Hand v. Dexter

McCAY, J. 1. The complainants in this bill are the owners of '- thousand shares of stock in an incorporated mining company of one hundred thousand shares. Its object is to take the property out of the hands of the company, the stockholders, place [462] it in the hands of a Receiver, and that a general account be taken. As a Court of Equity will not appoint a Receiver to carry on the business of mining, it follows that there can be no sufficient cause for such a bill, unless-the majority of the stockholders are pursuing a course so illegal and ruinous as to require the affairs of the company to be stopped. The very foundation principle of a corporation, is that majority of its stockholders have a right to manage its affairs so long as they keep within their chartered rights. They may, they often do, manage very foolishly, make very bad contracts, and do very reckless things. Indeed, as all experience shows, the very business which this company was chartered to carry on is one of great risks and extraordinary vicissitudes, and it would be madness for a Court to put its cautious and careful hand forward to keep steady an enterprise organized -for such risks and undertakings as necessarily pertain to gold mining. *There is no pretense in this bill that the company is - undertaking anything outside of the charter. The burden of the complaint is, that the majority, through the officers, are managing the company fraudulently, not for the benefit of all, but in the interest of a portion of the stockholders. This is the general charge, and that charge is sustained by the following statement of facts: 1st. The whole company granted to King $20,000 00 in its stock, and King after awhile repudiated the agreement,' and set up a claim for $20,000 00 expended by him for the company. 2d. The whole company, consenting to this repudiation by King, surrendered to Hand, as treasurer, thirty-four thousand shares of the stock, to be used by him to raise funds, under the direction of a committee, to put the works-in order and pay the debts. .Hand expended (he says and the committee say) three thousand dollars and did put the works in order. He has taken ten thousand shares as part pay for his expenditures, and has an unsettled claim against the company for the balance. There is no charge that he has not certified the money. It is true, the bill says the true construction of the arrangement surrendering the thirty-four thousand shares to the company is, that Hand was to take these shares in pay for his expenditures. We are not prepared to say this. The contract does not say so. We see nothing in the charter to forbid expenditures on credit to put the works in order, and if Hand, with the consent of the directors, was willing to do the work or advance the money, we see no reason why the directors might not permit him to do so. He seems to have acted all the time with the approbation of the directors, and indeed, in every thing stated in the bill and complained of, the directors and officers of the company seem to have acquiesced. At the last two meetings of the company, he was [463] sustained in all his acts, and he is still the regular treasurer of the company. The charge that he and others have been guilty of a fraud in ■executing a mortgage in violation of the understanding, at the time he was elected treasurer, does not, in our judgment, amount to much. If it was a fraud, it was repented of Almost immediately, since it was, soon after its execution, surrendered and is not now at all in the way. Nor are we prepared to say it was a fraud. We see no reason why the directors might not, tO' meet the new difficulties, make such an instrument. That both King and Hand have expended their money, to put these works in order, plainly appears, and how it can be a fraud to make them secure we are not able to see. It is also charged that the complainants had no notice of the meeting of the company at which these acts of Hand were approved. The hill sets forth a certificate of the clerk, taken from the minutes, that he had sent the usual notice, nor does the bill deny "its truth. It says they did not have legal notice, sufficient notice. This is very general. Do the by-laws fix any rule? The hill does not show whether or no the meeting is admitted, and it appears to have been the annual meeting. Is any special notice required of such a meetings? By the general law, we should say not, unless the by-laws so required, and this the bill ought to show. At the meeting the majority largely sustained Hand and the directors in all their acts. It is said, too, that the chairman refused to count more than half their stock. But was not this the bargain, and did he not do the same with all, who, by the agreement of the old stockholders, had surrendered half to the company. Upon the whole we think the charges in this bill are too loose and unsatisfactory to justify the prayer. If the majority of this corporation are, in fact, managing the affair in the interests of Hand, let the minority appear at the annual meeting, or call one, according to the by-laws, and demand that the true state of the company and its affairs be presented to the meeting. If this be refused, or if, on examination, anything rotten appears, the presumption is that right will be done. If not, let all the facts—not guesses and suspicions—be presented to the Chancellor. As it is, the Court is groping in the dark, under mere general charges, and is just as apt to do wrong as right in entertaining jurisdiction *of the bill. For these reasons we think the bill is demurrable and ought to have been dismissed. The majority of a corporation have a right to manage their affairs as they think fit, so long as they keep within their charter, and a Court of Equity will not interfere to prevent unwise or improvident acts; there must be fraud or the infringement of the legal rights of some one, to justify taking matters out of the hands of the officers. [464] 2. We do not think the bill multifarious. The complainants’ claim, by the same right, charge a common wrong and pray a common redress. Indeed, there is a privity between them and the corporation, which makes one matter of the whole purpose of the bill. 3. The fact that some parties are not joined who ought to be, is not good by way of general demurrer, as the complainants can amend that. Judgment reversed.