..

MAyER V.

DENVER,

T. &: FT. W. R. 00.

197

Plaintiff and Jenks excepted. After the filing of the report, the state of Pennsylvania filed a petition by leave of court to intervene, alleging & claim for baok taxes amounting to $224,868.67. George Tucker Bigpham and Artemaa H. Holmes, for Credit MobiIier. Weigly &: Oolton, for Jenks and the Commonwealth. BUTLER, J. The court is satisfied with the master's disposition of Barton' H. Jenks' claim, and the costs arising out of its presentation. The exceptions filed by Mr. Jenks on this account are therefore dismissed. We are also satisfied with the master's recommendation that the motion to dismiss the receiver and vacate the injunction be held over until the state has opportunity to test its right to taxes claimed. It is certainly true that the litigation which has extended over several years should not be unnecessarily continued. We are not entirely satisfied that an exercise of the vigilance now exhibited by the state would not sooner have discovered the facts on which its claim is based, and h.ave had its right to recover determined. In view, however, of all the circumstances, and especially of the fact tbat an allowance of the motion now would probably deprive the state of all remedy, we think it is proper to withhold action until it has had time to have the claim passed. upon, in the manner provided for, by the state statutes. If the claim shall be sustained, we will then allow the intervention prayed for, on condition that the state furnishes the funds necessary to enable the receiver to prosecute the claims of the Credit Mobilier against the Union Pacific Railroad Company. These claims have not been prosecuted heretofore for want of means to do it. There must be no lack of vigilance on the part of the state in recovering judgment for the taxes, nor in furnishing the funds referred to. If there shall be, the motion will be allowed, and counsel are at liberty to call it up hereafter whenever they believe, in view of what is here said, it should be allowed.

MAYER

V.

DENVER, T. & FT. W. R. Co.

al.

(Oircuit Oourt, 8.

n. New

York. March 18,1889.)

1.

CORPORATIONS-STOCKHOLDERS-FRAUD.

A bill by a stockh,older of the P. Co. to restrain the D. Co. from issuing certain mortgage bonds intended to secure an illegal advantage to the C. Co., in breach of an agreement between the D. Co. and the F. Co., alleged that the P. Co. was the equitable owner of stock in the F. Co., and that it designed, when it acquired the legal title to such stock, to exchange it in disregard of plaintiff's rights for stock of the D. Co., and that the fraudulent issue of mortgage bonds by the D. Co. would place a lien for their amount before the stock, which complainant would be entitled to receive as a stockholder of the P. Co. The bill prayed that the D. Co. and the C. Co. be en· joined from disposing of the bonds, and that the P. Co. be enjoined from ex· changing its stock of the F. Co. for that of the D. Co. until the agreement between the F. and D. Cos. had been complied with. Held that, concp,ding

·

198

FEDERAL REPORTER, vol. 38.

that complainant the right to sue on behf,l,lf of the P. Co., a cause of action was not stated. as -the P. Co. cOl.lld not be heard to complain until it became II. stockholder in the D. Co.; and, as it was nota party to the agreement between the D. and F. Cos., it could neither enforce it nol" restrain its breach. '
2.

P Co. the bill is multifarious, as the other defendants have no interest in the controversy

If the bill be taken as stating a cause of action by ,complainant against the

. '

·

In On demurrer to the bill. Edga1' M. Johnson; for complainant. Wagner Swayne, for defendants.

J. This is a suit in equity by the complainant as a stockholder of a corporation against that corporation, and against the Denver, Texas & Fort Worth Railroad Company, and the Colol'ado & Texas Railway Construction Company. The defendants: have demurred for want of equity, and absence of necessary parties. The substantive relief sought by the bill is to prevent the Denver, Texas & Fort Worth Railroad Company from issuing $1,000;000 mortgage bonds intended to secure an illicit advantage to the Colorado & Texas Construction Company in breach of an agreement between the firstnamed corporation and the Fort Worth & Denver City Railway Company. The plaintiff is a stockholder of the Pan Handle Construction Company" which is the equitable of stock in the Fort Woith & Denver City Railway Company; and he asserts that his corporation is about to receive its stock,and designs, when it acquires the legal title, immediately, and in disregard of his rights and interests. to exchange it for stock 61' the Denver, Texas & Fort Worth Railroad Company. The bill avers "that the issue of said bonds (by the Denver, Texas & Fort Worth Railroad Company) is fraudulent, and without sideration whatever. and is neither called for nor required, but is intended simply to give as a profit to said Colorado & Texas Construction Company the sum of $1,000,000 in bonds to which it is neither lawfully nor legally entitled." The bill also avers "that the issue of said bonds, and the delivery of the same to the said Colorado & Texas Construction Company, is a fraud upon his rights in this: that it would place before the stock which he is entitled to receive Of the Denver, Texas & Fort Worth Railroad Company by virtue of his ownership of said stock in said Pan Handle Construction Company a lien of $1,000,000 for the mortgage bonds priO!: in right to his stock." The bill also avers that. the issue of the bonds would be a violation of the organic law of the Denver, Texas & Fort Worth Railroad Company, and ultra vires. The prayer of the bill is that the Denver, Texas & Fort Worth Railroad Company, and the Colorado & Texas Co'nstruction Company, be restrained from disposing of the bonds, and be directed to deliver them up for cancellation, and that the Pan Handle Construation Company be restrained from exchanging its stock of the Fort Worth & Denver City Railway Company for the stock of the Denver, Texas & Fort Worth Railroad Company until compliance of the agreement between the

MAYER

v.

