113 Ga. 193 | Ga. | 1901
In 1898 the stockholders of the Atlanta and West Point Railroad Company, in annual meeting assembled, passed, by a majority vote of the stockholders of the company, a resolution that the company should at once apply to the secretary of State for an amendment to its charter, granting to it all the powers and privileges contained in the general law of the State for the incorporation of railroad companies. An application, in the name of the company, for the amendment, was then made to and granted by the secretary of State. The railroad company then undertook and began to construct, just outside of the corporate limits of the city of Atlanta, a belt railroad, about six miles long, extending from a point on its main line to a point on the Georgia railroad. The Central of Georgia Railway Company and certain other minority stockholders of the Atlanta and West Point Railroad Company brought an equitable petition against the latter company and other defend
As a general rule, only the court costs are chargeable to the losing party, and counsel fees and other expenses of litigation, con-
Thompson, in his valuable work on Corporations, vol. 5, § 7056, p. 5586, referring to the quotation last above given, and quoted in the preceding section of the work, says: “ The true principle is that expounded by the Supreme Court of South Carolina, in the quotation given in the preceding section and in other subsequent decisions, that it is only where one party is, under the principles of equity, entitled to proceed for the benefit of all who stand in a like situation with him, and consequently where the counsel whom he employs stands, in a sense, as representing all, that the counsel are entitled to have their fees paid out of the common fund which they have recovered for the benefit of all.” We agree with the South Carolina court and the learned author in holding that this is the true principle which should be applied in such cases. In the case under consideration the plaintiffs have brought no fund into
In 2 Pomeroy’s Equity Jurisprudence, § 1091,it is said: “Whenever the acts of the directors do not consist of any wrongful misuse of the corporate property, or wrongful exercise of the corporate franchise, but are of such a nature that they directly and primarily affect the interest of the stockholders in their shares of stock, by diminishing its value, or impairing their proprietary rights in it, then the stockholders are directly injured and are primarily interested ; as the cestuis que trustent whose rights have been violated they must institute and maintain any equitable suits for relief against their defaulting trustees; the remedy is for their benefit and belongs to them alone. On the other hand, wherever the breach of trust consists of a wrongful dealing of any kind or in any manner with the corporate property or with the corporate franchises, the corporation itself is directly injured and is primarily interested; as the cestui
Under these authorities, into which class of cases does the suit brought by the minority stockholders in the present case fall? Were they suing in right of the corporation, or in right , of themselves as minority stockholders ? What was the real gist of their action, the ground upon which they were entitled to and obtained the relief for which they prayed ? It is found in the 18th and 21st paragraphs of the petition as amended. These paragraphs set forth the real gravamen of their complaint, the cause of action upon which the injunction was granted. The 18th paragraph alleges: “The petitioners in this case, for valuable consideration, bought their stock in said Atlanta & West Point Railroad Company, long prior to the 13th day of September, 1898, in view of its charter rights, and because of its contracts so made with the State of Georgia as to its franchises, and because these petitioners, by the fact of holding the obligations of said Atlanta & West Point Railroad Company, were entitled to certain rights, and affected only by certain liabilities, growing out of and fixed in said charter of the Atlanta & West Point Railroad Company.” The 21st paragraph is as follows : “ The said action of the stockholders and directors was illegal in this: a majority of the stockholders of the Atlanta & West Point Railroad Company had no right, as against said minority petition-, ers, to make any such change in its articles of incorporation, because it was a material and fundamental change in the contract between the State of Georgia and the corporation, and between’ the corporation and these petitioners. If of force, it was a material and essential alteration of said original contract, and does not in any way bind these minority petitioners, because it impairs the ob
