Where a dissenting stockholder questions the act of the officers and stockholders of a corporation, if it be of a nature to be fairly considered incidental or auxiliary to such business, it will not be unlawful, because not within the literal terms of the corporate grant.

Courts have jurisdiction. Without doubt, Courts appliances and conveniences as will induce new customof equity in Pennsylvania have, under our Act of ers to use gas, or old customers to use more. Assembly of April 6, 1859, jurisdiction to enjoin unlawful acts by such corporations; to enforce performance of contracts in this State with third parties; in short, have general jurisdiction in equity; but they have no jurisdiction as to their internal management. What constitutes internal Appeal of R. A. Malone, stockholder, for himmanagement is well defined by STONE, J., in self and such other stockholders of the Lancaster Mining Co. v. Field, 64 Md. 154. "Where the act Gas Light and Fuel Company, as may desire to complained of affects the complainant solely in become parties to this bill, plaintiff, from the dehis capacity as a member of the corporation, cree of the Common Pleas of Lancaster County, whether it be as stockholder, director, president, dismissing a bill in equity filed against the Lanor other officer, and is the act of the corporation, caster Gas Light and Fuel Company and John I. whether acting in stockholder's meeting or Hartman, P. T. Watt, H. S. Williamson, John A. through its agents, the board of directors, then Coyle, J. Gust Zook, J. D. Skiles, J. Fred. Sener, such action is the management of the internal af- N. M. Woods, D. McMullen, H. M. North, J. C. fairs of the corporation; and in case of a foreign Hager, W. U. Hensel, P. B. Shaw and J. H. corporation, our Courts will not take jurisdic- Baumgardner, directors and stockholders of the tion."

said corporation, defendants, and other defendants unknown to the plaintiff.

The Court, BRUBAKER, J., set forth the facts and law in the following opinion:

Here, the plaintiffs, stockholders, accuse the corporate management with disregard of the rights of the whole body of stockholders, for whom the corporation is trustee, in making unwise and reckless contracts, which depreciate and from the testimony:

"The Court find the following facts as adduced

render valueless their stock. The wrong com- "1. That the plaintiff is a stockholder of the plained of, is not from the violation of a contract with them, but want of fidelity to duty in their fiduciary relation springing from the nature of the organization.

said the Lancaster Gas Light and Fuel Company, hereinafter called the gas company, holding three hundred and twenty shares of the capital stock.

"2. That the said gas company was incorporaIn substance, the averment is, that at the office ted on June 27, 1876, under the provisions of the of the company, in the State of New Jer- Act of April 24, 1874, and its supplements, for the sey, the management, in violation of their purpose of manufacturing and supplying illumiofficial duty, entered into a contract to be nating and heating gas to the citizens of Lancasperformed in Pennsylvania, whereby the stock- ter. holders suffer. This, plainly, strikes at the internal management of the company; the Company, of Lancaster, Pennsylvania, hereinafter existence of the wrong must be ascertained, and the remedy applied, according to the laws of the domicil.

"3. That the Edison Electric Illuminating

called the Edison Company, was incorporated on March 1, 1886, under the provisions of the Act of April 29, 1874, and its supplements, for the purpose of manufacturing, distributing and supplying electricity for lighting, heating, motive power and all other purposes for which electricity can or may be used, to the citizens of Lancaster, Pa., and to the territory adjacent and contiguous thereto.

"4. That the Citizens' Electric Light, Heat and Power Company, of Lancaster, Pennsylvania, hereinafter called the Citizens' Company, was incorporated on February 9, 1893, under the provisions of the Act of April 29, 1874, and its supplements, for the purpose of supplying light, heat and power by electricity to the public in the city of Lancaster, Pa., and to such persons, partnerships and corporations residing therein or adjacent thereto as may desire the same.

It is a legitimate mode of extending the company's business, and in direct furtherance of its charter object, not only to supply the gas itself, but incidentally such "5. That the capital stock of the said Edison

Company was $135,000, and the bonded indebted-chased all the stock of the Citizens' Company, he ness was $250,000. bought all of its property and assigned, trans"6. That the capital stock of the Citizens' Com-ferred and conveyed the same to the Edison pany was $100,000, and the bonded indebtedness Company, of the stock of which he held a large was $25,000.

majority.

