Hudson River Railroad Company to its stockment of June 30, 1893, to our stockbolders, to holders, made June 4, 1893, was as follows: acquire control, by lease or otherwise, of the At a special meeting held April 19, 1893,

New York & Northern Railroad property." 640,378 shares of the capital stock of this com- 1893, the minority stockholders gave notice to

The evidence also disclosed that in October, pany were voted in favor of a resolution ap: the New York Central & Hudson River Rail. proving and authorizing the acquirement, by purchase, of a controlling interest in the stock road Company, Drexel, Morgan, & Co., and and bonds of the New York & Northern Rail. Charles T. Barney that they were willing to way Company, and approving and authoriz: contribute their proportion of the money ing the making of a lease with that company necessary to pay or purchase the interest coustead) of its railroad property, and approving contribute their proportion for a like purpose. (or a company wbich shall be organized in its rons for the nonpayment of which such fore

closure was being bad, and asked them to and authorizing the guaranty under such lease of the principal and interest of $5,000,- River Railroad Company made no reply.

To this the New York Central & Hudson 000 in 4 per cent 100-year gold bonds of the Barney replied that the stock standing in his lessor company.

pame was owned by someone else, while The following note was also introduced in Drexel, Morgan, & Co. declined to act upon evidence:

that proposition. That the New York & $1,824,094.

Northern Railway Company and the New

August 1st, 1893. On demand, upon ten days' notice after York Central & Hudson River Railroad Com date, we promise io pay to the order of Drexel, papy were duly organized, and that the plainMorgan, & Company one million eight hundred tiff was a domestic corporation, were found as and twenty-four thousand and ninety-four dol- facts by the court. It also in substance found lars, with interest. Value received.

that the New York Central & Hudson River New York Central and Hudson River

Railroad Company owns and operates railroads Railroad Company,

which are parallel or competing lines with the

New York' & Northern Railway; that the apChauncey M. Depew, President. E. V. W. Rossiter, Treasurer.

pellant Pick owned 100 sbares of the capital

stock of the New York & Northern Railway The indorsements upon this note showed Company, and represented about 18,000 other payments in full, commencing August 2, 1893, shares of such capital stock, and the defendant and ending August 9.

Holmes owned 1,200 shares; and that the pur. A contract between Louis V. Bell and Henry chase of the bonds by the New York Central K. McHarg was also introduced in evidence, & Hudson River Railroad Company was after wbich shows that on the 14th of July, 1993, default had been made in the payment of the the New York Central & Hudson River Rail interest thereon. The court also found that road Company agreed to purchase from them, the plaintiff bad received a written request, at the price or rate of 80 cents on the dollar, signed by the holders of more than $2,000,000 second mortgage bonds of the New York & in amount of such bonds, requesting it to bring Northern Railway Company of the par value an action for the foreclosure and sale of the of at least $750,000, to be paid for at that rate premises covered by such mortgage; that it in the bonds of the company which should, at was for the best interests of all concerned that the time of their issue, be the owner of the all the property should be sold in one parcel, railroad covered by such mortgage, and a part and a sale in any oiber way would be greatly of an issue of $6,200,000, bearing interest at to the detriment and injury of the parties inthe rate of 4 per cent per annum, payable 100 terested in the railroad and its affairs; and years from the date of the new bonds, and se. that the rights of all the parties interested cured by a mortgage upon said mortgaged could be fully protected only by a sale of the property, principal and interest to be guaran. mortgaged premises, property, and appurtenteed by the New York Central & Hudson ances as an entirety. As conclusions of law, River Railroad Company; the purchase money the court held that there was due under said to bear interest at 4 per cent from July 13, mortgage, for principal and interest, the sum 1893, to be paid either by making the new of $3,453,511.11, and tbat the plaintiff was enbonds draw interest from ibat dale, or by de-titled to a judgment of foreclosure and sale. livering to them bonds of the $5,000,000 is. sue, the par value of which should be equal to Messrs. Simon Sterne and James C. the interest from July 13; the New York Carter, with Messrs. Holmes & Adams, Central & Hudson River Railroad Company for appellants: to have the option to pay the purchase price The Central company had no right to purin cash. The contract also provided that the chase the stock of the Northern company with boods purchased might be used by Messrs. a hostile intent toward that corporation. Such Drexel. Morgan, & Co. for the purpose of re purchase entailed upon it active duties of proorganizing the New York & Northern Rail-tection and good faith; and its various acts, way Company.

