the direct blow to the Northern company's | mitted to inaugurate or sanction 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 corpodone in defiance of such duties owed by it,―ration. should be disregarded by a court of equity, and no benefit should be allowed to result to the wrongdoer by reason thereof.

Perry, Tr. § 166 et seq., 428-435.

The purchase of the bonds must be deemed to have been made on behalf of the Northern company at the price paid for the bonds, and the foreclosure must be set aside and the bondholders decreed to have an equitable lien on the property for the amount paid for the bonds,-a lien, however, which they cannot assert until they disengage themselves from the trust relation they have assumed.

Draper v. Gordon, 4 Sandf. Ch. 210; Slade v. Van Vechten, 11 Paige, 21; Quackenbush v. Leonard, 9 Paige 334; Lewin, Tr. 8th ed. 275. When a person by the purchase of stock in a corporation becomes jointly interested with others in the property of such corporation he will not be permitted by any means to get the sole beneficial ownership of such property at the expense of other joint owners.

Jackson v. Ludeling, 88 U. S. 21 Wall. 616, 22 L ed. 492; Gamble v. Queens County Water Co. 123 N. Y. 91, 9 L. R. A. 527; Wright v. Oroville Gold, S. & C. Min. Co. 40 Cal. 20; Ervin v. Oregon R. & Nar. Co. 27 Fed. Rep. 625; Taylor v. Chichester & M. R. Co. L. R. 2 | Exch. 379; Meeker v. Winthrop Iron Co. 17 Fed. Rep. 48: Cook, Stock & Stockholders, 622; Morawetz, Priv. Corp. § 529: Beach, Priv. Corp. 70; 2 Bigelow, Fr. 1888, 645; Pearson v. Concord R. Co. 59 N. H. 85.

Community of interest produces a community of duty, and there is no real difference, on the ground of policy and justice, whether one cotenant buys an outstanding encumbrance or an adverse title to disseise and expel his cotenant. It cannot be tolerated when applied to a common subject in which the parties had an equal concern, and which created a mutual obligation to deal candidly and benevolently with each other, and to cause no harm to their joint interests.

Van Horne v. Fonda, 5 Johns. Ch. 388; Swinburne v. Swinburne, 28 N. Y. 573; Dens more Oil Co. v. Densmore, 64 Pa. 43; Baker v. Humphrey, 101 U. S. 494, 25 L. ed. 1065; Carpenter v. Carpenter, 131 N. Y. 101: Mitchell v. Reed, 61 N. Y. 123, 19 Am. Rep. 252.

The purchase of the majority of the Northern company's stock imposed a duty upon the Central company, and it was a violation of that duty of which just complaint is made and out of which a court of equity will not allow the party in fault to make a profit.

Menier v. Hooper's Teleg. Works, L. R. 9 Ch. 350; Meeker v. Winthrop Iron Co. supra; Pacific R. Co. v. Missouri P. R. Co. 111 U. S. 505, 28 L. ed. 498; Pondir v. New York, L. E. & W. R. Co. 72 Hun, 390: Colles v. Troy City Di rectory Co. 11 Hun, 397; Barr v. New York, L. E. & W. R. Co. 96 N. Y. 444; Cook, Stock & Stockholders, § 659; Woodroof v. Howes, 88 Cal. 184; Gamble v. Queens County Water Co. supra; Hart v. Ogdensburg & L. C. R. Co. 89 Hun, 316; Sage v. Culver, 147 N. Y. 241.

Ervin v. Oregon R. & Nav. Co. 20 Fed. Rep. 577, 27 Fed. Rep. 625; Menier v. Hooper's Teley. Works, supra; Meyer v. Staten Island R. Co. 7 N. Y. S. R. 245; Wheeler v. Pullman Iron & S. Co. 143 Ill. 197, 17 L. R. A. 818; Taylor, Corp. 3d ed. § 558, and cases cited; Gamble v. Queens County Water Co. supra; Aultman's Appeal, 98 Pa. 505; Thomp. Corp. S 4484; Waterman, Corp. $ 71; Gregory v. Patchett, 33 Beav. 595; Mowrey v. Indianapolis & C. R. Co. 4 Biss. 78.