DENVER,T. & ]'T. W. It.. CO.

199

Fort Worth & Denver City Railway Company and the Denver, Texas & Fort Worth Railroad Company. Assuming that the bill shows a case in which a stockholder is entitled to sue to enforce a cause of action in behalf of the corporation, which the corporation itself cannot be induced to assert, and viewing the bill as one filed by the Panhandle Construction Company, it does not state _ a cause of action against the other defendants. That company. as an expectant owner of the stock in the Denver, Texas & Fort Worth Railroad Company, may have a future interest in the question whether the latter corporation ought to be permitted to issue the bonds, but it has no interest at present. Until it. becomes a stockholder of the Denver, Texas & Fort Worth Railroad Company, it can. neither be .heard to of acts .of that corporation which may be tutra vire8, or permitted to interfere in any way in the affairs of that company. As it was nota party to the contract between the Denver. Texas &. Fort Worth Railroad Company and the Fort Worth & Denver City Railway Company, it cannot sue to enforce the contract between those corporations, or to prevent a breach of the contract. And. in any suit founded upon that contract the }j'ort Worth & Denver City Railway would be a necessary party. Of course the complainant would not become a stockholder in the Denver, Texas & Fort Worth Railroad Company if his corporation should acquire the stock of that com pany. That would require the further of his stock in his own corporation for the newly-acquired stock, which could only take place with hjs sent. If the Pan Handle Construction Company is about to mak,e disposition of the stock which it will acquire in the Fort Worth & Denver City Railway Company in fraud of its own stockholders. the ant, upon a proper showing of facts, can seek the aid of a courtof equity to restrain the threatened transaction, as any of its stockholders could if, the corporation were about to dispose of any of its other property in contravention of its duties as a trustee for them; but it is doubtful whether the present bill makes a sufficient case in that behalf. For all that appears, the exchange of the stock may be for the best interests ofthe stockholders of the Pan Handle Construction Company. That corporation, in its capacity as a stockholder of the Fort Worth & Denver City Railway Company, may be powerless to arrest the issue of the mortgage bonds by the Denver, Texas & Fort Worth Railroad Company; and its directors and officers, and the majority of its stockholders, may believe, and be justified in believing, that notwithstanding the contract between the Denver, Texas & Fort Worth Railroad Company and., the Fort Worth & Denver Construction Railway Company is about to be ignored, and the fraudulent issue of bonds is to take place, the shares to be received in exchange are more valuable than those which are 'to be given:. 'The statement' in the bill .that the stockholders of the Pan Handle Construction Company authorized the exchange upon the faith that the Denyer, Texas & Fort Worth Railroad Company would perform its contract with the Fort Worth & Denver City Railway Company, and that the officers of the Pan Handle Construction Company are

200

FEDERAL REPORTER,

vol. 38.

"warmly enlisted and deeply interested" in the issue of the bonds by the Denver, Texas & Fort Worth Railroad Company, are the only averments to impeach the good faith and good judgment of the latter in favoring the exchange, and no facts are set forth from which it can be seen that their conduct is prompted by a purpose to disregard the interests of the stockholders whom they represent, or is calculated to violate their rights, although this is suggested by implication. If there were enough in the bill to show a real grievance on the part of the complainant against the Pan Handle Construction Company, the other defendants ought not to be dragged into a controversy between him and the Pan Handle Construction Company. upon the theory that they are proper parties to a suit by the Pan Handle Construction Company to prevent a breach of contract between the Fort Worth & Denver City Railway Company and the Denver, Texas & Fort Worth Railroad Company. The two causes of action are distinct and unconnected, and the attempt to mingle them renders the bill multifarious. If the complainant is entitled to prevent his own corporation from making the exchange ofits stock with the Denver, Texas & Fort Worth Railroad Company, and can obtain that relief, it is wholly immaterial to him what indebtedness is created or mortgage bonds are issued by the latter corporation, because he will not become one of its stockholders, nor will his own corporation become a stockholder. Until the complainant becomes an actual shareholder of the Denver, Texas & Fort Worth Railroad Company he is a stranger to its affairs. He cannot be permitted Ito introduce it into a controversy in which no decree can be obtained against it, and compel it to litigate one issue between him and his own corporation in which it has no interest, and another between it a!1d the Fort Worth & Denver City; Railway Company, in which neither he nor his own corporation have any interest. The demurrer is sustained.

GAZIN

et al. v.

NORTON

et ale

(Circuit (lourt, E. D. Louisiana. March 23, 1889.)
BANXBUPTCy-AsSIGNEE'S COSTS AND EXPENSES.

Under Rev. St. U. S. !3 5099, providing that the assignee in bankruptcy shall be allowed out of the money in. his hands "all the necessary expenditures made by him in the discharge of his duty, and a reasonable compensation for his services, " where creditors have in good faith brought suit ag-ainst the assignee, and been defeated, and the estate is insufficient to pay both their costs and the costs and counsel fees of the assignee, the assignee is entitled to pref· erence.

In Equity. Petition for rehearing on question of costs· . E. H. Farrar and H. H. Walsh, for petitioners. Wm. Grant, for defendants.