both of omission, in failing to call the stook. The president of the New York Central & bolders together for the purpose of taking Hudson River Railroad Company gave the action to cure the default either by a voluntary following testimony: “I was aware of the assessment upon the stock or by any other of notice sent by Drexel, Morgan, & Company to, the numerous methods in which an insolvent the Farmers' Loan & Trust Company, and I railroad corporation can recover itself, and of acquiesced in having it sept. It was sent in commission in wilfully causing the continupursuance of the general purpose expressed in ance of the default by the repeated refusals of our circular of March 18, 1893, and our state- I lucrative business offered and particularly in the direct blow to the Northern company's | mitted to inaugurate or sauction transactions life dealt by the act of the Central company in resulting in injury to the interests of the mirequesting the trustee to declare the principal nority stockholders or inconsistent with the sum due and to commence foreclosure,-all original object of the formation of the corpo. done in defiance of such duties owed by it,- ration. should be disregarded by a court of equity, Eroin v. Oregon R. & Nao. Co. 20 Fed. Rep. and no benefit should be allowed to result 577, 27 Fed. Rep. 625; Menier v. Hooper's to the wrongdoer by reason tbereof.

Teleg. Works, supra; Meyer v. Staten Island R. Perry, Tr. $S 166 et seq., 428–435.

Co. 7 N. Y. S. R. 245; Wheeler v. Pullman The purchase of the bonds must be deemed Iron & S. Co. 143 III. 197, 17 L. R. A. 818; to have been made on bebalf of the Nortbern Taylor, Corp. 3d ed. S 558, and cases cited; company at the price paid for the bonds, and Gamble v. Queens County Water Co. supra; the foreclosure must be set aside and the bond- Aultman's Appeal, 98 Pa. 505; Tbomp. Corp. holders decreed to have an equitable lien on 4484; Waterman, Corp. § 71; Gregory v. the property for the amount paid for the Patchett, 33 Beav. 595; Mourey v. Indianapolis bonds,-a lien, however, which they cannot & C. R. Co. 4 Biss. 78. assert until they disengage themselves from the The Northern company was during the trust relation they have assumed.

period in which the things complained of ocDraper v. Gordon, 4 Sandf. Ch. 210; Slade curred under the control of the Central Comv. Van Vechten, 11 Paige, 21; Quackenbush v. pany, and was so dominated by that company Leonard, 9 Paige 334; Lewin, Tr. 8th ed. 275. that all its acts and omissions during that period

When a person by the purchase of stock in were dictated by the Central company, which a corporation becomes jointly interested with must be held responsible for them. others in the property of such corporation be Pullman's Palace Car Co, v. Missouri P. R. will not be permitted by any means to get the Co. 115 U. S. 587, 29 L. ed. 499; Porter v. sole beneficial ownership of such property at Pittsburgh Bessemer Steel Co. 120 U. S. 649, 30 the expense of other joint owners.

L. ed. 830; Morris v. Tuthill, 72 N. Y. 575; Jackson v. Ludeling, 88 U. S. 21 Wall. 616, Hayden v. Official Hotel Red Book & D. Co. 42 22 L ed. 492; Gamble v. Queens County Water Fed. Rep. 875; Angle v. Chicago, St. P. M. & Co. 123 N. Y. 91, 9 L. R. A. 527; Wright v. 0. R. Co. 151 U. S. 1, 38 L. ed. 55. Orocille Gold, S. & C. Min. Co. 40 Cal. 20; A party who by bis own acts has prevented Ervin v. Oregon R. & Nar. Co. 27 Fed. Rep. performance of a contract or brought about a 625; Taylor v. Chichester & M. R. Co. L. R. 2 forfeiture or default by another party cannot Exch. 379; Meeker v. Winthrop Iron Co. 17 recover damages or compensation for the nonFed. Rep. 48; Cook, Stock & Stockbolders, performance, por cap he complain of or in any $ 622; Morawetz, Priv. Corp. $ 529: Beach, way secure any advantage from the forfeiture Priv. Corp. $ 70; 2 Bigelow, Fr. 1888, 645; or default which be has bimself created. Pearson v. Concord R. Co. 59 N. H. 85.