Counsel for the plaintiffs in error cite, “ as absolutely conclusive” in their favor, “the remarks of Mr. Pomeroy, in his work on Equity Jurisprudence, in § 1095 of the third volume,” and quote extensively from this section of the author’s valuable work. We think counsel have misunderstood the author’s meaning. We have already shown, in the two sections which we have quoted from this work, that, according to this eminent authority, the right to sue in a case of this character is in the stockholder and not in the corporation, and, rightly understood, there is nothing in the section quoted by counsel which conflicts with those which we have quoted. The learned author does not here contradict himself. In the section upon which counsel rely he says: “ Wherever a cause of action exists primarily in behalf of the corporation against directors, officers, and others, for wrongful dealing with corporate property, or wrongful exercise of corporate franchises, so that the remedy should regularly be obtained through a suit by and in the name of the corporation, and the corporation either actually or virtually refuses to institute or prosecute such a suit, then, in order to prevent a failure of justice, an action may be brought by and maintained by a stockholder or stockholders, either individually or suing on behalf of themselves and all others similarly situated, against the wrong-doing directors, officers, and other persons; but it is absolutely indispensable that the corporation itself should be joined as a party- — -usually as a codefendant. The rationale of this rule should not .be misapprehended. The stockholder does not bring such a suit because his rights have been directly violated, or because the cause of action is his, or because he is entitled to the relief sought; he is permitted to sue in this manner simply in order to set in motion the judicial machinery of the court.” The italics here are the author’s. “ The rationale 'of this rule should not be misapprehended,” as it seems to have been by the learned counsel for the plaintiffs in error. In thé present case the stockholder does bring
Counsel for the plamtiffs in error cite a number of cases in support of their contention. They say: “ There was no fund in court in Meeker v. Winthrop Iron Co., 17 Fed. Rep. 48. When the expenses of litigation were allowed there, nothing had been done except the cancellation of a lease which had been adjudged to be unlawful. There was no property in court.” We have read that case
Another case cited is Grant v. Lookout Mountain Co., 93 Tenn. 691, 28 S. W. Rep. 90, where the corporation was held liable for the reasonable attorney’s fees of the plaintiffs, who were minority stockholders. There the suit, though brought by these stockholders, was, in the language of the court, “ to all intents and purposes, the suit of the corporation itself,” and the whole of its property, both real and personal, which had been illegally conveyed away, “threatening the entire destruction and dissolution of the corporation,” was recovered and restored to the corporation. The court said it was a suit which the corporation ought to have commenced, that it was an indispensable party thereto, and that, for this reason, the decree was not recovered for the minority stockholders, hut for the corporation. In the case of Fox v. Hale & Norcross S. M. Co., 108 Cal. 475, a single stockholder successfully prosecuted a suit to undo a wrong done to the corporation, and to recover from the wrong
Counsel for plaintiffs in error quote from Kernaghan v. Williams, L. R. 6 Eq. 228, some remarks of Lord Romilly, M. R, at page 231, in delivering the opinion of the court: “If Mr. Williams [a complainant minority stockholder] is right in the suit which he has instituted, he will obtain a decree, and he will obtain, as the results of the suit, the costs; if he is not right, then he will not; and this, unquestionably, is certain, that if he succeeds, when the suit is over, the company can not come and claim the amount of funds recovered by that suit for their benefit, without paying the expenses incurred.” We fail to see the relevancy of this citation. The question whether the corporation could be compelled by the court to pay the necessary expenses incurred by the minority stockholder in the suit which he had instituted was not directly involved in that case, and the opinion of the master of the rolls as to the rule which would be applied, in the event certain contingencies with reference to that suit should occur, is a well-recognized one and not in conflict with the views which we have expressed. In the present case the corporation has not come forward to claim'anything, as the result of the suit instituted by the minority stockholders, and if it hadj it would have found nothing to claim, for no fund or property has been recovered. Another case to which we are referred is Trustees v. Greenough, 105 U. S. 527. There a large holder of the bonds
Because the building of this belt line would have been an ultra vires act on the part of the corporation, we do not think it necessarily follows that the funds of the company invested therein would have been dissipated or lost. So far as we are informed, if the belt line had been built and operated by the company, the enterprise might or might not have proved to be a profitable one. It is urged, in one of the briefs for the plaintiffs in error, that if this belt road
Judgment affirmed.