The Northern company was during the period in which the things complained of occurred under the control of the Central Company, and was so dominated by that company that all its acts and omissions during that period were dictated by the Central company, which must be held responsible for them.

Pullman's Palace Car Co. v. Missouri P. R. Co. 115 U. S. 587, 29 L. ed. 499; Porter v. Pittsburgh Bessemer Steel Co. 120 U. S. 649, 50 L. ed. 830; Morris v. Tuthill, 72 N. Y. 575; Hayden v. Official Hotel Red Book & D. Co. 42 Fed. Rep. 875; Angle v. Chicago, St. P. M. & O. R. Co. 151 U. S. 1, 38 L. ed. 55.

A party who by his own acts has prevented performance of a contract or brought about a forfeiture or default by another party cannot recover damages or compensation for the nonperformance, nor can he complain of or in any way secure any advantage from the forfeiture or default which he has himself created.

Fleming v. Gilbert, 3 Johns. 528; Kidd v. Belden, 19 Barb. 266; Taylor v. Risley, 28 Hun, 141; 3 Addison, Cont. 798; United States v. Peck, 102 U. S. 64, 26 L. ed. 46; Higgins v. Soloman, 2 Hall, 482; Farnham v. Ross, Id. 167: Young v. Hunter, 6 N. Y. 203; McCreery v. Day, 119 N. Y. 1, 6 L. R. A. 503; 1 Pom. Eq. Jur. 426; 8 Am. & Eng. Enc. Law, p. 450; Sanders v. Pope, 12 Ves. Jr. 289; Hill v. Barclay, 18 Ves. Jr. 60; Angle v. Chicago, St. P. M. & O. R. Co. supra; Meeker v. Winthrop Iron Co. 17 Fed. Rep. 48.

The trustee of a railroad mortgage has no individual interest whatever, and only represents the holders of the bonds which such mortgage secures. He has therefore only such rights and equities with regard to the mortgaged property as have the bondholders themselves, and consequently any defense which would be available against the bondholders is equally available against the trustee when bringing an action to foreclose the mortgage for their benefit.

Kenicott v. Wayne County Supers. 83 U. S.. 16 Wall. 452, 21 L. ed. 319; Union College v. Wheeler, 61 N. Y. 88; Indiana & I. C. R. Co. v. Sprague, 103 U. S. 756, 26 L. ed. 554; Tallinghast v. Troy&B. R. Co. 48 Hun, 420; 2 Perry, Tr. § 760; Williamson v. New Albany etc. R. Co. 1 Biss. 198.

A monopoly or anything savoring of or tending to promote a monopoly is against the pol icy of both law and equity.

People v. North River Sugar Ref. Co. 54 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. S. 290, 30 L. ed. 83; Pearsall v. Great Northern R. Co. 161 U. S. 646, 40 L. ed. 838.

The plaintiff had no authority or right to bring this foreclosure suit, it not having received a valid request so to do from a sufficient number of bondholders as contemplated by the mortgage.

While plaintiff had originally the right to bring this foreclosure proceeding without any request whatever, it not having exercised its option so to do, but having adopted the alternative course provided for by the mortgage, namely, to proceed upon the request of the bolders of $2,000,000 of such bonds, proof of such request becomes an essential requisite, and the plaintiff is put to the necessity of showing that the request received by it was a valid one and complied with the terms of the mortgage. Chicago, D. & V. R. Co. v. Fosdick, 106 U. S. 47, 27 L. ed. 47.

Messrs. Ashbel Green, David McClure, and Thomas Thacher, for respondent:

The railroad corporation was the only owner of the property. The shareholder in a corporation has no legal title to its property or profits until a division is made. The property of the corporation is not the property of its stockholders. Its rights are not their rights. They have only an indirect interest therein.