Fleming v. Gilbert, 3 Jobps. 528; Kidd v. Community of interest produces a commun. Beiden, 19 Barb. 266: Taylor v. Risley, 28 ity of duty, and there is no real difference, on Hun, 141; 3 Addison, Cont. 798; United States the ground of policy and justice, whether one v. Peck, 102 \'. S. 64, 26 L. ed. 46; Higgins v. cotepant buys an outstanding encumbrance or Soloman, 2 Hall, 482; Farnham v. Ross, Id. an adverse title to disseise and expel bis coten- 167: Young v. Hunter, 6 N. Y. 203; McCreery ant. It cannot be tolerated when applied to a v. Day, 119 N. Y. 1, 6 L. R. A. 503; 1 Pom. common subject in which the parties had an Eq. Jur. $ 426; 8 Am. & Eng. Enc. Law, equal concern, and which created a mutual p. 450; Sanders v. Pope, 12 Ves. Jr. 289; Hill v. obligation to deal candidly and benevolently Barclay, 18 Ves. Jr. 60; Angle v. Chicago, St. with each other, and to cause no harm to tbeir P. M. &0. R. Co. supra; Meeker v. Winthrop joint interests.

Iron Co. 17 Fed. Rep. 48. Van Horne v. Fonda, 5 Jobps. Ch. 388; The trustee of a railroad mortgage bas no Swinburne v. Suinburne, 28 N. Y. 573; Den individual interest whatever, and only repremore Oil Co. v. Densmore, 64 Pa. 43; Baker v. sents the bolders of the bonds which such Humphrey. 101 U. S. 494, 25 L. ed. 1065; Car- mortgage secures. He bas therefore only such penter v. Carpenter, 131 N. Y. 101: Mitchell rights and equities with regard to the mortgaged v. Reed, 61 N. Y. 123, 19 Am. Rep. 252. property as have the bond bolders themselves,

Tbe purchase of the majority of the North and consequently any defense which would be ern company's stock imposed å duty upon the available against the bondholders is equally Central company, and it was a violation of available against the trustee when bringing an that duty of which just complaint is made and action to foreclose the mortgage for their beneout of which a court of equity will not allow fit. the party in fault to make a profit.

Kenicott v. Wayne County Supers. 83 U. S. Menier v. Hooper's Teleg. Works, L. R. 9 Ch. 16 Wall. 452, 21 L. ed. 319; Union College v. 350; Meeker v. Winthrop Iron Co. supra; Pacific Wheeler, 61 N. Y. 88; Indiana & I. C. R. Co. R. Co. v. Missouri P. R. Co. 111 U. S. 505, 28 v. Sprague, 103 U. S. 756, 26 L. ed. 554; Trl. L. ed. 498; Pondir v. New York, L. E. & W. lingnast v. Troy & B. R, Co. 48 Hup, 420; 2 R. Co. 72 Hun, 390: Colles v. Troy City Di Perry, Tr. $ 760; Williamson v. New Albany rectory Co. 11 Hun, 397; Barr v. New York, L. etc. R. Co. 1 Biss. 198. E. & W. R. Co. 96 N. Y. 444; Cook, Stock & A monopoly or anything savoring of or tendStockholders, $ 659; Woodroof v. Howes, 88 Cal. ing to promote a monopoly is against the pol184; Gamble v. Queens County Water Co. supra; icy of both law and equity. Hart v. Ogdensburg & L. C. R. Co. 89 Hun, People v. North River Sugar Ref. Co. 54 316; Sage v. Culver, 147 N. Y. 241.

Hun, 370, 5 L. R. A. 386; Leslie v. Lorillard, The majority stockholders will not be per- / 110 N. Y. 519, 1 L. R. A. 456; Pennsylvania R. Co. v. St. Louis, A. & T. H. R. Co. 118 U. Hollister v. Stewart, 111 N. Y. 644; Shau v. S. 290, 30 L. ed. 83; Pearsall v. Great North- | Little Rock & Ft. S. R. Co. 100 U. S. 612, 25 ern R. Co. 161 U. S. 646, 40 L. ed. 838. L. ed. 759; Morgans' L. & T. R. & S. 8. Co.

The plaintiff had no authority or right to v. Teras C. R. Co. 137 U. S. 171, 34 L. ed. bring this foreclosure suit, it not having re- 625; Guaranty Trust & S. D. Co. v. Green Cove ceived a valid request so to do from a sufficient Springs & M. R. Co. 139 U. S. 137, 35 L. ed. number of bondholders as contemplated by the 116. mortgage.

