rupt, ceased to pertain to his estate,'and ceased to be under control of the bankrupt court, just as much as it wonld have passed out of the jurisdiction of any other court that might have had judicial possession of it, and ordered and completed its sale. Can it be pretended that an admiralty court, after having possession and control of a ship, and after selling it free and clear of all liens, as against all the world, can preveut parties with alleged liens pursuing the ship in the hands of the purchaser in any other courts; or that a probate conrt, having the exclusive control and jurisdiction of a minor's property, can protect it, after sale, from alleged mortgages and liens? It would seem immaterial whether the debts, which are the basis of the alleged liens claimed by defendants, were the debts of the bankrupt Weaver or not; but, in fact, they are not his debts, but the debts of strangers to the bankruptcy, and were not provable in said bankruptcy, although the liens might have been allowed therein. The views of this case. as herein expressed, or others leading to the same conclusions, were undoubtedly entertained by the learned judge presiding in the district court who decided the case adversely to the pretensions of the plaintiff. Let a decree be entered affirming the decree of the district court.
and others v. CUNARD MINING Co. and others
(Ci1'cuit Court, D. Colorado.
SUIT BY STocrrnOLDERS-PllEREQUISITES.
Before a stockholder can sue in his own name lIe must show to tlle satisfaction of the court that he has exhausted ail the means within his reaeh to obtain within the corporation itself the redress of his gr:evances, or action in conformity to his wishes. .
S.un;·-BILL MUST Snow, WIIAT.
In such a case the bill must set forth with particularity the efforts of the plaintifI to secure such action as he desires on the part of the managing directors or trustees, and, if necessary, of the shareholdcrs, and the causes of his faUure to obtain such aClion.
REFUSAL OF CORPORATION TO
It is not enough that it appears from the bill that the corporation would probably refuse relief. The rule is imperative that efforts shoule! be made to obtain relief in that direction before suit can be instituted by a stockholder·
. In Equity. Demurrer to the bill. Bentley J: Vaile, for plaintiffs. Decker c1: Youley, for defendants. MCCP.ARY, J., after stating the facts, delivered the opinion of the court, orally, as follows: The demurrer to the bill will have to be sustained. It is apparent that this is a suit brought in the interest of the Amulet Mining Company, a corporation. It is brought by the stockholders of that cor-
FOOTE 'D. CUNARD MINING CO.
poration. The substance of the allegation is that certain property, which in equity belonged to the Amulet Mining Company, was fraudulently conveyed to the Cunard Mining Company, and the relief sought is that the title be transferred from the one corporation to the other; It is, therefore, a suit which ought to be brougllt by the Amulet Mining Company, unless thei'e is some reason set forth in the bill why it should be brought by the complainants as stockholders in that company. There are no sufficient allegations in the bill upon this ject. The rule which obtains now in such cases is laid down in the case of Hawes v. Oakland, 104 U. S. 450, in which, after having stated the circumstances under which a bill may be brought by a stockholder against the corporation of whic,", he is a member, the court adds:
"Bnt in addition to the existence of grievances which call for this kind of relief, it is equally important that, before the shareholder is permitted in his own name to institute and conduct a litigation which usually belongs to the corporation, he should sllow, to the satisfaction of the court, that he has exhausted all the means within hisreach to obtain, within the corporation itself, the redress of his grievances, or action in conformity to his wishes. He must make an earnest, not a simulated, effort with the managing body of the corporation to induce remedial action on their part; and this must be made apparent to the court. If time permits, or has permitted, he must show, if he fails with the directors, that he has rode au honest effort to obtain action uy the stockholders as a body in the matter of which he complains; and he must show a case, if this is not done, where it could not be done, or it was not reasonable to require it. "The efforts to indnce snch action as complainant desires on the part of the directors, and of the shareholders, when that is necessary. and the cause of failure in these efforts, should Iw statee} with particularity, and an allegation that complainant was a shareholder at the time of the transactions of which he complains. or that his shares have devolved upon him since by operation of law. and that the suit was not a collusive one to confer on a court of the United States jurisdiction in a case of which it could otherwise have no cognizance, should be in the bill, which should be verified by arIidavit,"
Upon the announcement of that opinion the supreme court adopted an additional rule in equity, to which I think, perhaps, the attention of counsel in this case has not been called. It is rule \)4, and will be iound in the 104th volume of the United States Reports, and is as follows:
"Every bill brought by one or more stockholders in a corporation against the corporation and other parties, founded on rights which may properly be asserted by the corporation, must be verified by oath, and must contaUl an allegation that the plaintiff was a shareho:cler at the time of the trans.'lction Which he complains, or that his share had devolved on him since by operatIOn of law; and that the su.t is not a collusive one to confer on a court of the United States jurisdiction of a case of which it would not otherwise have cognizance. It must alsa set forth with partiCUlarity tile efforts of the plaintiff to secure such action as he desires. on the part of the managing or trustees, and. if necessar:', of the shareholders, and the causes of hiS failure to oMain such aetiull."