Hyatt v. Allen, 56 N. Y. 553, 15 Am. Rep. 449; Burrall v. Bushwick R. Co. 75 N. Y. 216; Jermain v. Lake Shore & M. S. R. Co. 91 N. Y. 492; Davenport v. Dows, 85 U. S. 18 Wall. 626, 21 L. ed. 938; Humphreys v. McKissock, 140 U. S. 304, 35 L. ed. 473; Porter v. Sabin, 149 U. S. 473, 37 L. ed. 815; Pullman's Palace Car Co. v. Missouri P. R. Co. 115 U. S. 587,29 L. ed. 499; Morgan v. Railroad Co. 1 Woods, 15; Sala v. New Orleans, 2 Woods, 196: Porter v. Pittsburgh Bessemer Steel Co. 120 U. S. 670, 30 L. ed. 838; McMullen v. Ritchie, 64 Fed. Rep. 253; Forbes v. Memphis, E. P. & P. R. Co. 2 Woods, 323.

It is questionable whether in any case where a suit is properly instituted against a corporation a stockholder of that corporation can, even on a suggestion of fraud on the part of its of ficers, come in by way of intervention as a party to that suit and seek to defend or control the proceedings.

Forbes v. Memphis, E. P. & P. R. Co. supra; Alexander v. Donohoe, 143 N. Y. 210; Little v. Bowers, 134 U. S. 547, 33 L. ed. 1016; Inglehart v. Stansbury, 151 U. S. 68, 38 L. ed. 76. There is no rule of law or of equity requiring sale of a railroad in parcels. The policy of the law is to treat them as an entirety.

Cook, Stock & Stockholders, 1892, chap. 688, 5; Muller v. Dors, 94 U. S. 449, 24 L. ed. 209; Hammock v. Farmers' Loan & T. Co. 105 U. S. 77, 26 L. ed. 1111; Columbia Finance & T. Co. v. Kentucky U. R. Co. 60 Fed. Rep. 799, 22 U. S. App. 54; Macon & W. R. Co. v. Parker, 9 Ga. 377.

The trustee represents not only the requesting bondholders but all the bondholders, and when it is called to the attention of the trustees that a default has occurred entitling it to a foreclosure it must act then in behalf of all the bondholders in such a way as seems to it best.

Hollister v. Stewart, 111 N. Y. 644; Shaw v. Little Rock & Ft. S. R. Co. 100 U. S. 612, 25 L. ed. 759; Morgans' L. & T. R. & S. S. Co. v. Texas C. R. Co. 137 U. S. 171, 34 L. ed. 625; Guaranty Trust & S. D. Co. v. Green Cove Springs & M. R. Co. 139 U. S. 137, 35 L. ed. 116.

The trustee was requested to foreclose by the holders of $2,000,000 of bonds.

Bowling v. Harrison, 47 U. S. 6 How. 248, 12 L. ed. 425; Smedes v. Bank of Utica, 20 Johns. 372.

There is no fiduciary relation between the Central company as a stockholder and other stockholders preventing it from enforcing the bonds which it held or requiring it to give to other stockholders the benefit of the purchase of bonds or to account to them for the profits.

Bird Coal & I. Co. v. Humes, 157 Pa. 278; Mickles v. Rochester City Bank, 11 Paige, 118, 42 Am. Dec. 103; Russell v. M'Lellan, 14 Pick. 63; Abbott v. Merriam, 8 Cush. 591; Gillett v. Bowen, 23 Fed. Rep. 625; Gamble v. Queens County Water Co. 123 N. Y. 91, 9 L. R. A. 527; Harpending v. Munson, 91 N. Y. 652; Leavenworth County Comrs. v. Chicago, R. I. & P. R. Co. 134 U. S. 688, 33 L. ed. 1064: Central Trust Co. v. Bridges, 57 Fed. Rep. 767, 16 U. S. App. 115; Fitzgerald & M. Constr. Co. v. Fitzgerald, 137 U. S. 110, 34 L. ed. 613.

A director may buy a claim against the company and enforce it for the full amount. Inglehart v. Thousand Island Hotel Co. 32 Hun, 377.

If he holds a bond secured by mortgage he may purchase at the sale.

Preston v. Loughran, 58 Hun, 210; TwinLick Oil Co. v. Marbury, 91 U. S. 587, 23 L. ed. 329.

