the name of the company, many exceptions are allowed in this respect, as where the loss falls exclusively upon a portion of the shareholders, and where the majority are proceeding in violation of the fundamental law of such companies.9

7. And where the managing committee employed the funds of the company in buying up the shares in the market, it was held that the members of the committee were not properly charged with these sums in winding up the concern.10 But the ViceChancellor said he entertained no doubt of it being a breach of trust, and that the parties, and all the parties, aiding or coun-* selling it, when properly brought before the master, might be made liable.10

*

8. But a court of equity will not entertain a bill to compel a railway company to apply funds raised by the issue of new stock, according to the resolution by which the new stock was created by the directors of the company.11

9. It is a settled rule of equity law, that the minority of the shareholders in a joint-stock corporation may maintain a suit to restrain the directors of the company, or the majority of the shareholders, from entering into a stipulation whereby the business of the company is changed and directed into channels and enterprises wholly diverse from those originally contemplated and entered upon, and from which their emoluments had been derived.12

• Preston v. Grand Collier Dock Co., 2 Railw. C. 335; s. c. 11 Simons, 327; Wallworth v. Holt, 4 My. & Cr. 619. Each shareholder has a distinct interest in dividends declared on stock, which cannot be represented by other shareholders, suing on behalf of themselves and the rest of the shareholders. Carlisle v. Southeastern Railw., 6 Railw. C. 670. See also the opinion of Lord Cranworth, V. C., Beeman v. Rufford, 6 Eng. L. & Eq. 106; Hodges on Railways, 71.

10 London & Birmingham, &c. Railw. in re, 13 Eng. L. & Eq. 201.

11 Yetts v. Norfolk Railw., 5 Railw. C. 478; 3 De G. & S. 293; 13 Jur. 249. 12 Kean v. Johnson, 1 Stockton (N. J.) Ch. 401; ante, § 20; March v. Eastern Railw., 40 N. H. R. 548; Nazro v. Merchants' Mutual Ins. Co., 14 Wisconsin R. 295. In the last case the question was affected by an act of the legislature authorizing the proposed change, and the decision turned in part upon the construction to be given to this act. And see Dyckman v. Valiente, 43 Barb. 131. And in State v. Bailey, 16 Indiana R. 46, it was held that, where corporations are consolidated, with the consent of the legislature, those stockholders in the old who do not join the new are entitled to withdraw their shares, and

10. And because no individual stockholder can maintain any action against the directors for defrauding the company, as the directors are liable only to the company for any misconduct at law, equity will interfere at the suit of any stockholder, and sustain a bill at his suit against the directors for misconduct in may have an injunction against the company until they are secured. See Port Clinton Railw. v. Cleveland & Toledo Railw., 13 Ohio St. 544. The rule of the text is applied to a church congregation in Winebrenner v. Colder, 43 Penn. St. 244. See German Ev. Con. v. Pressler, 14 La. Ann. 799; Charlton v. Newcastle, &c. Railw., 5 Jur. N. S. 1096; Knabe v. Ternot, 16 La. Ann, 13. But a minority of stockholders cannot restrain the company from doing what is plainly within the scope of their powers, on the ground that it will probably hinder the attainment of one of the objects of the company. Syers v. Brighton Brewery Co., 13 W. R. 220. And the plaintiff must be acting in good faith, not merely as a puppet in the hands of others. Filder v. London, Brighton & South Coast Railw., 1 H. & M. 489; Forrest v. Man. Sh. & L. Railw., 7 Jur. N. S. 887. In Phoenix Life Insurance Company in re, ex parte Burges & Stock, 9 Jur. N. S. 15, an extension of the business of a life insurance company to marine insurances, made by a resolution of a specially convened meeting, and specified in a deed executed by some of the shareholders, and carried on without objection for a year and a half, was held not to bind the general body of the shareholders. But see Saxon Life Assurance Co. in re, ex parte Era Life & Fire Assurance Co., 1 De G. J. & Sm. 29. See also Maunsell v. Midland Great Western Railw., 1 H. & M. 130; s. c. 9 Jur. N. S. 660; Hattersley v. Shelburne, 7 L. T. N. S. 650; Great Western Railw. v. Metropolitan Railw., 9 Jur. N. S. 562; s. c. 32 L. J. Ch. 382. In the last mentioned case the Great Western Railw. Company were authorized by act of Parliament to hold 17,500 shares in the Metropolitan Railroad company. On an extension of the Metropolitan railway additional shares were to be offered to the original shareholders; and the Great Western Company claimed its proportion of additional shares. Held, by Wood, V. C., that the company was not authorized to take, and could not claim any additional shares; by the Court of Appeal, that they might be authorized to take, though not to hold the additional shares, and leave to amend given, as their bill did not show which they wished to do. Id. And see Forrest v. Man. Sh. & L. Railw., 30 Beav. 40; s. c. on appeal, 7 Jur. N. S. 887; Attorney-General v. Great Northern Railw., 1 Drew & Sm. 154; South Wales Railw. v. Redmond, 9 W. R. 806; s. c. 4 L. T. N. S. 619; Hare v. London & N. W. Railw., 1 Johns. & H. 252; Sturges v. Knapp, 31 Vermont R. 1. In this case those having the control of railroads in Vermont were enabled by statute to lease them to companies owning other roads connecting with them at the line of the State. A railroad having in this manner been leased to the Troy & Boston Railroad Company, it was held that the want of authority in the Troy & Boston Railroad Company to take the lease could not be raised as long as the State of New York and those interested in that company had taken no measures to interfere with or avoid the lease.

office, where the corporation is unable to bring a suit at law, or where, through collusion or fraud, it neglects to seek redress, and an application has been made to the directors for the use of the corporate name in the suit and that has been denied.13

