it being held by it that some person must be brought be fore the court having an estate of inheritance, and who is, on that account, entitled to represent both his own interests and the interests of all who may come after his death; while, according to Lord Redesdale, if there be no person in existence possessing an estate of inheritance, then the tenant for life may be brought before the court, and treated as the representative of persons who may, by their subsequent birth, acquire interest in the estate. The views of Lord Redesdale are sustained by the majority of the reported adjudications on this subject.75

§ 37. Trustees in insolvency.

A bankrupt or insolvent debtor is not, ordinarily, a necessary party to a suit brought by or against his assignee.76 It is said to be improper for a creditor of an estate to join with its receiver in a suit concerning it.77

§ 38. Corporations.

In some cases a stockholder is bound by a decree against the corporation, such as one making an assessment in the enforcement of a corporate duty, although not a party as an individual, but only through representation by the company." He is so far

78

75 Freeman, Co-Ten. & Partn. § 482; Faulkner v. Davis, 18 Grat. (Va.) 684; Gaskell v. Gaskell, 6 Sim. 643; Hale v. Hale, 146 Ill. 246, 33 N. E. 858. For Maryland cases on this subject, see Downing v. Sprecher, 35 Md. 474; Shreve v. Shreve, 43 Md. 382; Long v. Long, 62 Md. 33. In Miller, Eq. Proc. 41 (a Maryland work), it is said: "In the absence of statutory provision, the tenant for life does not represent remaindermen, born or unborn, except in the case of partition simply;" and the views of the Maryland court of appeals are fully considered. See, also, Story, Eq. Pl. §§ 144-147.

76 De Wolf v. Johnson, 10 Wheat. (U. S.) 368.

77 Foster, Fed. Pr. (3d Ed.) § 45, citing Doggett v. Railroad Co., 99 U. S. 72.

78 Glenn v. Liggett, 135 U. S. 533; Sanger v. Upton, 91 U. S. 56; Glenn v. Williams, 60 Md. 93; Hamilton v. Glenn, 85 Va. 901, 9 S. E. 129; Hale v. Hardon, 95 Fed. 747; Great Western Telegraph Co. v. Purdy, 162 U. S. 329; Hendrickson v. Bradley, 55 U. S. App. 715, 85 Fed. 508; Stutz v. Handley, 41 Fed. 537; Wilson v. Seymour, 40 U. S.

an integral part of the corporation that, in the view of the law, he is privy to the proceedings touching the body of which he is a member.79 Where a stockholder sued a corporation to restrain payment of a dividend which had been declared, and other stockholders petitioned to become parties defendant, in order to defend the case and secure the dividend, it was held that the corporation did not represent the petitioners any more than it did the complainant in the suit.80

§ 39. Suit by stockholder on behalf of corporation.

In some instances a stockholder may sue on behalf of a corporation. The supreme court of the United States have considered this question, and have laid down the rule that in such cases there must exist, as the foundation of the suit, (1) some action or threatened action of the managing board of directors or trustees of the corporation which is beyond the authority conferred by their charter or other source of organization; or (2) such a fraudulent transaction, completed or contemplated, by the acting managers in connection with some other party, or among themselves, or with other shareholders, as will result in serious injury to the corporation, or to the interests of the other

App. 567, 76 Fed. 678; Howarth v. Lombard, 175 Mass. 570, 56 N. E. 888, 49 L. R. A. 301; Hancock Nat. Bank v. Farnum, 176 U. S. 640.

79 Hawkins v. Glenn, 131 U. S. 319; Scheafe v. Larimer, 79 Fed. 921; Hale v. Hardon, 95 Fed. 747; Singer v. Hutchinson, 183 Ill. 606, 56 N. E. 388; Slee v. Bloom, 20 Johns. (N. Y.) 669; Central Trust Co. of New York v. Western North Carolina R. Co., 89 Fed. 24. There is no such privity between a private corporation and its stockholders that a judgment against the one is res judicata as to the other, except in cases where the law gives to a creditor of such corporation the right of recourse against the individual stockholders for the satisfaction of the judgment debts of the corporation. Wilgus v. Germain, 44 U. S. App. 569, 72 Fed. 773. In respect to rights arising out of contracts other than subscriptions for stock, a shareholder cannot be bound by a judg ment or judicial proceeding against a corporation to which he was not in fact a party. Andrews v. National Foundry & Pipe Works, 46 U. S. App. 281, 76 Fed. 167; Rood v. Whorton, 67 Fed. 434. See, also, Cumberland Lumber Co. v. Clinton Hill Lumber Mfg. Co., 57 N. J. Eq. 627, 42 Atl. 586.