The trustee was requested to foreclose by While plaintiff bad originally the right to the holders of $2,000,000 of bonds. bring this foreclosure proceeding without any Bowling v. Harrison, 47 U. S. 6 How. 248, request whatever, it not having exercised its 12 L. ed. 425; Smedes v. Bank of Utica, 20 option so to do, but having adopted the alter. Johns. 372. native course provided for by the mortgage, There is no fiduciary relation between the namely, to proceed upon the request of the Central company as a stockholder and otber bolders of $2,000,000 of such bonds, proof of stockholders preventing it from enforcing the such request becomes an essential requisite, and bonds which it held or requiring it to give to the plaintiff is put to the necessity of showing other stockbolders the benefit of the purchase that the request received by it was a valid ope of bonds or to account to them for the profils. and complied with the terms of the mortgage. Bird Coal & I. Co. v. Humes, 157 Pa. 278;

Chicago, D. & V. R. Co. v. Fosdick, 106 Ŭ. S. Mickles v. Rochester City Bank, 11 Paige, 118, 47, 27 L. ed. 47.

42 Am. Dec. 103; Russell v. M'Lellan, 14 Pick. Messrs. . Ashbel Green, David Mc- 63; Abbott v. Merriam, 8 Cush. 591; Gillett v. Clure, and Thomas Thacher, for respon- Bowen, 23 Fed. Rep. 625; Gamble v. Queens dent:

County Water Co. 123 N. Y. 91, 9 L. R. A. The railroad corporation was the only owner | 527; Harpending v. Munson, 91 N. Y. 652; of the property. The shareholder in a corpora- Leavenworth County Comrs. v. Chicago, R. I. & tion has no legal title to its property or profits P. R. Co. 134 U. S. 688, 33 L. ed. 1064; Central until a division is made. The property of the Trust Co. v. Bridges, 57 Fed. Rep. 767, 16 U. corporation is not the property of its stock. S. App. 115; Fitzgerald & M. Constr. Co. v. holders, Its rights are not iheir rights. They Fitzgerald, 137 U. S. 110, 34 L. ed. 613. bave only an indirect interest therein.

A director may buy a claim against the comHyatt v. Allen, 56 N. Y. 553, 15 Am. Rep. pany and enforce it for the full amount. 449; Burrall v. Bushwick R. Co. 75 N. Y. 216; Inglehart v. Thousand Island Hotel Co. 32 Jermain v. Lake Shore & M. S. R. Co. 91 N. Hun, 377. Y. 492; Darenport v. Doros, 85 U. S. 18 Wall. If he holds a bond secured by mortgage he 626, 21 L. ed. 938; Humphreys v. McKissock, may purchase at the sale. 140 U. S. 304, 35 L. ed. 473; Porter v. Sabin, Preston v. Loughran, 58 Hun, 210; Twin. 149 U. S. 473, 37 L. ed. 815; Pullman's Palace Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. ed. Car Co. v. Missouri P. R. Co. 115 U. S. 587, 29 329. L. ed. 499; Morgan v. Railroad Co. 1 Woods, If an officer or director to whom tbe doctrine 15; Sala v. Nero Orleans, 2 Woods, 196; Por as to the dealings by an agent with the propter v. Pittsburgh Bessemer Steel Co. 120 U. S. erty of his principal is said to apply may so 670, 30 L. ed. 838; McMullen v. Ritchie, 61 Fed. act, a fortiori may a stockholder who is under Rep. 253; Forbes v. Memphis, E. P. & P. R. no such relation to the corporation or costockCo. 2 Woods, 323.

holders. It is questionable whether in any case where A mortgagee may buy an adverse claim a suit is properly instituted against a corpora- against the mortgaged property. tion a stockholder of that corporation can, even Cornell v. Woodruff 77 N. Y. 203; Porter v. on a suggestion of fraud on the part of its of Pittsburgh Bessemer Steel Co. 120 U. S. 670, 30 ficers, come in by way of intervention as a L. ed. 838; Pullman's Palace Car Co. v. Misparty to tbat suit and seek to defend or control souri P. R. Co. 115 U. S. 587, 29 L. ed. 499. ihe proceedings.

