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Cunningham v. Wechselberg, 105 Wis. 359, 81 N. W. 414, it was held that where a receiver was in charge of a corporation, a stockholder could not sue till the court had been appealed to to direct the receiver to bring action. A refusal by the receiver will not empower a stockholder to sue, and application should be made to the court: Swope v. Villard, 61 Fed. 417.
Excuses for Failure to Request Corporate Action. 1. Futility of Demand Must be Alleged.-An exception to the rule that a demand upon the corporation to proceed exists where such request would obviously be useless and unavailing, as the law does not require the doing of a vain and idle act: Memphis etc. R. Co. v. Woods, 88 Ala. 630, 16 Am. St. Rep. 81, 7 South. 108; Jefferson County etc. Bank v. Francis, 115 Ala, 317, 23 South. 48; Jasper Land Co. v. Wallis, 123 Ala. 652, 26 South. 659; Alexander V. Searcy, 81 Ga. 536, 12 Am. St. Rep. 337, 8 S. E. 630; City of Chicago v. Cameron, 120 Ill. 447, 11 N. E. 899, affirming 22 Ill. App. 91; Bruschke v. Der Nord etc. Verein, 145 Ill. 453, 34 N. E. 417; Schoening v. Schwenck, 112 Iowa, 733, 84 N. W. 916; Atchison etc. R. Co. v. Sumner County Commrs., 51 Kan. 617, 33 Pac. 312; Forrester v. Boston etc. Min. Co., 21 Mont. 544, 55 Pac. 229, 353; Barr v. New York etc. R. Co., 96 N. Y. 444; Wenzel v. Palmetto Brewing Co., 48 S. C. 80, 26 S. E. 1; Tazewell County v. Farmers' etc. Trust Co., 12 Fed. 752.
The excuse must be alleged particularly and definitely, and the facts upon which it is based, mere conclusions not being sufficient: Bell v. Montgomery Light Co., 103 Ala, 275, 15 South. 569; Deca. tur etc. Land Co. v. Palm, 113 Ala. 531, 59 Am. St. Rep. 140, 21 South. 315; Albers v. Merchants’ Exchange, 45 Mo. App. 206; and if no request, or excuse therefor, is alleged, the complaint states no cause of action: Beshoar v. Chappell, 6 Colo. App. 323, 40 Pac. 244.
2. Where the Officers are the Wrongdoers.—A valid excuse, often employed, is that the managing officers of the corporation are themselves the wrongdoers, against whose actions relief is sought; that in the litigation about to be commenced, they would be the defendants; and that it would be unavailing to request them to sue themselves. Where therefore, such officers are in control of the corporation, allegations setting forth those facts dispense with the necessity of a demand to sue: Bell v. Montgomery Light Co., 103 Ala. 275, 15 South. 569; Mayle v. Landers (Cal.), 21 Pac. 1133; Smith v. Dorn, 96 Cal. 73, 30 Pac. 1024; Brewer v. Boston Theater, 104 Mass. 578; Hannerty v. Standard Theater Co., 109 Mo. 297, 19 S. W. 82; L00inis v. Missouri Pac. Ry. Co., 165 Mo. 469, 65 S. W. 962; Albers v.
Mer. chants’ Exchange, 45 Mo. App. 206; Fitzgerald v. Fitzgerald etc. Co., 41 Neb. 374, 59 N. W. 838; Appleton v. American Malting Co. (N. J.), 54 Atl. 454; Robinson v. Smith, 3 Paige, 222, 24 Am. Dec. 212; Brewster v. Hatch, 10 Abb. N. C. 400; Davis v. Congregation, 57 N. Y. Supp. 1015, 40 App. Div. 424; Ithaca Gaslight Co. v. Tre
plaintiff could obtain the co-operation of a majority of stockholders, or was in control of the corporation, it was held that the corporation itself must sue: Miller v. Murray, 17 Colo. 408, 30 Pac. 46; Loomis V. Missouri Pac. Ry. Co., 163 Mo. 469, 65 S. W. 962.
b. Demand on, and Refusal to Act by Corporation Must be Alleged. — These allegations of demand and refusal of the corporation itself to proceed must be alleged in the complaint: Ide v. Bascomb (Colo. App.), 72 Pac. 62; Wilkie v. Rochester etc. Ry. Co., 12 Hun, 242; and a failure to make such allegation gives a stockholder no standing in court: Ware v. Bazemore, 58 Ga. 316; and will render the pleading bad on demurrer: Vanderbilt v. Garrison, 3 Abb. Pr. 361.