80 Gregg v. City of Baltimore, 14 Md. 479.

shareholders; or (3) where the board of directors, or a majority of them, are acting for their own interests in a manner destructive of the corporation itself, or of the rights of the other shareholders; or (4) where the majority of shareholders themselves are oppressively and illegally pursuing a course, in the name of the corporation, which is in violation of the rights of the other shareholders, and which can only be restrained by the aid of a court of equity; (5) it must also be made to appear that complainant has made an earnest effort to obtain redress at the hands of the directors and shareholders of the corporation; (6) that he was the owner of the stock on which he claims the right to sue at the time of the transactions of which he complains, or that it has since devolved upon him by operation of law; (7) and, in the federal courts, that the suit is not a collusive one to confer on a court of the United States jurisdiction in a case of which it would otherwise have no cognizance.81 The stockholder must allege in his bill that he has made a request

81 Hawes v. Oakland, 104 U. S. 450; Taylor v. Holmes, 127 U. S. 489. See, also, Dodge v. Woolsey, 18 How. (U. S.) 331; Foss v. Harbottle, 2 Hare, 461; Mozley v. Alston, 1 Phil. Ch. 790; Gray v. Lewis, L. R. 8 Eq. 526; Atwool v. Merryweather, L. R. 5 Eq. 464; MacDougall v. Gardiner, 1 Ch. iv. 21; March v. Eastern R. Co., 40 N. H. 548; Peabody v. Flint, 6 len (Mass.) 52; Brewer v. Proprietors of Boston Theatre, 104 Mass. 378; Bell v. Donohoe, 17 Fed. 710; Hutton v. Bancroft & Sons Co., 77 Fed. 481; Smith v. Hurd, 12 Metc. (Mass.) 371; Fry v. Rush, 63 Kan. 429, 65 Pac. 704; Doud v. Wisconsin, P. & S. Ry. Co., 65 Wis. 108, 25 N. W. 533, 56 Am. Rep. 620; Alexander v. Searcy, 81 Ga. 536, 8 S. E. 630, 12 Am. St. Rep. 337; Talbot v. Scripps, 31 Mich. 268; Consolidated Water Co. v. Babcock, 76 Fed. 243. Eq. Rule U. S. 94 regulates the practice in the federal courts, providing: "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 contain an allegation that the plaintiff was a shareholder at the time of the transaction of which he complains, or that his share had devolved on him since by operation of law, and that the suit is not a collusive one to confer on a court of the United States jurisdiction of the case of which it would not otherwise have cognizance." See, also, Dimpfell v. Ohio & M. R. Co., 110 U. S. 209; Symmes v. Union Trust Co. of New York, 60 Fed. 830; Watson v. United States Sugar Refinery, 34 U. S. App. 81, 68 Fed. 769.

to the corporate officers that suit be instituted by the corporation, and that such request has not been complied with.82 If a receiver is in charge, the request is to be made to him.8 Where directors are chargeable with mismanagement, or a receiver, who is a director, is chargeable with other directors, it cannot be supposed that they or he would bring an action against themselves, and their or his refusal is not a prerequisite to the filing of the bill.84

$ 40. Classification of parties.