This bill does not set forth that the complain:mts were shareholders at the time of the transactions of which they complain; it does not set forth any efforts which have been made by complainants to obtain redress from the corporation; it is, therefore, in these particulars insufficient. It is not enough to say that it appears from the bill that the corporation would probably refuse relief. The rule is imperative that efforts shall be made to obtain relief in that direction before such a suit as this shall be commenced in the courts. On this ground the demurrer to the .Ii!.l will be sustained.
anet others v.
In ON Co. anet others.!
(Circuit Court, lV. D. Michigan, N. D. June, 1883.)
OFFICERS OF A COHPORATWN DEALING WITII TIIEMSELVES-CONTRACT VOIDAIlJ.E.
Uffieers of a corporation are but agents, and cannot, as such officers, while acting for the corpo,ation, deal with themselvcs, to the detriment of the corporation for whom they are acting. All such contracts, if not Yoid, ar" Yordable at the option of the corporation.
BAME-El<'FECT OF 8TOCKHOLDi4 S' lIlEETING.
property to themselves, or to another corporation formed for the purpose and exclusively owned by t hem, un Ie,s such lease IS made in good faith, and is supp,,·'ted by an adequate considemtion; and in a suit, properly prosecuted, to set lISI11e such a contract, the bUl'llen of proof, showing fairness and adequacy, is upon the party or parties claiming thereunder. All doubts will he solved in favor of the corporat.on fur whom such stockholders assumed to act.
their vote,. in a stocklulders' meeting, lawfully authorize its officers to lcase its
Nor can the holders of a majority of the capital stock of a corporation, by
BAMFo-POWER OF .MAJORITY.
The holdl'rs of a majority of the stock of a corporation may legally control the company's business, pre<crihe its general pulicy, make themselves its agents, and take reasonabll' cumpensation for their services. Bllt, in thus assmuing the control, they also take upon themselves the correlative dutv of diligence and good faIth. They caunot lawfully manipulate the company's business in own interests, to the injury of other stockholders.
An owner of capital stock in a corporation. who sues for and all other shareholders, and snccessfully prosecutes the action, for a wrong done to the corporation, is entitled to be reimhursed his actual and necessary expenditures, ineludinp; attorney's fees, out of the corporate funds. 6. S.UlE-C· oF. GHA..'i1TED. The flhlr hr:,thers S. leased the mine of the Iron Co. for five yeurs, at a royalty of 50 ceuts per ton of are mined, they to furnish the requisite mach,ner,V, which was to he by the les.;or upon the expiration of the lea.;e. They ineorporatcd the W. Hematite Co. tooperale the mine, they being the sale owuers of it, stock. Shurtly hefure the expiration of their lease, being unahle to obtain a renewal of it, they purchased a majority of the stock of the Iron Co., and cailed a meeting or its stockholders, hut at which no other stockholder attended. That meeting ordered an expenditure of $50,000 of the company's capital in sinking a shaH in the mine to facilitate its operation; directed a lease for 18 years of the mine, machnery, and all of the company's other property to the W. Hematite Co. at a royalty of 25 cents per ton of or" mined, with cedain
t Reported b)' J. C. Harper, Esq., of tbe Cincinnati bar.