Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/588

 § 562.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. IX. Like out- siders, a share- holder may sue the cor- poration. as such, has the same capacity to sue the corporation as any other person having a right of action against it. 1 Thus a shareholder, who is also an officer, may sue the corporation for injuries caused by the negli- gence of the corporation in allowing a ditch belong- ing to it to break and overflow his lands ; he having often pro- tested against the mode in which the ditch was constructed, and having offered to reconstruct it himself, which the corpo- ration would not permit. 2 § 562. From what has preceded it appears that, as long as the corporation carries on its business, the general right of individual shareholders in the corporate funds is to have them applied to the purposes of incorporation in a reasonable and proper manner, so that, due regard being had to the continuing sol- vency of the corporation, profits may accrue. When profits have arisen from corporate transactions, shareholders have no unconditional right to their immediate distribution as dividends. 3 For it ordinarily lies within the discretion of the corporate management to decide whether profits shall be dis- tributed among the shareholders, or whether they shall be applied to the payment of the debts of the corporation or be retained as a surplus fund. 4 Should the question arise of ap- plying the profits to a substantial extension of the corporate Share- holders have no uncondi- tional right to a divi- sion of profits. R. 20 Eq. 669; Merchants and Planters' Line v. Waganer, 71 Ala. 581. 1 Brinliam v. Wellersburg Coal Co., 47 Pa. St. 43; Life Association v. Levy, 33 La. Ann. 1203; Barker v. Cairo, etc., R. R. Co., 3 T. & C. (N. Y.) 328. See Criswell's Appeal, 100 Pa. St. 488. 2 Bin bank v. West Walker River Ditch Co., 13 Xev. 431. See also O' Conner v. North Truckee Ditch Co., 17 Nev. 245. 8 Phelps v. Farmers 1 and Mechan- ics' Bk., 26 Conn. 269; Goodwin v. Hardy, 57 Me. 145; Miuot v. Paine, 99 Mass. 101; Beveridge v. N. Y. E. R. Co., 112 N. Y. 1; Spooner v. Phillips, 62 Conn. 62. See Gordon 568 v. Richmond, etc., R. R. Co., 78 Va. 501, 518. An unconditional agree- ment to pay a shareholder a specified dividend each year is ultra vires, and cannot be enforced against the cor- poration. Elevator Co. v. Memphis, etc., R. R. Co., 85 Tenn. 703. 4 Ely o. Sprague, Clarke, Ch. (N. Y. ) 351; State of Louisiana v. Bank of Louisiana, 6 La. 746; see Pratt v. Pratt, 33 Conn. 446; Karnes v. Rochester, etc., R. R. Co., 4 Abb. Pr. N. S. (N. Y.) 107; Barry v. Mer- chants' Exchange Co., 1 Sandf. Ch. (X. Y.) 280, 303; Smith v. Prattville M'f'g Co., 29 Ala. 503; Howell v. Chicago and N. W. R'y Co., 51 Barb. 378; Hunter v. Roberts, 83 Mich. 63.