as held in Kean v. Johnson; he can prevent all the others from changing or abandoning the work.

The supplement of 1861 is a perfectly valid and constitutional act. It is a grant of privileges that the legislature have a right to grant, as they could grant to this corporation the right to conduct banking or insurance business, or to run a ferry across the North River; but the company is restrained by the law of corporations and partnerships from expending the money or using the credit of the corporation in such enterprises, unless every shareholder consents.

The extension to Passaic street, both because it comes within the grant in the charter, and more especially because every shareholder must be held to have consented to it by acquiescing in its construction and maintenance for years, must be decided to be lawful.

The defendants must be restrained from extending the road beyond its present terminus at Passaic street, and from expending any money of the company to pay for any such extension, or from giving any mortgage for the cost of such extension.

There is no foundation for an injunction against a mortgage for any lawful object, on either part of the road. There is great doubt whether a mortgage on either of the two parts of the road heretofore constructed, for the costs of the other, would pass the franchises of the company in such mortgaged part, but it would be valid as to the property other than franchises, which the company can mortgage without any special power. And besides, the bonds of the company, or its lawful contracts, would entitle the holder to recover upon them, and under the judgment, by the act of 1858 (Nix. Dig., 719), the whole road and franchises would be sold. The complainant, therefore, cannot be injured by a mortgage, whether valid or not, upon any part of the road.

MISAPPLICATION OF CORPORATE FUNDS WILL BE ENJOINED.

TWELFTH SELECTED CASE.

PRATT V. PRATT, READ & COMPANY.*

Where a corporation is about to exceed its powers by applying its property to objects not authorized by its charter, a court of equity will interfere in behalf of the dissenting minority of the stockholders.

The corporation and its directors are trustees for the stockholders, and as such fall under the supervision of the courts of chancery.

But where a manufacturing corporation had a large surplus above its stated capital, which the directors, with the concurrence of a majority of the stockholders, were about using for the purpose of extending the business of the company and erected an additional factory against the objection of a minority of the stockholders, but it appeared that the business as extended was within the powers of the corporation, and that the stated capital of the company was much less than the amount actually used and necessary for its ordinary operations, it was held, on a bill brought by the dissenting minority praying for an order that the surplus be divided among the stockholders and the company be enjoined against erecting a new factory, that the facts were not such as to require the interposition of the court in behalf of the minority.

Bill for an Injunction brought to the Superior Court for Middlesex county.

THE bill alleged that the petitioners in the year 1863 associated themselves with Julius Pratt, Henry C. Butler and others as a joint stock corporation by the name of Pratt, Read & Company, under the statute with regard to such corporations, for the purpose of manufacturing and selling ivory, bone, shell and wood combs, and piano and melodeon ivory, and other articles made in part or in whole of ivory; that the capital of the corporation was held $175,000; that the petitioners were owners of a minority of the stock; that the corporation had been and was still engaged in a profitable business, but that the directors had combined with the owners of a majority of the stock to misapply the funds of the corporation; that there was a surplus of earnings in the hands of the

*Revorted in 33 Conn., 446 (1866).

treasurer amounting to $125,000, which the petitioners had insisted upon having divided, but the directors had refused; that the company was proceeding, through the directors and without any vote of the stockholders, to erect a large and expensive building for the purpose of extending their business beyond what was contemplated when the company was formed; that the petitioners were in need of their share of the surplus for their individual purposes; and that the directors and the majority of stockholders were acting fraudulently and in disregard of the interests of the petitioners, and were conspiring together to secure their own private interests by means of the corporate organization and funds and to injure the interests of the petitioners. The bill therefore prayed for an injunction against the corporation forbidding it to proceed with the erection of the building, and for a decree that the corporation divide among the stockholders the surplus funds on hand.