Even a mortgagee cannot reform a mortgage Forbes v. Memphis, E. P. & P. R. Co. supra; which through mistake covers more property Alerander v. Donohoe, 143 N. Y. 210; Little v. than was agreed to be covered. The movey Bowers, 134 U. S. 547, 33 L. ed. 1016; Ingle. must be paid and thus the maxim be fulfilled hart v. Stansbury, 151 U. S. 68, 38 L. ed. 76. that he who asks equity must first do equity.

There is no rule of law or of equity requir- Ames v. New Jersey Franklinite Co., 12 N. J. ing sale of a railroad in parcels. The policy of Eq. 66, 72 Am. Dec. 385; Williams v. Fitzthe law is to treat them as an entirety.

hugh, 37 N. Y. 451; Lewis v. Mott, 36 N. Y. Cook, Stock & Stockbolders, 1892, chap. 688, 402; Halstead v. Suartz, 1 Thomp. & C. 562; $ 5; Muller v. Dous, 94 U. S. 449, 24 L. ed. 209; Morris v. Tuthill, 72 N. Y. 575. Hammock v. Farmers' Loan & T. Co, 105 U. A stockholder does pot occupy a fiduciary S. 77, 26 L. ed. 1111: Columbia Finance & T. relation so as to be accountable for profits of Co. v. Kentucky U. R. Co, 60 Fed. Rep. 799, contracts made with the corporation. 22 U. S. App. 54; Macon & W. R. Co. v. Par. Bird Coal & I. Co. v. Humes, 157 Pa. 278. ker, 9 Ga. 377.

The purpose with which the bonds are held The trustee represents not only the request- makes no difference as to the rights under the ing bondholders but all the bondholders, and mortgage. when it is called to the attention of the trus- Morris v. Tuthill, supra. tees that a default has occurred entitling it to A party is not debarred from the vindication a foreclosure it must act then in behalf of all of legal right because he is actuated by an imthe bondholders in such a way as seems to it proper motive. best.

Phelps v. Nowlen, 72 N. Y. 39, 28 Am. Rep.

93; Chenango Bridge Co. v. Paige, 83 N. Y. 188, Central & Hudson River Railroad, and were 38 Am. Rep. 407; Ramsey v. Erie R. Co. 8 clearly subject to the order and conirol of the Abb. Pr. N. S. 174; Ervin v. Oregon R. & latter. Moreover, the request that Drexel, Nav. Co, 20 Fed. Rep. 579.

Morgan, & Co. made to the plaintiff to comThat the suit may work hardship is of no mence this action was not only based upon the consequence,

bonds owned by tbe New York Central & Clinton v. Myers, 46 N. Y. 515, 7 Am. Rep. Hudson River Railroad Company and otbers 373; Oglesby v. Attrill, 105 U. S. 605, 26 L. ed. it bad contracted to purchase, but the sole 1186; Simpson v. Dall, 70_U. S. 3 Wall. 476, purpose of that request was to procure a fore18 L. ed. 267; Adler v. Fenton, 65 U. S. 24 closure, and thus enable the New York Cent. How. 407, 16 L. ed. 696.

ral & Hudson River Railroad Company to acThe defendant Pick is a very recent holder quire control of the property and franchises of of stock purchased presumably in order to de. the New York & Northern Railway Company fend this action and bound by the acquiescence for its own benefit, as set forth in the circular of former holders of bis sbares.

letter sent to the stockbolders of the New York Parsons v. Hayes, 18 Jones & S. 29; Manni Central & Hudson River Railroad Company. v. Currie, 2 Barb. 294; Re Syracuse, C. & N. The president of the latter company himself Y. R. Co. 91 N. Y. 1; Dimpfell v. Ohio & M. testified that that was the object and purpose R. Co. 110 U. S. 210, 29 L. ed. 122.

which induced the sending of the notice reThe affairs of the Northern company were questing the commencement of this action. managed by its directors who were alone au. The notice given by the New York Central & thorized to deal with the application of its earn- Hudson River Railroad Company to its stockings.

bolders states the fact tbat on March 18, 1893, Beveridge v. New York Elev. R. Co. 112 N. agreements had already been made in respect Y. 1, 2 L. R. A. 648: Leslie v. Lorillard, 110 to the purcbase of a controlling interest in the N. Y. 519, 1 L. R. A. 456; Pullman's Palace New York & Northern Railway Company, Car Co. v. Missouri P. R. Co. 115 U. S. 587, subject to the approval therein asked for. 29 L. ed. 499.