So a stockholder cannot question a corporate deed in the absence of averments showing that the corporation itself has failed, after & proper application, to bring suit to set it aside: Savings etc. Co. v. Bear Valley Irr. Co., 112 Fed. 695. And where a mortgage made by the officers of a corporation had been foreclosed, a stockholder cannot obtain an injunction to restrain levy and sale under a fieri facias, without showing good reason why the corporation itself has not brought the bill: Henry v. Elder, 63 Ga. 347.
The averments of request upon the corporation to proceed must be clearly set forth, and vague and general allegations of fraud on the part of the directors are not sufficient: Ziegler v. Lake St. etc. R. Co., 76 Fed. 662, 22 C. C. A. 465, affirming 69 Fed. 176; nor is an allegation of the assumption of the expenses of suit by the stockholders such as will fulfill the requirements: Warren v. Shoe Co., 166 Mass. 97, 44 N. E. 112. A request and refusal must be shown, and it is not enough to say that the directors will not bring the suit: House 5. Cooper, 30 Barb. 157, 16 How. Pr. 292; and the specific facts must be set forth, and not general allegatiops: Swope v. Villard, 61 Fed. 417.
6. On Whom It should be Made.-The demand for action must be made upon the governing body, the directors or trustees, and this is not complied with by requesting the president to sue: Wallace v. Lincoln Sav. Bank, 89 Tenn. 630, 24 Am. St. Rep. 625, 15 8. W. 448. Such demand should be made upon the directors as a board, and not individually: Latimer v. Richmond etc. R. Co., 39 8. C. 44, 17 S. E. 258.
A demand is not necessary in order to enable a director to maintain à suit on behalf of his corporation, where express authority to sue is conferred upon him by statute: Miller v. Barlow, 79 N. Y. Supp. 964, 78 App. Div. 331.
d. Where a Receiver is in Charge.--No demand for redress upon the corporate authorities is necessary where the functions of the corporation have been suspended by the appointment of a receiver, its faculty for suing then no longer existing: Walter v. McAlister Co., 48 N. Y. Supp. 26, 21 Misc. Rep. 747, 27 Civ. Proc. Rep. 33. But in
Am. St. Rep., Vol. 97–3
berita teress: Bagd 5. Sims, di Tenn. Til, 11 S.
in bol, there the following language is need:
then, the others and board of directors of the cor
tin antii is a stockholder have given the use of
trust would not, by a mere demand and asser.
of the interests of the stockholders before
A, would be futile and may well be dispensed
Geng 5. Central R. B. Co., 101 Ala, 607, 14 South.
, 105 Wis. 359, 81 N. W. 414, it was held in charge of a corporation, a stockholder ad been appealed to to direct the receiver I by the receiver will not empower & plication should be made to the court: 17.
ure to Request Corporate Action. Must be Alleged.—An exception to the the corporation to proceed exists where ly be useless and unavailing, as the law of a vain and idle act: Memphis etc. R. 16 Am. St. Rep. 81, 7 South. 108; JefFrancis, 115 Ala. 317, 23 South. 48; Jas3 Ala. 652, 26 South. 659; Alexander v. St. Rep. 337, 8 S. E. 630; City of Chicago 1 N. E. 899, affirming 22 III. App. 91; Verein, 145 Ill. 453, 34 N. E. 417; Schoen733, 84 N. W. 916; Atchison etc. R. Co.
51 Kan. 617, 33 Pac. 312; Forrester v. ont. 544, 55 Pac. 229, 353; Barr v. New
444; Wenzel v. Palmetto Brewing Co., ewell County v. Farmers' etc. Trust Co.,
persoana X2, 3 & C. 5:9, 31 & E. sa en la ig Dak. 1,6 N. W. 1976; 230,98 1,194, citing Cates
Bp. 18. 11 & W.846; Jog 27, 19)5& T. 183; Cramlish T. SIT, TL 3 Exiveiber v. Stowe!, *8
ACN. T. 161.
