a larger benefit than the other stockholders have received or may reasonably expect from the purchase, or compel the company to buy their shares at prices above the market value. Unfortunately, litigation against large companies is often instituted by individual stockholders from no higher motive. But assuming that the complainants were the owners of the shares held by them when the transactions of which they complain took place, it does not appear that they made any attempt to prevent the purchase of the additional road, and the issue by the company of its bonds secured by a mortgage on that road. We are not informed of any appeal by them to the directors to stay their hands in this respect, nor of any representation to them of a want of power to make the purchase and issue the bonds, nor of any probable injury which would arise therefrom. The purchase was made in January, 1875, and this suit was not commenced until September 12, 1878. In the mean time, the new road purchased was operated as an integral part of the line of the Ohio & Mississippi Ry. Co., without objection from any stockholder. During these three years and eight months the earnings of the new road went into the treasury of the company, and the bonds issued upon the mortgage of that road, executed by the company in payment of its purchase, passed into the hands of parties who bought them on the faith of contracts which had been carried out without complaint from any one. Objections now come with bad grace from parties who knew at the time all that was being done by the company, and gave no sign of dissatisfaction. The purchase and the issue of the bonds were public acts known to them, and presumably to all the stockholders.

Å stockholder must make a better showing of wrongs which he has suffered, and also of efforts to obtain relief against them, be

fore a court of equity will interfere and set aside the transactions of a railway company or of its directors. It is not enough that there may be a doubt as to the authority of the directors or as to the wisdom of their proceedings. Grievances, real and substantial, must exist, and before an individual stockholder can be heard he must show, in the language of this court, that "he has exhausted all the means within his reach to obtain, within the corporation itself, the redress of his grievances or action in conformity to his wishes." Hawes v. Oakland, 104 U. S. 450. In that case the court added that the efforts to induce such action as he desired on the part of the directors or of the stockholders, when that was necessary, and the cause of his failure, should be stated with particularity in his bill of complaint, accompanied with an allegation that he was a stockholder at the time of the transactions of which he complains, or that his shares have devolved on him since by operation of law. According to the rule thus declared, and its value and importance are constantly manifested, the complainants have no standing in court, and the demurrer was properly sustained for want of equity in the bill.

This view renders it unnecessary to consider whether, as held by the court below, the railway company had the right to acquire the Springfield Division and to execute the mortgage and issue the bonds mentioned by virtue of the legislation of Illinois. The complainants have not shown any ground which would justify the court, on this application, to inquire into the validity of the transaction.

Decree affirmed.

See Leo v. Union Pacific R. Co., and note, supra, and Du Pont v. Northern Pacific R. Co., and note, supra. Cf. In re Syracuse, C. & N. Y. R. R. Co., 90 N. Y. 1.

BROWN V. FLORIDA SOUTHERN RY. Co.

FLORIDA SOUTHERN RY. Co v. BROWN.

(19 Florida Reports, 472.)

An original incorporator in Florida Southern Ry. Co., first known as Gainesville, Ocala, and Charlotte Harbor R. R. Co., was not as such, independent of a contract with the directors of the company, entitled under the charter of the corporation, on the common law controlling the subject, to a proportion of the stock, to be determined by the number of original incorporators named in the articles of incorporation.

A grant of land by the State of Florida to a corporation having power to make contracts for the purpose of accomplishing corporate purposes is not a grant to the original incorporators signing the articles authorized by the