Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/661

 CHAP. X.] CORPORATION AND OFFICERS. [§ 638. they will be liable to account to the corporation equally with its guilty officers. 1 Thus, in an English case, the plaintiff, a stock company, made with the defendant, also a stock company, a contract which gave the plaintiff the option of having a telegraph cable manufactured and laid by the defendant ; the cable to be paid for in instalments, payable, after the first, as the work was certified to by the plaintiff's engineer. The option was exer- cised, and the first instalment paid to the defendant, the plaintiff also paying a commission to its own engineer. It then discovered that its engineer had a secret sub-contract with the defendant company to lay the cable himself. The court held the plaintiff entitled to have the contract set aside, and the instalment and commission returned to it. 2 § 638. In the United States it is not uncommon for the directors of a railroad companv, whose road is in Railroad process of construction, to join with other persons constmc- in forming a construction company ; and then, on panies 0m " behalf of their railroad, make contracts with the construction company most favorable to the latter and them- selves. Such dishonest transactions the courts will set aside, and by compelling accountings for profits, or awarding dam- ages against the guilty directors, restore, as far as possible, the railroad company to its property and rights. 3 Under such circumstances, it is not necessary for the railroad corporation 1 Ryan v. Leavenworth, etc., R'y Co., 21 Kan. 365; see, also, Kersey Oil Co. v. