Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/585

 CHAP. IX.] CORPORATION AND SHAREHOLDERS. [§ 559. canal company as a railroad track, paying a price agreed on between the directors of the two companies, which was far below the value of the property. It was held that the share- holders and creditors of the canal company could not, after the road had been completed, reclaim the property or enjoin its use ; but could compel the railroad company to pay them the difference between the value of the property and the price which the railroad company paid for it. Justice Welsh said, giving the opinion of the court : " To undertake by getting control of the company, and then, under pretence of acting as agents and trustees for all the stock- holders and creditors, deliberately to trample under foot the rights of the minority, is rather a sharp practice, and one which a court of equity will never tolerate. A director whose per- sonal interests are adverse to those of the corporation, has no right to act as a director. As soon as he finds that he has interests in conflict with those of the company, he ought to resign, no matter if a majority of stockholders, as well as him- self, have personal interests in conflict with the company. He does not represent them as persons, or represent their personal interest. He represents them as stockholders, and their inter- ests as such. He is trustee for the company, and whenever he acts against its interests — no matter how much he thereby benefits foreign interests of the individual stockholders, or how many of the individual stockholders act with him — he is guilty of a breach of trust, and a court of equity will set his acts aside, at the instance of stockholders or creditors who are dam- nified thereby. Any act of the directors by which they inten- tionally diminish the value of stock or property of the company is a breach of trust, for which any of the stockholders or cred- itors may justly complain, although all the other stockholders and creditors are benefited in some other way more than they are injured as such. " 1 1 Goodin v. Cincinnati, etc., Canal Co., 18 Ohio St. 169, 182. See Davis v. U. S. Electric, etc., Co., 77 Md. 35. See, also, State v. Brown, 64 Md. 199, 206 ; Memphis, etc., R. R. Co. v. Woods, 88 Ala. 630. One corpora- tion cannot purchase majority of stock in another, obtain control of its affairs, and so divert business from it as to cause it to default in the payment of its obligations, and then institute an action in equity to enforce those obligations, all for the purpose of obtaining control to the injury of a minority of shareholders. Farmers' L. & T. Co. v. N. Y., etc., 565