Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/587

CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 561. otherwise fair and unobjectionable ? The better view is that they cannot ; l but there are cases which hold that they may. 2 § 560. A minority of shareholders, on behalf of themselves and other shareholders, may, for conspiracy and fraud, whereby their interests have been sacrificed, shire- ° maintain a bill in equity against the corporation, its sue d the e°r- offlcers and others who have participated in the P ora ti on 1 * and its wrongful acts. 3 But a bill in equitv brought by officers for iiii • i . , conspiracy. shareholders against the corporation, and persons who were its directors in former years, for fraud and conspiracy whereby the interests of the corporation had been sacrificed, cannot be maintained unless the bill show either that an effort has been made by an application to the directors in office at the time of bringing the bill to set the corporation in motion to redress the wrong, or that such application would have been useless. And this requirement is not satisfied by an allegation that a majority of directors are acting in the interests and under the control of persons charged with the fraud. 4 A formal application and refusal need not be alleged, however, if enough appear to show that such an application would be un- availing. And allegations that individual defendants control the majority of the stock and the proceedings at the corporate meetings, and that a majority of the directors are knowingly and fraudulently colluding with them to continue to them the control of the corporation and its property, sufficiently show that no redress can be obtained through the corporation or its directors. 5 § 561. A shareholder, in matters outside of his relationship 1 Chicago Hansom Cab Co. v. Yerkes, 141 111. 320. See §§ 640- 644. 2 Northwest Trans. Co. v. Beatty, L. R. 12 App. Cas. 589; Bjorngaard v. County Bank, 49 Minn. 483. 3 Peabody ». Flint, 6 Allen, 52. Unless by unreasonable delay they forfeit their right to equitable re- lief, lb. 4 Cases in next note. But see Wayne Pike Co. v. Hammons, 129 Ind. 368. 5 Brewer v. Boston Theatre, 104 Mass. 378; Eschweiler v. Stowell, 78 Wis. 316; Dunphy v. Newspaper Ass'n, 146 Mass. 495; Rogers v. Lafayette Agricultural Works, 52 Ind. 296; Pond v. Vermont Valley R. R. Co., 12 Blatchf. 280. See Heath v. Erie R'y Co., 8 Blatchf. 347; Moyle v. Lander's Adm'rs, 83 Cal. 579. For the right of share- holders to sue on behalf of the cor- poration, see §§ 138-142; for their right to sue improperly acting offi- cers of the corporation, see §§ 685- 691. Compare Cannon v. Trask, L. 567