"7. That the above named electric light compa- "14. That there was no arrangement at the time nies were competitors for business in the city of of its purchase by and between P. B. Shaw and Lancaster, and that P. B. Shaw, a stockholder of his co-defendants, or any of them, to raise any the Edison Electric Light Company, owned about money for the purchase of any stock of the Citi$100,000 of its $135,000 capital stock; that he was zens' Gas Company. Neither they nor any of also the owner of some of the bonds of said com- them, ever arranged, or authorized any arrangepany; that the said P. B. Shaw obtained an op- ment to be made by them, for the raising of montion by which he was enabled to, and did, pur-ey for the purchase of said stock by the increase chase a majority of the stock of the said Citizens' of the capital stock or the bonded indebtedness Company; that after such purchase he subse- of the gas company. Neither they nor any of quently purchased a controlling interest in the them made or entered into, or authorized any arLancaster Gas and Fuel Company; that he pur-rangement by which any increased stock or bonds chased all of said interest for himself and on his of said gas company were to be issued to the said own responsibility and with money owned or P. B. Shaw in the interest of himself and the other borrowed by him.

"8. That the said gas company was a corporation with a capital stock of $200,000, divided into 8000 shares of the par value of $25 each, and a bonded indebtedness of $202,400, and the profits from its business had for many years enabled it to pay the interest on all its indebtedness, dividends of at least 8 per cent. on its capital stock, and that it had, in addition thereto, on December I, 1894, a balance of cash on hand of $10,406.46. At the same time the gas company had and was liable to pay a floating indebtedness of $25,000, for which it had given a promissory note of that

amount.

parties, co-defendants, as he avers, to raise money for acquiring control of the said gas company and the said Citizens' Company.

"15. That at a meeting of the stockholders of the gas company, held on February 12, 1895, the following preamble and resolution were adopted:

'Whereas, The Backus Manufacturing Company, being the owner of useful and valuable patents for the application of gas for heating purposes, has, through P. B. Shaw, proposed to sell and assign to this company the exclusive right to use and sell and to license others to use and sell within the territory of Lancaster, Pennsylvania, and adjacencies, the Backus Portable Steam "9. That of the said defendants, John I. Hart- Heater, Radiating Mantel and Gas Consuming man, John A. Coyle, J. Gust. Zook, John D. Appliances now owned by said Backus ManufacSkiles, J. Fred. Sener, N. M. Woods, H. M. turing Company, for the sum of one hundred and North, John C. Hager, W. U. Hensel and John ninety-seven thousand six hundred dollars, payaH. Baumgardner, were not stockholders, owners ble in the stock and bonds of the said Lancaster or directors in the Edison Company at the time Gas Light and Fuel Company, one hundred and P. B. Shaw acquired control of a majority of the twenty-five thousand dollars in stock and seventystock in the gas company and the Citizens' Com-two thousand and six hundred dollars in bonds, upon condition that this company will immedi

pany.

"10. The three companies and corporations ately, upon acceptance of said proposition, begin hereinbefore named were the only corporations and energetically push the sale and use of said organized for the purpose of supplying heat, light system of steam heating in the the city of Lanand fuel to the citizens of Lancaster and in exist- caster; therefore, be it ence on December 1, 1894, subsequent thereto or for some years previous.

"II. That said P. B. Shaw, in procuring an interest in or majority of the stock of the said Citizens' Company and gas company, was not the agent of any of the said parties, his co-defendants, and when he purchased the said stock and interest, he acted on his own behalf and without any authority from, nor as the agent of, any of his co-defendants.

"Resolved, That the aforesaid proposition of P. B. Shaw be, and the same hereby is, accepted, and that the Board of Directors be requested to make said purchase and to issue the stock and bonds to said P. B. Shaw, in accordance with said proposition.'