If an officer or director to whom the doctrine as to the dealings by an agent with the property of his principal is said to apply may so act, a fortiori may a stockholder who is under no such relation to the corporation or costockholders.

A mortgagee may buy an adverse claim against the mortgaged property.

Cornell v. Woodruff, 77 N. Y. 203; Porter v. Pittsburgh Bessemer Steel Co. 120 U. S. 670, 30 L. ed. 838; Pullman's Palace Car Co. v. Missouri P. R. Co. 115 U. S. 587, 29 L. ed. 499.

Even a mortgagee cannot reform a mortgage which through mistake covers more property than was agreed to be covered. The money must be paid and thus the maxim be fulfilled that he who asks equity must first do equity.

Ames v. New Jersey Franklinite Co., 12 Ň. J. Eq. 66, 72 Am. Dec. 385; Williams v. Fitzhugh, 37 N. Y. 451; Lewis v. Mott, 36 N. Y. 402; Halstead v. Swartz, 1 Thomp. & C. 562; Morris v. Tuthill, 72 N. Y. 575.

A stockholder does not occupy a fiduciary relation so as to be accountable for profits of contracts made with the corporation.

Bird Coal & I. Co. v. Humes, 157 Pa. 278. The purpose with which the bonds are held makes no difference as to the rights under the mortgage.

Morris v. Tuthill, supra.

A party is not debarred from the vindication of legal right because he is actuated by an improper motive.

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 Abb. Pr. N. S. 174; Ervin v. Oregon R. & Nav. Co. 20 Fed. Rep. 579.

That the suit may work hardship is of no consequence.

Clinton v. Myers, 46 N. Y. 515, 7 Am. Rep. 373; Oglesby v. Attrill, 105 U. S. 605, 26 L. ed. 1186; Simpson v. Dall, 70 U. S. 3 Wall. 476, 18 L. ed. 267; Adler v. Fenton, 65 U. S. 24 How. 407, 16 L. ed. 696.

The defendant Pick is a very recent holder of stock purchased presumably in order to defend this action and bound by the acquiescence of former holders of his shares.

Parsons v. Hayes, 18 Jones & S. 29; Mann v. Currie, 2 Barb. 294; Re Syracuse, C. & N. Y. R. Co. 91 N. Y. 1: Dimpfell v. Ohio & M. R. Co. 110 U. S. 210, 28 L. ed. 122.

The affairs of the Northern company were managed by its directors who were alone authorized to deal with the application of its earnings.

Beveridge v. New York Elev. R. Co. 112 N. Y. 1, 2 L. R. A. 648: Leslie v. Lorillard, 110 N. Y. 519, 1 L. R. A. 456; Pullman's Palace Car Co. v. Missouri P. R. Co. 115 U. S. 587, 29 L. ed. 499.

The law does not presume that the board of directors or a majority of them will be unfaithful because they were elected by a person own ing a majority of the stock.

Allen v. Wilson, 28 Fed. Rep. 678.

If the purchase were ultra vires that would not prevent title to the bonds from passing. Holmes &G. Mfg. Co. v. Holmes & W. Metal Co. 127 N. Y. 252.

clearly subject to the order and control of the latter. Moreover, the request that Drexel, Morgan, & Co. made to the plaintiff to commence this action was not only based upon the bonds owned by the New York Central & Hudson River Railroad Company and others it had contracted to purchase, but the sole purpose of that request was to procure a foreclosure, and thus enable the New York Central & Hudson River Railroad Company to acquire control of the property and franchises of the New York & Northern Railway Company for its own benefit, as set forth in the circular letter sent to the stockholders of the New York Central & Hudson River Railroad Company. The president of the latter company himself testified that that was the object and purpose which induced the sending of the notice requesting the commencement of this action. The notice given by the New York Central & Hudson River Railroad Company to its stockholders states the fact that on March 18, 1893, agreements had already been made in respect to the purchase of a controlling interest in the New York & Northern Railway Company, subject to the approval therein asked for. The letter of Drexel, Morgan, & Co. to the treasurer of the New York Central & Hudson River Railroad Company, dated April 5, 1893, shows that the majority of the stock and bonds mentioned therein was held by them, subject to the order of the New York Central & Hudson River Railroad Company, and that they had received the note of that company in payment therefor. Thus, it is obvious that this action was procured to be commenced by the New York Central & Hudson River Railroad Company, while it owned a majority of the stock and bonds of the New York & Northern Railway Company, for the sole and avowed purpose of obtain