The letter of Drexel, Morgan, & Co. to the The law does not presume that the board of treasurer of the New York Central & Hudson directors or a majority of them will be unfaith- River Railroad Company, dated April 5, 1893, ful because they were elected by a person own shows that the majority of the stock and boods ing a majority of the stock.

mentioned therein was beld by them, subject Allen v. Wilson, 28 Fed. Rep. 678.

to the order of the New York Central & HudIf the purchase were ultra vires that would son River Railroad Company, and tbat they not prevent title to the bonds from passing. had received the note of ibat company in pay

Hilmes & G. Mfg. Co. v. Holmes & W. Metal ment therefor. Thus, it is obvious that this Co. 127 N. Y. 252.

action was procured to be commenced by This defense is that the alleged owner bas the New York Central & Hudson River not legal capacity to hold. This is no busi Railroad Company, wbile it owned a ness of the defendant mortgagor or any of its jority of the stock and bonds of the New stockholders and po defense to the foreclosure. York & Northern Railway Company, for

Silver Lake Bank v. Norih, 4 Johos. Ch. 370; the sole and avowed purpose of obtain. Steam Nav. Co. v. Weed, 17 Barb. 378; Hum. ing control of its property and business, bert V. Trinity Church, 24 Wend. 630; Bo regardless of the rights of the minority stock. gardus v. Trinity Church, 4 Sandf. Ch. 758. holders or the owners of the remainder of ibe

The trial judge is only required to find upon honds. Tbe appellants contend that the New material questions of fact submitted to him York Central & Hudson River Railroad Comand involved in the evidence.

pany, as such majority stockholder, also ac. Callanan v. Gilman, 107 N. Y. 372; Stero-quired the entire control of the affairs of the art v. Mor88, 79 N. Y. 629; Baldwin v. Doying, New York & Northern Railway Company 114 N. Y. 455.

through its board of directors, wbo were will. Mr. Sherman Evarts for respondents ing to serve the interests of those owning a New York & Northern Railway Company et al. majority of the stock, as was indicated by ibe

resignation of three of the directors, the apMartin, J., delivered the opinion of the pointment of others in their places, by the court:

resignation of two officers who occupied imThat the New York Central & Hudson portant positions in the affairs of that comRiver Railroad Company purchased a majority pany, and by the appointment of two officers of the second mortgage bonds and a majority in their places, who were in the employ of the of the stock of the New York & Northern New York Central & Hudson River Railroad Railway Company, for the sole purpose of ob. Company, to discharge the duties of such offi. taining control of the property of the latter, is cers, and compensated for their services by clearly established by the proof contained in the New York Central & Hudson River Railthe record. Indeed, such was the avowed road Company. Wbile the proof upon that purpose of its purchase. The record renders question was not rerhaps conclusive, yet the it equally clear that the New York Central & circumstances developed by the evidence Hudson River Raitroad Company was the ac plainly indicate that, after it became the owner tual and beneticial owner of such bonds and of a majority of tbe stock and boods, the New stock for several months before the commence- | York Cen'ral & Hudson River Railroad Comment of this action. They were retained in pany dictated and governed the action of the the hands of Drexel, Morgan, & Co., not as board of directors, and controlled the manageowners or bolders in their own right, but as ment of the affairs, of the New York & Northagents or naked trustees for the New York lern Railway Company.