The supreme court of the United States divides parties to suits in equity into three classes: First, formal parties; second, necessary parties; third, indispensable parties. Formal parties are those who have no interest in the controversy between the immediate litigants, but have an interest in the subject-matter, which may be conveniently settled in the suit, and thereby prevent further litigation. They may be parties or not, at the option of the complainant. Necessary parties are those who have an interest in the controversy, but whose interests are separable from those of the parties before the court, and will not be directly affected by a decree which does complete and full justice between them. Such persons must be made parties, if practicable, in obedience to the general rule which requires all

82 Cook, Corp. § 740. Eq. Rule U. S. 94 prescribes the necessity of this request. For cases involving necessity of such request, see Holton v. Newcastle Ry. Co., 138 Pa. 111, 20 Atl. 937; Hazard v. Durant, 11 R. I. 195; Taylor v. Holmes, 127 U. S. 489; General Electric Co. v. West Asheville Improvement Co., 73 Fed. 386; Latimer v. Richmond & D. R. Co., 39 S. C. 44, 17 S. E. 258; Stebbins v. Perry County, 167 Ill. 567, 47 N. E. 1048; City of Chicago v. Cameron, 120 Ill. 447, 11 N. E. 899.

83 Cook, Corp. § 740; Nelson v. Burrows, 9 Abb. N. C. (N. Y.) 280; Streight v. Junk, 59 Fed. 321. See, concerning application to receiver, Swope v. Villard, 61 Fed. 417.

84 Flynn v. Third Nat. Bank of Detroit, 122 Mich. 642, 81 N. W. 573; Weir v. Bay State Gas Co., 91 Fed. 940; Hawes v. Oakland, 104 U. S. 460; Ziegler v. Lake St. Elevated R. Co., 46 U. S. App. 242, 76 Fed. 662; Ball v. Rutland R. Co., 93 Fed. 513; Home Min. Co. v. McKibben, 60 Kan. 387, 56 Pac. 756. For a full consideration of suits by stockholders on behalf of a corporation, see Cook, Corp. §§ 734-749; Fry v. Rush, 63 Kan. 429, 65 Pac. 701.

persons to be made parties who are interested in the controversy, in order that there may be an end of litigation. But the rule in the federal courts is that if they are beyond the jurisdiction of the court, or if making them parties would oust the jurisdiction of the court, the case may proceed to a final decree between the parties before the court, leaving the rights of the absent parties untouched, and to be determined in any competent forum. The reason for this relaxation of the general rule in dispensing with necessary parties in the federal courts resulted from two causes: First, the limitation imposed upon the jurisdiction of these courts by the citizenship of the parties; and, secondly, their inability to bring in parties out of their jurisdiction by publication. Indispensable parties are those who not only have an interest in the subject-matter of the controversy, but an interest of such a nature that a final decree cannot be made without either affecting their interests, or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience.85

Much confusion and misunderstanding have arisen in the use

85 Minnesota v. Northern Securities Co., 184 U. S. 199; Chadbourne's Ex'rs v. Coe, 10 U. S. App. 78, 51 Fed. 479; Shields v. Barrow, 17 How. (U. S.) 139; Ribon v. Chicago, R. I. & P. R. Co., 16 Wall. (U. S.) 450; Coiron v. Millaudon, 19 How. (U. S.) 113; Williams v. Bankhead, 19 Wall. (U. S.) 563; Kendig v. Dean, 97 U. S. 423; Jessup v. Illinois Cent. R. Co., 36 Fed. 735; Barney v. Baltimore City, 6 Wall. (U. S.) 284. Eq. Rule U. S. 47 reads: "In all cases where it shall appear to the court that persons who might otherwise be deemed necessary or proper parties to the suit cannot be made parties by reason of their being out of the jurisdiction of the court or incapable otherwise of being made parties, or because their joinder would oust the jurisdiction of the court, as to the parties before the court, the court may, in their discretion, proceed in the cause without making such persons parties, and in such cases the decree shall be without prejudice to the rights of the absent parties." This rule is simply declaratory of the previous decisions of the supreme court on the subject of the general rule, which court has said repeatedly that, notwithstanding this rule, a circuit court can make no decree affecting the rights of an absent party, and that all persons whose interests would be directly affected by the decree are indispensable parties. Chadbourne's Ex'rs v. Coe, 10 U. S. App. 78, 51 Fed. 479.