This defense is that the alleged owner has not legal capacity to hold. This is no busi ness of the defendant mortgagor or any of its stockholders and no defense to the foreclosure. Silver Lake Bank v. North, 4 Johns. Ch. 370; Steam Nay. Co. v. Weed, 17 Barb. 378; Huming control of its property and business, bert v. Trinity Church, 24 Wend. 630; Bo gardus v. Trinity Church, 4 Sandf. Ch. 758.

The trial judge is only required to find upon material questions of fact submitted to him and involved in the evidence.

Callanan v. Gilman, 107 N. Y. 372; art v. Morss, 79 N. Y. 629; Baldwin v. Doying, 114 N. Y. 455.

Mr. Sherman Evarts for respondents New York & Northern Railway Company et al.

Martin, J., delivered the opinion of the

court:

regardless of the rights of the minority stockholders or the owners of the remainder of the honds. The appellants contend that the New York Central & Hudson River Railroad Company, as such majority stockholder, also acStew-quired the entire control of the affairs of the New York & Northern Railway Company through its board of directors, who were will ing to serve the interests of those owning a majority of the stock, as was indicated by the resignation of three of the directors, the appointment of others in their places, by the resignation of two officers who occupied important positions in the affairs of that company, and by the appointment of two officers in their places, who were in the employ of the New York Central & Hudson River Railroad Company, to discharge the duties of such offi cers, and compensated for their services by the New York Central & Hudson River Railroad Company. While the proof upon that question was not rerhaps conclusive, yet the circumstances developed by the evidence plainly indicate that, after it became the owner of a majority of the stock and bonds, the New York Central & Hudson River Railroad Company dictated and governed the action of the board of directors, and controlled the management of the affairs, of the New York & North

That the New York Central & Hudson River Railroad Company purchased a majority of the second mortgage bonds and a majority of the stock of the New York & Northern Railway Company, for the sole purpose of ob taining control of the property of the latter, is clearly established by the proof contained in the record. Indeed, such was the avowed purpose of its purchase. The record renders it equally clear that the New York Central & Hudson River Railroad Company was the actual and beneficial owner of such bonds and stock for several months before the commencement of this action. They were retained in the hands of Drexel, Morgan, & Co., not as owners or holders in their own right, but as agents or naked trustees for the New York lern Railway Company.

The facts already referred to are strong ministration or of policy upon which there proof that the New York Central & Hudson might 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 hardly 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 the the latter, where the contemplated action of president of that corporation as directors of the majority is so far opposed to the interests the company, and place the officers of that of the corporation as to lead to a clear infercompany in control of its financial affairs, esence that such action is with an intent to serve pecially when it was the owner of competing lines of railroad. The clear and legitimate inference to be drawn from the circumstances proved in this case is that, after the New York Central & Hudson River Railroad Company purchased a majority of the stock and bonds of the New York & Northern Railway Company, i controlled its officers and directors as fully and completely as though they had been elected by its votes. All the facts and circumstances, so far as the defendants were permitted to prove them, tend to show that such was the situation. Indeed, it is a matter of common knowledge that, where the ownership of a majority of the stock of such a corporation changes, the board usually changes, un less its members are already in harmony with the policy of the purchasers.