The facts already referred to are strong ministration or of policy upon wbich there proof that the New York Central & Hudson migbt be a difference of opinion that would River Railroad Company was in the control justify the minority in coming into a court of of the affairs of the New York & Northern equity to obtain relief, yet, where the action of Railway Company. It is bardly to be sup a majority of the stockholders of a corporaposed that a board of directors which was not tion is fraudulent or oppressive to the minority under the control of another corporation shareholders, an action may be maintained by would appoint three of the friends of tbe the latter, where the coniemplated action of president of that corporation as directors of the majority is so far opposed to the interests the company, and place the otticers of that of the corporation as to lead to a clear ipfercompany in control of its financial affairs, es ence ibat such action is with an intent to serve pecially wben it was the owner of competing some outside purpose, regardless of the conselines of railroad. The clear and legitimate in quences 10 the company and inconsistent with ference to be drawn from tbe circumstances its interests. In Pondir v. New York, L. E. & proved in this case is that, after the New York W. R. Co. 72 Huo, 385, 389, where the Erie Central & Hudson River Railroad Company Railroad Company, through the action of the purchased a majority of the stock and bonds Buffalo, Bradford, & Pittsburgh Railroad of the New York & Northern Railway Com. Company, whose directors were elected and pany, il controlled its officers and directors as controlled by the Erie Company, without confully and completely as tbough they had been sideration, obtained the property of the latter elecied by its votes. All the facts and circum- corporation, and so arranged its affairs as to stapces, so far as the defendants were per render all the shares of its stock, otber than mitted to prove them, tend to show that such those held by the Erie Company, valueless, it was the situation. Indeed, it is a matter of was beld that a stockholder of the Buffalo, common knowledge that, where the ownership Bradford, & Pittsburgh Railroad Company of a majority of ihe stock of such a corpora. might maintain an action to redress the wrong tion changes, the board usually changes, un done to bis company. In that case Mr. Jusless its members are already in harmony with tice Follett said: “This was a fraud on the the policy of the purcbasers.

Buffalo, Bradford, & Pittsburgh Railroad On the trial the appellants sought to prove Company and its shareholders. Such frauds that after the New York Central & Hudson are not uncommon in the management of corRiver Railroad Company became the owner porations, and when tbey are exposed should of such stock and bonds, and wbile its offi. be condemned by the courts and a beavy hand cers were in substantial control of the New laid upon all who participate in them.” In York & Northern Railway Company, tbey de Barr v. New York, 1. E. & W.R. Co. 96 N. Y. clined to accept traffic from other roads that 444, where the officers of another corporation would have produced a fund with which to bad leased the property of the first corpora. pay the interest due on the bonds in question; lion, controlled a majority of its stock, and that the income of the road wbich sbould have conspired to compel the minority to sell its been employed to pay such interest was used stock by refusing to pay the rent due, it was for otber and improper purposes; and that such held ibat a court of equity, on the application action caused the inability of the New York of the minority, would compel the payment of & Northern Railway Company to pay the in the rent; and that, wbere the majority of the terest, and thus cure its default. This evi- stockholders of a corporation are illegally purdence was rejected as immaterial, and the ap- suing a course which is in violation of the pellants duly excepted.

rights of the other stockholders, an action to In determining ibe correctness of the rulings obtain equitable relief may be maintained by made by the trial court, it becomes necessary an aggrieved stockholder. Sage v. Cuirer, 147 to determine ipcidentally whether a corpora- N. Y. 241, is to the effect thai, when it can be tion, purcbasing a majority of the stock of an- fairly gathered ibat the officers and directors other competing corporation, may thus obtain of a corporation have made use of relations of control of its affairs, cause it to divert the in trust and confidence to secure or promote some come from its business, or to refuse business selfish interest it is enough to set a court of wbich would enable it to pay the interest for equity in motion, and to require them to exwhich it was in default, and then institute an plain such a transaction which there is a preaction in equity to enforce its obligations, for sumption against in equity. In veyer v. the purpose of obtaining control of its prop- Staten Island R. Co. 7 N. Y. S. R. 245, it erty at less than its value to the injury of ibe was beld that a majority of the stockholders of minority stockholders, and they bave po rem- a corporation would not be permitted to sancedy; or, in other words, whether a court of tion a transaction wbicb is the outcome of a equity, with those facts established, would scbeme, disbonest or fraudulent in its incep. lend iis aid to such a stockholder, hy enforc- tion, and that the minority stockholders bave ing the mortgage and decreeing a foreclosure rigbts which under such circumstances must and sale of the mortgaged premises, at its re- be recognized; that the majority may legally quest, in its bebalf, and to accomplish such a control the company's business, but, in assumpurpose. If it would, then the rulings of the ing such control, ihey take upon themselves trial court were proper; if not, then the appel the correlative duty of diligence and good lants were entitled to prove those facts, and faith; and that they cannot manipulate ibe it was error to reject the evidence.

company's business in their own interests, to In Gamble v. Queens County Water Co. 123 the injury of the minority stockholders. In N. Y. 91,9 L. R. A. 527, in discussing a similar Errin v. Oregon R. & Nar. Co. 27 Fed. Rep. question, Judge Peckbam, in effect, said that, 630, it was held that when a number of stockalthougb it is not every question of mere ad. ! holders combine to constitute themselves a ma

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