933 8. W. 451, 34 8. W. 100. 19 med en opposed to the suit, or they are se and in the misconduct, or the director
Hier erwas the must be the defendants 22 Berary: Knoop 7. Bohmrich,
ali i Sreed in Bohmrich F. Rooop, 39 S.
n. Sea York ete. R. Co., 35 Han,
2011 51, 5 ALL. St. Bep. 867, 89 , W.
olü la uzite in resisting the assertion of
, and suit may be institute yleen's Bark, 19 Mont. 191, 41 Pac. 63. a tantermith (1n.), 66 9, E. 79, 912, affirmed in
mer fart that the offers are peerniariis per a thesaplainant does not of itself erruse
elketan el ito Corporations.Cases bare arisen in
common directors upon the man. a til barns ennitted Frongful acts, detrimental to
un, ja endar to advance the interests of the other. szach ste. Con 13 N. Y. Supp. 1039, 68 App. Div.
62 ezplaint and the facts to be inferred therefrom
ged particularly and definitely, and the d, mere conclusions not being sufficient: Co., 103 Ala. 275, 15 South. 569; Deca
113 Ala. 531, 59 Am. St. Rep. 140, 21 tants' Exchange, 45 Mo. App. 206; and erefor, is alleged, the complaint states 7. Chappell, 6 Colo. App. 323, 40 Pac. 244. the Wrongdoers.-A valid excuse, often ing officers of the corporation are themst whose actions relief is sought; that in mmenced, they would be the defendants; Sling to request them to sue themselves. -s are in control of the corporation, al. • facts dispense with the necessity of [ontgomery Light Co., 103 Ala. 275, 15 -(Cal.), 21 Pac. 1133; Smith v. Dorn, ewer v. Boston Theater, 104 Mass. 578; er Co., 109 Mo. 297, 19 S. W. 82; Loonis
Mo. 469, 65 8. W. 962; Albers v. Merpp. 206; Fitzgerald v. Fitzgerald etc. 338; Appleton v. American Malting Co. on v. Smith, 3 Paige, 222, 24 Am. Dec. Abb. N. C. 400; Davis v. Congregation, . Div. 424; Ithaca Gaslight Co. v. Tre
man, 30 Hun, 212; Stahn v. Catawba Mills, 53 S. C. 519, 31 S. E. 498; Loftus v. Farmers' etc. Assn., 8 S. Dak. 201, 65 N. W. 1076; Becker v. Real Estate Co., 80 Tex. 475, 15 S. W. 1094, citing Cates V. Sparkman, 73 Tex. 619, 15 Am. St. Rep. 806, 11 S. W. 816; Joy 1. Fort Worth etc. Co. (Tex. Civ. App.), 58 S. W. 173; Crumlish v. Shenandoah Val. R, Co., 28 W, Va. 623; Eschweiber v. Stowell, 78 Tis. 316, 23 Am. St. Rep. 411, 47 N. W. 361.
Where the directors would pay no attention to a demand for relief, a stockholder may maintain a bill to vindicate the corporate rights: Fisher v. Patton, 134 Mo. 32, 33 S. W. 451, 54 S. W. 1096. So where the officers' interests are opposed to the suit, or they are confederating with the defendants in the misconduct, or the directors are under the control of the very persons who must be the defendants in the proposed action, no request is necessary: Knoop v. Bohmrich, 49 N. J. Eq. 82, 23 Atl. 118, affirmed in Bohmrich v. Knoop, 50 N. J. Eq. 485, 27 Atl. 636; Currier v. New York etc. R. Co., 35 Hun, 355; Meyers v. Scott, 50 Hun, 603, 2 N. Y. Supp. 753; Northern Trust Co. v. Snyder, 113 Wis. 516, 90 Am. St. Rep. 867, 89 N. W. 46). Where two of the four directors are in a conspiracy to defraud the corporation, and all four unite in resisting the assertion of corporate rights, a demand is useless, and suit may be instituted without it: Gerry p. Bismarck Bank, 19 Mont. 191, 47 Pac. 810. See, also, Tevig v. Hammersmith (Ind.), 66 N. E. 79, 912, affirmed in 67 N. E. 672. But the mere fact that the officers are pecuniarily interested adversely to the complainant does not of itself excuse proper efforts to obtain redress: Boyd v. Sims, 87 Tenn. 771, 11 S. W. 948.