some outside purpose, regardless of the consequences to the company and inconsistent with its interests. In Pondir v. New York, L. E. & W. R. Co. 72 Hun, 385, 389, where the Erie Railroad Company, through the action of the Buffalo, Bradford, & Pittsburgh Railroad Company, whose directors were elected and controlled by the Erie Company, without consideration, obtained the property of the latter corporation, and so arranged its affairs as to render all the shares of its stock, other than those held by the Erie Company, valueless, it was held that a stockholder of the Buffalo, Bradford, & Pittsburgh Railroad Company might maintain an action to redress the wrong done to his company. In that case Mr. Justice Follett said: "This was a fraud on the 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 they are exposed should of such stock and bonds, and while its offi- be condemned by the courts and a heavy hand cers were in substantial control of the New laid upon all who participate in them." In York & Northern Railway Company, they de-Barr v. New York, L. E. & W. R. Co. 96 N. Y. clined to accept traffic from other roads that would have produced a fund with which to pay the interest due on the bonds in question; that the income of the road which should have been employed to pay such interest was used for other and improper purposes; and that such action caused the inability of the New York & Northern Railway Company to pay the interest, and thus cure its default. This evidence was rejected as immaterial, and the appellants duly excepted.

In determining the correctness of the rulings made by the trial court, it becomes necessary to determine incidentally whether a corporation, purchasing a majority of the stock of another competing corporation, may thus obtain control of its affairs, cause it to divert the income from its business, or to refuse business which would enable it to pay the interest for which it was in default, and then institute an action in equity to enforce its obligations, for the purpose of obtaining control of its property at less than its value to the injury of the minority stockholders, and they have no remedy; or, in other words, whether a court of equity, with those facts established, would lend its aid to such a stockholder, by enforcing the mortgage and decreeing a foreclosure and sale of the mortgaged premises, at its request, in its behalf, and to accomplish such a purpose. If it would, then the rulings of the trial court were proper; if not, then the appellants were entitled to prove those facts, and it was error to reject the evidence.

In Gamble v. Queens County Water Co. 123 N. Y. 91, 9 L. R. A. 527, in discussing a similar question, Judge Peckham, in effect, said that, although it is not every question of mere ad

444, where the officers of another corporation had leased the property of the first corporation, controlled a majority of its stock, and conspired to compel the minority to sell its stock by refusing to pay the rent due, it was held that a court of equity, on the application of the minority, would compel the payment of the rent; and that, where the majority of the stockholders of a corporation are illegally pursuing a course which is in violation of the rights of the other stockholders, an action to obtain equitable relief may be maintained by an aggrieved stockholder. Sage v. Cutter, 147 N. Y. 241, is to the effect that, when it can be fairly gathered that the officers and directors of a corporation have made use of relations of trust and confidence to secure or promote some selfish interest it is enough to set a court of equity in motion, and to require them to explain such a transaction which there is a presumption against in equity. In Meyer v. Staten Island R. Co. 7 N. Y. S. R. 245, it was held that a majority of the stockholders of a corporation would not be permitted to sanction a transaction which is the outcome of a scheme, dishonest or fraudulent in its inception, and that the minority stockholders have rights which under such circumstances must be recognized; that the majority may legally control the company's business, but, in assuming such control, they take upon themselves the correlative duty of diligence and good faith; and that they cannot manipulate the company's business in their own interests, to the injury of the minority stockholders. In Ervin v. Oregon R. & Nav. Co. 27 Fed. Rep. 630, it was held that when a number of stockholders combine to constitute themselves a ma

their duty to the extent of their power, to secure for all those whose interests are in their charge the highest possible price for the property which can be obtained. In Menier v. Hooper's Teleg. Works, L. R. 9 Ch. 350, it was held that, where a majority of a company proposed to benefit themselves at the expense of the minority, the court might interfere to protect the minority, and that in such a case the bill is rightly filed by one shareholder on be

In Gregory v. Patchett, 33 Beav. 595, where the only available property of a company was transferred to two shareholders in lieu of their shares, and the company was thereby practically put to end, and this was sanctioned by a majority of the shareholders at a general meeting, it was held that a majority could not bind the minority in such a transaction; that where measures were adopted which were plainly beyond the powers of the company, and inconsistent with the objects for which the company was constituted, the court, at the instance of the minority, would interpose to prevent the performance of such an act.

