Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/131

 PART I.J CONSTRUCTION OF CORPORATE POWERS. [§ 141. directors to sue is a breach of trust on their part, and not a mere error of judgment in a matter properly within their dis- cretion. 1 Finally, it is always essential that the corporation itself should be made a party defendant. 2 § 141. In Hawes v. Oakland, 3 where the rules under discus- sion received the most careful consideration, the following state- ment was made by Justice Miller, giving the opinion of the court : — " We understand [the doctrine of the English and American cases, including Dodge v. Woolsey] to be that to enable a stock- holder in a corporation to sustain in a court of equity in his own name a suit founded on a right of action existing in the corporation itself, and in which the corporation itself is the appropriate plaintiff, there must exist as the foundation of the suit — " Some action or threatened action of the managing board of directors or trustees of the corporation w T hich is beyond the au- thority conferred on them by their charter or other source ofy -*■ " Or such a fraudulent transactiorrcompletea or conxeinplatedy^j^i by the acting managers, in connection with some other party,-'***^ or among themselves, or with other shareholders, as will result-'^V^t?! in serious injury to the corporation, or the interests of the x other shareholders ; ,y- _J " Or where the board of directors, or a majority of them, are p y acting for their own interest in a manner destructive of the corporation itself, or the rights of other shareholders; (?* " Or where the majority of shareholders themselves are op- *Jr**v* ultra vires act of directors to which a large majority of shareholders make no objection, it must appear that complainants were shareholders at the time of the transactions com- plained of, or that the shares have devolved on them since by operation of law. Dimpfell v. Ohio & Miss. R. Co., 110 U. S. 209. 1 See the cases in last note but one ; also Memphis Gas Co. v. Williamson, 9Heisk. (Tenn.) 314, 337; Dodger. Woolsey, supra ; Memphis City v. 3 /V/r* Dean, supra (§ 139, note). 2 See cases in preceding notes. It has even been said that the failure to make the corporation a party is not a mere defect of parties to be taken advantage of by special demurrer, but leaves the shareholder without a cause of action; the part}' entitled to the relief, i. e., the corporation, not being before the court. Shawhan v. Zinn, 79 Ky. 300. s 104 U. S. 450, 460. Ill