Upon the bill and the answer of the respondents the court found the following facts:

The respondents, a joint stock corporation under the name of Pratt, Read & Company, was on the sixth day of October, 1863, duly organized and located in the town of Meriden and county of New Haven, with a capital stock of $175,000, divided into seven thousand shares of $25 each, for the "purpose of manufacturing, selling, and dealing in all kinds of ivory, shell, .horn, bone, rubber, wood and other combs, all kinds of piano and melodeon ivory, and other articles made in whole or in part of ivory, shell, bone, India-rubber, guttapercha, composition, wood or metal, and to purchase, hold, sell, and deal in all real and personal estate necessary and convenient for the prosecution of said business, and generally to do all acts connected with or incidental to said business or the prosecution of the same." The stockholders of the corporation are exclusively composed of the former members of the firms of George Read & Co., and Pratt Brothers & Co., late of Saybrook, in Middlesex county, and the stockholders in the former corporation of Julius Pratt & Co., late of Meriden. The petitioners are the former members of said copartnership of Pratt Brothers & Co., and now own 1,441 shares of stock. The remaining 5,559 shares are owned and held by those in

dividuals who formerly composed said copartnership of George Read & Co., and said corporation of Julius Pratt & Co. One of the principal objects in the formation of the new corporation by the consolidation of said copartnership and corporation, was to secure as far as practicable uniformity in prices, and certainty in profits, and to that end it was understood by all concerned that the respondents were not to receive and be prejudiced by any competition from any of its own stockholders, and that they should not carry on the same business independently of the business of the respondents.

In June, 1864, Ulysses Pratt, one of the petitioners, purchased from the Deep River Ivory Comb Company, a corporation located in Saybrook, their factory, machinery, fixtures and privileges, and in February or March, 1865, formed a copartnership with other persons and commenced and still carries on thereat the business of manufacturing ivory combs, and sells their manufactured goods in competition with the respond

ents.

At the time the respondents were organized, the real and personal assets of the corporation of Julius Pratt & Co., and of the copartnerships of George Read & Co., and Pratt Brothers & Co., were appraised by persons, mutually selected, at $446,000, which was held in the following proportions; towit., by Julius Pratt & Co., $258,511, by George Read & Co., $89,593, and by Pratt Brothers & Co., $97,917, and in the subscriptions to the capital stock of the respondents, the members of said corporation Julius Pratt & Co., and of said copartnerships of George Read & Co., and Pratt Brothers & Co., subscribed and owned in the same proportions. The remainder of the real and personal estate of said corporation and copartnerships, amounting to $271,000, after deducting and applying the capital of the respondents, $175,000, which was taken by the respondents, and the notes of the new corporation given in the same proportions that the stock was subscribed to said corporation of Julius Pratt & Co., and said copartnerships of George Read & Co., and Pratt Brothers & Co. All the notes so given to George Read & Co., and Pratt Brothers & Co., were paid at maturity, and all those given to said corporation of Julius Pratt & Co., had been paid at the

time of the bringing of the suit, except about $36,000, which for the accommodation and convenience of the respondents had been extended and allowed to remain over due.

At the time of the organization of the new corporation there was a general understanding by the parties that the notes should be paid at its convenience, and that they should be extended to suit its convenience in reasonable prosecution of its business, and that the payment of the notes to the holders should be received by them in lieu of dividends, until they were all canceled and discharged; but the petitioners, Alexis Pratt and Felix A. Dennison, were not cognizant of and did not participate in that understanding, and it did not clearly appear that the other petitioner, Ulysses Pratt, did.

At the time of the bringing the petitioners' bill; to-wit., on the 8th of March, 1866, the outstanding indebtedness of the respondents was about $72,000, of which $30,000 was matured and had been exhausted as aforesaid, and the respondents had then on hand in cash $21,000, and a surplus of property and earnings including said cash of about $130,000. This surplus, aside from said $21,000 in cash, consisted of stock, manufactured goods, and some $50,000 in paper, taken on short time, upon the sale of manufactured goods at their agency in New York. The amount and value of the respondents' surplus was arrived at by an inventory and estimate of its assets, made, so far as that portion which consisted of manufactured goods was concerned, at 28 per cent below the selling prices in market.

The building now in process of erection by the respondents in Saybrook is designed for the manufacture of piano keyboards, a business incidental to the manufacture of piano keys, and, if carried on to a considerable extent by the respondents, requires the additional room and power and expenditure contemplated in the building and improvements which the respondents have commenced to erect and make, and which, with the machinery and fixtures, and the necessary additional outlay in lumber and materials will call for some $30,000 or $35,000.

The directors of the corporation at the time of its organization contemplated the prosecution in some manner of this branch of business, and the said Ulysses Pratt was then and