jority, to control the corporation as they see fit; they become, for all practical purposes, the corporation itself, and assume the trust relation of the corporation towards its stockholders; and if they seek to make profit out of it, at the expense of those whose rights are the same as their own, they are unfaithful to the relation they have assumed, and guilty, at least, of constructive fraud, which a court of equity will remedy. In Wright v. Oroville Gold, S. & C. Min. Co. 40 Cal. 20, it was, in sub-half of the others, and against the company. stance, held that in dealing with the relations between a corporation and its officers, on one hand, and the stockholders, upon the other, in the management of the corporate affairs, courts of equity will look beyond the mere observance of the forms of law, and inquire if the authority has been in good faith exercised to promote the interests of the stockholders; and that a court of equity will, at the instance of a stockholder, control the corporation and its officers, and restrain them from doing acts even within the scope of the corporate authority, if such acts would amount to a breach of the trust upon which the authority had been conferred. In Meeker v. Winthrop Iron Co. 17 While the opinions in the cases cited are inFed. Rep. 48, it was held that a majority of structive, and have an important bearing upon the holders of the capital stock of a corpora- the question under consideration, still, within tion could not, by their votes in a stockhold the limits of this opinion, we have found it imers' meeting, lawfully authorize its officers to practicable to quote from the language of the lease its property to themselves, or to another courts in those cases. "The law requires of corporation formed for the purpose, and ex the majority of the stockholders the utmost clusively owned by them, unless such lease good faith in their control and management of was made in good faith, and supported by an the corporation as regards the minority, and in adequate consideration; and that in a suit, prop- this respect the majority stand in much the erly prosecuted, to set aside such a contract, same attitude towards the minority that the dithe burden of proof, showing fairness and ad rectors sustain towards all the stockholders. equacy, is upon the party or parties claiming Thus, where the majority are interested in anthereunder. In Goodin v. Cincinnati & W. other corporation, and the two corporations Canal Co. 18 Ohio St. 169, a railroad company bave contracts between them, it is fraudulent purchased a majority of the shares of stock in for that majority to manage the affairs of the a canal company, elected for the latter a board first corporation for the benefit of the second. of directors who were in the interest of the A court of equity will intervene and protect railroad company, and then, with the assent of the minority, upon an application by the latsuch board, appropriated the entire canal and ter." 2 Cook, Stock & Stockholders, 3d ed. property of the canal company as a railroad § 662, p. 945. The same principle is stated in track, paying therefor a price or compensation 1 Morawetz, Priv. Corp. 2d ed. § 529; 1 Beach, which was agreed upon by the directors of the Priv. Corp. $ 70; 2 Bigelow, Fr. § 645, and two companies, but which was far below the Beach, Mod. Eq. Jur. § 132, 686. Hackettsactual value of the property. Under those town Nat. Bank v. D. G. Yuengling Brewing circumstances the court held that, although Co. 20 C. C. A. 327, 74 Fed. Rep. 110, is to the the stockholders and creditors of the canal effect that every delegation of power implies company could not, after the road had been that it will be honestly exercised, and in that completed, reclaim the property, or enjoin its case it was held that the evidence offered upon use, yet they were not concluded by such the trial presented a question of fact for the agreement as to the price of the property, but jury whether a consent, given in pursuance of might compel the railroad company to account a resolution passed by a majority of the bondfor its additional value. In Jackson v. Ludel-holders of a corporation, extending the time of ing, 88 U. S. 21 Wall. 616, 22 L. ed. 492, it was held that the managers and officers of a company where capital is contributed in shares are in a very legitimate sense trustees, alike for its stockholders and its creditors, though they may not be trustees technically and in form. They, accordingly, have no right to enter into or participate in any combination the object of which is to devest the company of its property, and obtain it for themselves at a sacritice. They have no right to seek their own profit at the expense of the company, its stock holders, or even its bondholders. In case of embarrassment to the company, and any necessity to sell the estates of the company, it is

payment of the principal and interest of its bonds, was given in good faith, in the common interest of all, or amounted to an unwarranted exercise of the power of the majority, because given in the interest of one bondholder, with a view of enabling him to compel the minority bondholders to sell their bonds on such terms as he might dictate. While the question in some of the cases cited arose between stockholders and the directors and officers of a company who, as such, held a position of trust as to the former, still where, as in this case, a majority of the stock is owned by a corporation or a combination of individuals, and it assumes the control of an