93 Va. 427 | Va. | 1896
delivered the opinion of the court.
The appellant instituted a suit in equity in the Corporation Court of Radford city against the appellees, in behalf of himself and all other stockholders of the Radford Publishing Company, who would come in and contribute to the costs of the suit. He alleged in his bill that he was the owner of fifty-one shares of the stock of that corporation; that the Radford Land and Improvement Company claimed to hold a deed of trust on all the property of the Publishing Company to secure the payment of a note for one thousand dollars, payable to the Radford Land and Improvement Company, and then held by the Radford Trust Company, as assignee; that the note was not paid at maturity, and that the trustee had advertised the trust subject for sale, for the payment of the $1,000 and its interest, without giving the Publishing Company credit for certain sums which it had paid on the debt, and that he also proposed to sell for an additional sum paid out for insurance upon the trust property for which there was no authority; that while he, the complainant, was a stockholder of the Publishing Company, he had no personal knowledge of the execution of the pretended deed of trust, nor of the note whose payment it was given to secure; that he had been unable to obtain access to the books of the Publishing Company, and was unable to ascertain by what authority the note and deed of trust were executed, and that he therefore denied that the same were legally authorized by the Publishing Company, or constituted any valid claim upon its property; that he was advised that at the time of the execution of the deed of trust there were other and valid outstanding debts and demands against
The prayer of the bill was that the Radford Trust Company, M. C. Jamison, the trustee in the deed of trust, Wharton and Gardner, attorneys, and Jones, Page, and Miles, the lessees of the property, be made parties defendant to the bill; that they be required to answer, but not under oath; that the note for $1,000, and the deed of trust to secure it, be declared null and void, or, if they should be deemed valid and in force, that an account of the indebtedness of the Publishing Company be taken as of the date of the deed of trust; that it be held to enure to the benefit alike of all its creditors; that the Publishing Company be exonerated from further liability for the $ 1,000-note assumed by Jones, Page, and Miles; that, in the event the Publishing Company be held to be not exonerated from its payment, the note be credited with all proper credits, and the estate, real and personal, of Jones, Page, and Miles, be subjected first to its payment, and that the Radford Trust Company, assignee, the Radford Land and Improvement Company, M. C. Jami-son, trustee, and Gardner and Wharton, attorneys, be enjoined and restrained from further proceedings under the deed of trust, and that general relief be afforded the complainant.
From that decree the appellant appealed to this court.
He assigns as error, first, that the court erred in dissolving the injunction.
A stockholder in a corporation has no right to bring a suit in his own name in a court of equity upon a cause of action existing in the corporation, and in which the corporation itself is the proper complainant, except where it actually or virtually refuses to institute or prosecute such suit. The corporation holds the title; legal or equitable, to the corporate property, and is, as a rule, the only proper party to sue for wrongful dealings with its property. If, however, the corporation is unwilling or unable to sue, .then a stockholder has the right to institute proceedings in equity for the protection of his interests in the corporation. The reason why he is allowed to do this when he has no estate in the corporate property, either legal or equitable, is stated by Mr. Pomeroy as follows: “The stockholder does not bring such suit because his rights have been directly violated, or because the cause of action is Ms, or because he is entitled to the relief sought. He is permitted to sue in this manner simply
In order that a stockholder may institute such a suit, he must allege and prove that a request or demand has been made upon the board of directors, or other body managing the corporation that they institute proceedings on the part of the corporation against the wrong-doers, and their refusal to do so after reasonable request, or demand. Or he must allege such a state of facts as will show that the defendants whom he charges with the wrong doing constitute a majority of the board of directors, or managing body at the time of the suit, or that they, or a majority of them, are under the control of the defendant wrong-doers, so that the court may infer that they would refuse to bring such suit; or he must allege such facts in his pleading as will show that it is reasonably certain that a suit by the corporation would be impossible, and that a demand to sue would be useless. Then, in either case, the stockholder may, without averring or proving that he made any request or demand, maintain such suit. Pomeroy’s Eq. Jur., sec. 1095; Cook on Stockholders, secs. 740, 741, (3rd Ed.); Hawes v. Oakland, 104 U. S. 450.
If the facts existed upon which the appellant based his suit, the Radford Publishing Company was the proper party
The bill did not make a case which entitled The appellant to sue. The court ought not to have granted an injunction in the case in the first instance, and properly dissolved it upon the motion to dissolve. But upon that motion it had no right, even if the appellant had shown that he had the right to bring the suit, to decide the case upon the merits. It was a motion to dissolve an injunction in vacation. There had been no consent entered of record, as required by the statute, which authorized the court to hear the case in vacation upon the merits. Code, sec. 3427.
The decree appealed from, so far as it purports to pass upon the merits of the case, is therefore void, and must be disregarded. We are of opinion that the decree must be amended in that respect, and, as amended, affirmed, and the cause remanded to the said Corporation Court with direction upon the hearing of the cause to dismiss the bill of the complainant, unless he can amend it in accordance with the views expressed in this opinion, but the dismissal, shall be without prejudice to the rights of anyone.
Amended and affirmed.