"16. That the meeting of the stockholders of the gas company at which said resolution was adopted was regularly called, in accordance with a resolution duly passed at a meeting of the Board "13. That after the said P. B. Shaw had pur- of Directors on December 13, 1894, and according

to the laws of the Commonwealth providing for "2. Whether the license assigned by the Backus the increase of stock and the bonded indebted- Manufacturing Company or P. B. Shaw to the ness of corporations. All of the stockholders Lancaster Gas Light and Fuel Company was a of said Gas Company except two, one of whom license to use anything that was proper, convewas plaintiff, numbering in all twenty-seven out nient, necessary or connected with the manufacof twenty-nine, and holding 7580 shares out of ture of gas, or its distribution, or for the purthe 8000 shares of the capital stock of the said poses for which the company defendant was incompany, expressly waived notice of said meet- corporated. ing and assented to said increase of stock and "The plaintiff contends that the increase of the indebtedness in writing; advertisement was made capital stock of the gas company to the amount for sixty days in the newspapers of the city of of $125,000, and the increase of its bonded inLancaster of the time and place of said stock- debtedness to the amount of $72,600, are not for holders' meeting; and at the meeting of said any value actually received by the said company, stockholders every share of stock present or rep- and not in the furtherance of its real interests, resented was voted in favor of said increase of but it was done for the purpose of enabling said stock and indebtedness, and the above resolution, defendants, other than the gas company, to obrequesting the directors to issue the stock and tain control of the three companies organized in bonds to the said P. B. Shaw for the purchase said city of Lancaster, for the purpose of supof the right to use and sell and license others to plying heat, light and fuel to the citizens thereof. use and sell the Backus Portable Steam Heater, "A careful examination of the testimony adRadiating Mantel and Gas Consuming Ap-duced on the part of the plaintiff will show that pliances, was unanimously adopted at said meet- the plaintiff failed in his proof to establish the ing. material averments contained in his bill; and,

"18. That since the adoption of the said res- therefore, the Court was obliged to refuse to find, olution and since the increase of the stock and in- as requested by the plaintiff, that the increase of debtedness of the Gas Company, and since the the gas company's capital stock and bonded inpurchase of the right to use the Backus patents debtedness was not for any value by the company and appliances, the operations of the said Gas Company have been conducted with increased efficiency and economy, so that, with a gain to the stockholders, the said gas company has been 'enabled to supply gas to the citizens of Lancaster and to their customers and patrons at a reduced price.

and not in furtherance of its real interests. There was no evidence before us to show that the license assigned by the Backus Manufacturing Company was not of any value, or that the increase of the capital stock and bonded indebtedness of the gas company was not made in compliance with the Act of Assembly. Admitting, "20. That P. B. Shaw, one of the defendants, for the sake of the discussion, that P. B. Shaw, sold a large quantity of the stock of the Lancas- one of the defendants, who controlled the Editer Gas Company and the Edison Company, in son Company by reason of holding a majority equal proportions, all at its par value, with the of its stock, and virtually the gas company for exception of that sold to one or two persons, and the same reason, and made the purchase of the to them at prices not less than seventy-five per Citizens' Company, devised a scheme for the purcent. of its par value; all of whom are bona fide pose of controlling the three companies, which purchasers and are still stockholders, a list of whom is appended to the testimony filed of record in this case.

"21. That the plaintiff was not a stockholder in either of said electric light companies.

CONCLUSIONS OF LAW.

is the most that can be inferred from the testimony adduced, the transaction, in our opinion, did not prejudice the rights of the stockholders of the gas company. On the contrary, the proof rather shows it to have been of benefit to the company. We cannot conceive how, therefore, under the circumstances of this case, it has prej

"Two questions arise from the pleadings and udiced the rights of the complainant. All the the testimony in this case: stockholders of the gas company, it appears, with "1. Whether, as alleged by the plaintiff, the the exception of the plaintiff, and, perhaps, one purchase by the gas company of the Backus heat- other, willingly entered into the transaction and er and the increase of the capital stock and the gave it their support. The acts of its directors bonded indebtedness of the said gas company was were not considered improper within the belief a scheme and a fraud on the gas company, per- of all these stockholders, many of whom as will petrated by the parties defendant, other than the be seen are among our best and most intelligent gas company, and prejudicial to the plaintiff. business men, who, doubtless, would have been