11. Such a bill should be brought on behalf of the plaintiff and all other stockholders who elect to come in under the proceeding, and should make the corporation a party as well as the directors, and should allege the refusal of the corporation to proceed against the directors.13

12. The directors of a railway company are not responsible personally for property purchased on the credit of the company, or in its name and behalf, on the ground that it was purchased by them when the company had no available means to pay for it.14

13. It is the implied law of the association, that the business shall continue to the limit of the time fixed by the charter if it prove remunerative, and "it is the right of a partner to hold his associates to the specified purposes while the partnership continues." 12

14. And where the directors of a bank refused to take the proper measures to resist the collection of a tax which they themselves believed to have been imposed upon them in violation of their charter, this refusal amounts to what is termed in law a breach of trust, and a stockholder may maintain a bill in equity against them, asking for such remedy as the case might require.15

15. And it would seem that the company might expend their funds, to a reasonable amount, in resisting proceedings in parliament, the tendency of which will be to injure the company.16

16. But a court of equity will not compel the directors of a corporation to declare dividends out of the surplus earnings of

13 Allen v. Curtis, 26 Conn. R. 456.

14 Rochester v. Barnes, 26 Barb. 657.

15 Dodge v. Woolsey, 18 How. U. S. Sup. Ct. 331.

16 Bright v. North, 2 Phill. 216, before Cottenham, Lord Chancellor. This was the case of the conservators of river banks, whose funds are raised by a rate upon the adjacent land-owners, and is stronger, perhaps, than that of a railway company. And the Lord Chancellor seemed to entertain so little doubt of the duty of the commissioners to expend money in opposing any grant in parliament which would injure the works under their care, that he did not call for argument in favor of the exercise of the right.

the company, unless they are shown to have refused from a wilful abuse of their discretion.17

17. The directors are only liable for good faith and reasonable diligence.17

* SECTION VIII.

Applications to Legislature for Enlarged Powers.

1. Equity will not restrain railway companies | 3. The proper limitations stated. from petition for enlarged powers.

2. The early English cases favored such applications.

4. Applications on public grounds not to be restrained; those on private grounds may

be.

§ 212. 1. In general, perhaps, courts of equity would not feel called upon to restrain the directors and agents of the company from applying to the legislature for an alteration or enlargement of their powers, for this is sometimes indispensable for the accomplishment of the objects of their creation, and very often highly desirable.1 There are numerous instances in the books2 of companies being enjoined from proceeding to certain works, until they did obtain such an enlargement of their powers. But it is not uncommon for a court of equity to restrain the company from applying their existing funds to such purpose. And where the new scheme is in conflict with the interests of other railways, who, by leave of the legislature, own shares in the company applying for an extension of their line, or an enlargement of their powers, equity will not restrain them absolutely from procuring 17 Smith v. Prattville Man. Co., 29 Ala. R. 503.

3

1 In Bill v. Sierra Nevada, &c. Co., 1 De G. F. & J. 177, it was held that an injunction will not be granted to restrain a corporation for applying for increased powers to the legislature of their own, or, if necessary, a foreign country.

2 Frederick v. Coxwell, 3 Y. & J. 514.

3 Stevens v. South Devon Railw., 2 Eng. Law & Eq. 138. In this case, and in Parker v. Dun Navigation Co., 1 De G. & S. 192, the company entered into a stipulation, that the objectors should be heard before the parliamentary committee, without which, it is said, in the English practice, before such committees, where the application is in the name and behalf of the company, shareholders objecting are not allowed to be heard. Where it was shown that the provisions of a bill would have the effect to reduce the income of a corporation, it was held that the corporation should not be restrained from opposing the bill before a committee of the House of Lords. Reg. v. Dublin, 9 L. T. N. S. 123.

VOL. II.

22

*496

the contemplated grant, but only from using their funds for that purpose; and will also prohibit one company from keeping its proceedings secret as to another company owning part of their stock, and will generally enjoin the act of a majority of a jointstock company, where the voice of the minority is not properly heard at the meeting, or is agreed to be disregarded by previous concert.4

2. The early cases upon this subject before Lord Brougham, as Chancellor, although in some respects more liberal in favor *of allowing applications to parliament, seem to be more in accordance with the spirit of enterprise in this country than some of the recent English cases.5

3. The most which upon principle can be justified in this direction, is to restrain the company from applying their existing funds either to the obtaining of enlarged powers or to carrying them into effect.

But the question of enlarging the powers of the company, or altering its fundamental law, is a matter resting altogether in the discretion of the legislature. But this, if accomplished, will not bind the existing shareholders, who have not assented to the alteration, but must be carried into effect by a new subscription probably, and this will subject the corporation to the embarrassment of a double accountability, or the apportionment of loss and profits upon the several portions of the enterprise.5

4. In a late case of some interest, it was decided that applications to the legislature on public grounds could not be restrained by injunction, while those of a private nature might be so restrained in the discretion of courts of equity.6

Great Western Railw. v. Rushout, 10 Eng. L. & Eq. 72. See also Const v. Harris, 1 Turner & Russell, 496, where Lord Eldon goes into an elaborate consideration of the rights of the minority of joint-stock companies, and what acts of the majority are binding upon the company. Attorney-General v. Norwich, 9 Eng. L. & Eq. 93.

5 Hare v. The Grand Junction Water Works Co., 2 Russ. & Mylne, 470. And see Ward v. The Society of Attorneys, 1 Collyer, 370; Munt v. The Shrewsbury & Chester Railw., 3 Eng. L. & Eq. 144. See Cunliffe v. Manchester & Bolton Canal Co., 2 Russ. & Mylne, 480, in note. Ante, § 56.

• Lancaster & Carlisle Railw. Co. v. N. W. Railw. Co., 2 Kay & J. 293.

* 497