Cornell v. Sims

Little, J. As a general proposition, stockholders in a corporation can, not in their own names institute an action against it, nor defend one brought against it, until a request from them to the directors to institute or defend such action has been made and refused, which fact must be alleged in either instance. Such allegation, however, may be omitted when the corporate management is under the control of parties who, it is alleged, are guilty of fraud or collusive conduct in refusing to bring or to defend the suit which such stockholders desire shall be instituted or defended. But in neither of these events can the stockholders institute or defend an action in the name of the corporation. On the contrary, the corporation must be a party defendant to the action, and sufficient allegations of the failure of the corporate authorities to take action be made, to authorize the stockholders to intervene in their own name. When stockholders intervene in a suit filed against the corporation and allege that through fraud and collusive conduct the officers and directors refuse to defend such suit, it is not error to refuse to permit such stockholders to appear and defend in the name of the corporation, when they decline to proceed in their own namesas stockholders, in behalf of themselves and other stockholders who may see proper to join with them in defense of such suit. Judgment affirmed. All the Justices concurring. Hugh V Washington and Olin J. Wimberly, for Cornell et'al. Anderson & Grace, Dessau, Bartlett & Ellis, Bacon, Miller & Brunson, and Hardeman, Davis & Turner, contra.