the first to complain if these acts had been done given, or their clear import; and whatever is not
to their prejudice as stockholders. Thus, we given in unequivocal terms, is to be deemed as
have the request of but one stockholder invoking expressly withheld. And even in their own in-
the aid of a court of chancery to declare the ternal affairs, they are held to strict and rigid con-
acts of his company in the premises illegal and formity with the powers granted, and the manner
void, unsupported by any proof of fraud or col- of their exercise prescribed by the statutes under
lusion, or evidence of fraud or corrupt motives which they have their being.' ENDLICH, on the
by other parties than the company defendant, as Intrepretation of Statutes, sec. 354. This rule is,
charged and averred in plaintiff's bill. Had it however, modified. Id., sec. 416. Emerson v.
been shown at the hearing of this case that P. B. Commonwealth, 108 Pa. 129.
Shaw or a majority of the gas company or any "The legislation affecting the subject is contain-
of its directors had entered into an alleged scheme ed in the Act of 1874 and its supplements. The
to benefit themselves at the expense of the gas second section of the eleventh clause (Purdon's
company or of the minority of the stockholders, Digest, p. 406), defines the granting of the fran-
the case would have been different. The plain-chise for 'the manufacture and supply of gas, or
tiff has not brought himself, however, within this the supply of light or heat to the public by any
chancery rule, by reason of the lack of proof, other means.' The 34th section provides as fol-
and, therefore, we must hold that the plaintiff lows: 'Companies incorporated under the provi-
has no standing on this point of the case.

sions of this statute for the supply of water to the
public, or for the manufacture and supply of gas,
or the supply of light or heat to the public by any
other means shall, unless otherwise provided by
this Act, from the date of the letters patent creat-
ing the same, have the powers and be governed,
managed and controlled as follows:
"Clause 1. Where any such company shall

"The second question, however, needs care-
ful consideration. It involves the interpretation
of the statute governing the franchise of the com-
pany; and in this we recognize the principle that
a single stockholder may, when measures are
adopted, which are plainly beyond the powers
of the company and inconsistent with the ob-
jects for which the company was incorporated, be incorporated as a gas company, or company
invoke the aid of a chancellor to interpose in be- for the supply of heat or light to the public, it
half of the minority stockholders to prevent the shall have authority to supply with gas light the
performance of such act. The usual remedy, borough, town, city or district where it may be
however, is by quo warranto by the Common- located, and such persons, partnerships and cor-
wealth through the attorney-general, but in our porations residing therein or adjacent thereto as
opinion it is not the only remedy. We will, may desire the same at such price as may be
therefore, consider this question: That is, were agreed upon and also to make, erect and main-
the acts of the gas company in the purchase of tain therein the necessary buildings, machinery
the Backus heater, and consequently, its increase and apparatus for manufacturing gas, heat or
of the capital stock and bonded indebtedness, light from coal or other material, and distribut-
ultra vires?
ing the same,' with the right to enter upon the
streets and lay pipe, etc.: Emerson v. Common-
wealth, 108 Pa. 124.

"What was the intendment of this Act? The

"It is contended by the learned counsel for the plaintiff that the Backus heater is not an appliance used in the manufacture and supply of gas, cr in distributing the same to consumers. They application for the charter of the gas company pressed this point with great force at the argu- says that the corporation was formed for the purment, and with some degree of plausibility un- pose of manufacturing and supplying illuminating der the following rule: and heating gas to the public in the city of Lan"A corporation, indeed, constituted by statute caster. This is, in effect, in our opinion, a charfor certain purposes, is regarded as so entirely ter to furnish heat as well as to furnish light to the creature of the statute, that acts done by it citizens of this place. The furnishing of light without the prescribed formalities, or for objects contemplates more than the supply of illuminatforeign to those for which it was formed, would ing gas; so, also, the furnishing of heat more be, in general, null and void. In so far as the than the furnishing of heating gas. The purpose rights granted to corporations are destructive of, of the grant necessarily contemplates a contrivor encroach upon public or common right, they ance for the distribution of heat. In order to disare undoubtedly to be construed most strongly tribute gas there are required not only pipes for against those setting them up, and in favor of the conveying of gas, but, also, in our opinion, the State or public; they are not to be extended all other necessary appliances and fixtures for is beyond the express words in which they are reception and use by the patrons of the company.