3. Common Directors of Two Corporations.—Cases have arisen in which rival corporations have had common directors upon the managing boards, and have committed wrongful acts, detrimental to one of the companies, in order to advance the interests of the other. Boaz v. Sterlingworth etc. Co., 73 N. Y. Supp. 1039, 68 App. Div. 1, was a case of that kind, where the following language is used: "According to the complaint and the facts to be inferred therefrom by fair intendment, the officers and board of directors of the cor. poration in which plaintiff is a stockholder have given the use of all its property to a rival foreign corporation, of which they are also the officers and directors, without consideration, and without the consent of the stockholders. It is manifest that directors who Fould so betray their trust would not, by a mere demand and asser. tion of his rights on the part of a minority stockholder, be transformed into champions of the interests of the stockholders before the courts or elsewhere, or endeavor in good faith to undo the Trongs committed, or in process of commission, by themselves. In effect it would be requesting them to sue themselves. Such a demand, under these circumstances, would be futile and may well be dispensed with." See, also, George v. Central R. R. Co., 101 Ala. 607, 14 South.
752, a demand being held needless where a majority of stock was shown to be owned by a rival corporation, which controlled the managing bodies of the first company. In Pittsburg etc. Ry. Co. v. Dodd, 24 Ky. Law Rep. 2057, 72 8. W. 822, it is said: “The directors need not be dishonest. It is enough if their situation is such that by reason of conflict of interest they cannot or should not act.”
4. Where the Corporation has Abandoned Business – No Managing Body.—Where the corporation has abandoned business, no demand is necessary: Tennessee etc. Min. Co. v. Ayers (Tenn.), 43 S. W. 744; Crumlish v. Shenandoah Val. R. Co., 28 W. Va. 623. And the same applies where there is no governing body upon which a request could be made: Sheridan Brick Works v. Marion Trust Co., 157 Ind. 292, 87 Am. St. Rep. 207, 61 N. E. 666. An allegation that all of the officers have absconded and that their whereabouts are unknown, shows sufficiently that it was impossible for a stockholder to make a demand: Wilcox v. Bickel, 11 Neb. 154, 8 N. W. 436. That a stockholder of a dissolved corporation may sue to set aside a void judgment rendered against it, see Musson v. Richardson, 11 Rob. (La.) 37.
The fact that a corporation is no longer a going concern does not, however, dispense with the necessity for a demand: Dillon v. Lee, 110 Iowa, 156, 81 N. W. 245.
5. Relationship as Giving Rise to Presumption of Refusal.—The mere fact that three stockholders control the election of the seven directors of a corporation and actually elected them does not, of itself, give rise to the legal presumption that the directors thus elected would refuse to discharge their duties to the corporation and the stockholders, when requested by the latter: Decatur etc. Land Co. v. Palm, 113 Ala. 531, 59 Am. St. Rep. 140, 21 South. 515, disapproving Mack v. De Bardeleben etc. Iron, Co., 90 Ala. 396, 8 South, 150.
How far the question of relationship between a director and a defendant may excuse a demand, is brought out in Siegman v. Ma. loney (N. J.), 54 Atl. 405, affirming 63 N. J. Eq. 422, 51 Atl. 1003. The action was to recover dividends illegally declared by certain persons while directors of the corporation; and the facts are stated by the court as follows: “It appears from an examination of the allegations of the bill that only five of the twelve directors in office at the time of the institution of the suit were upon the board at the time when the illegal dividends were declared and paid; and it was admitted in the bill that, notwithstanding this fact, the complainant did not apply to the board to bring suit for the purpose of obtaining the relief sought by the bill before beginning this action. He alleges in excuse of his failure in this regard that, in addition to the five members who participated in the declaration and payment of the illegal dividends, one other was a brother of, and connected in business with, one of the individual defendants,