Gas stoves and gas heaters, therefore, are indis- exercise of it is given by implication.' ENDLICH pensable to the use of heating gas, and, there- on the Interpretation of Statutes, section fore, are not foreign to or inconsistent with the 418.

objects for which the company was incorporated. "We hold, therefore, that the gas company had We might as well contend that the appliance of a gas burner, which is absolutely necessary for the creating of light from illuminating gas, is foreign to and inconsistent with the objects for which the company was incorporated.

legal authority to purchase the right to the use of the Backus heater as a part of its franchise. There was no contention at the argument of this case that the gas company did not follow the Act of Assembly in its proceedings to increase its capital stock and bonded indebtedness. The plaintiff simply denies that the increase was for value received, or in furtherance of the real interests of the company. In this respect we do not agree "When powers, privileges от property are with him. The increase, in our opinion, was not granted by statute, everything indispensable to only regularly and lawfully made, but it was made their exercise or enjoyment is impliedly granted for a valuable consideration, and that the effect also, as it would be in a grant between private has been without any prejudice to any of the persons.' And farther on he adds: 'Even when rights to the plaintiff or to any interest of the gas a corporation is created with certain specifically company. It can not be questioned that the gas enumerated powers, it possesses, in addition, by company had a legal right to increase the capital implication, all such as are necessarily incident stock and bonded indebtedness of the company to those specified, or essential to the expressed either for money or for labor done or for proppurposes and objects of the corporate existence. erty actually received: 2 Thompson's CommenIn this country all corporations whether public or taries on the Law of Corporations, sec. 1604, et private, derive their powers from legislative grant, sequitur; Act of April 29, 1874, relating to corand can do no act for which authority is not porations, Pur. Dig. 417, pl. 68. expressly given or may not be reasonably infer-| "A corporation may take in payment of its red. But, if we were to say that they can do noth- shares any property which it may lawfully puring for which a warrant could not be found in chase. Such a transaction is not ultra vires or the language of their charters, we should deny void, but is valid and binding upon the original them in some cases the power of self-preserva- sharetakers and upon the corporation, unless retion, as well as many of the means necessary to effect the essential objects of their incorporation. And, therefore, it has been an established principle in the law of corporations that they may exercise all the powers within the fair intent and purpose of their creation, which are reasonably proper to effect the powers expressly granted. Nor should anything that is fairly incidental to those things which the Legislature has author- taken. ized be held ultra vires, unless expressly prohibited. Thus, it has been decided, that e. g. the grant to a municipality of power to 'prevent and extinguish fires,' granted, by implication, the power to erect a fire-engine house, of power to 'make police regulations or needful by-laws,' a power to purchase fire-engines, of power to con- July 15, 1897. MITCHELL, J. There is very littract for lighting' streets, a power to acquire tle contest in this case over the facts or the law, street fixtures, including gaspipes and lamp-posts the real controversy turning on the inferences to for that purpose; and a grant of power to a rail- be drawn from the facts proved. It is a stockroad company to purchase land in order to pro- holder's bill to enjoin the issue of new stock and cure stone and other material necessary for the the increase of the corporation's bonded indebtedconstruction of its road, a grant of power to pur-ness, upon two grounds, first that the increase is chase land in order to get cross-ties and firewood, not in good faith for the purposes and in the inIndeed, it may be generally said, that, whenever terest of the corporation but in pursuit of a a power is given by statute, everything necessary scheme to acquire control of the corporation and to make it effectual, everything essential to the run it in the interest of a rival; and secondly,

"Judge ENDLICH in his excellent work on the Interpretation of Statutes, from which we have already quoted, gives us the principle, which we think applicable to this case, in these words:

scinded or set aside for fraud. While such a contract stands unimpeached for fraud or otherwise, the Courts, even where the rights of creditors are involved, will treat that as payment which the parties have agreed should be payment: 2 Thompson's Commentaries, sec. 1642.”

It was ordered that the bill be dismissed at the cost of the plaintiff, whereupon this appeal was

John E. Malone and George Nauman, for ap pellants.

W. U. Hensel and H. M. North, (D. M. McMullen and J. Hay Brown with them), for appellees.

that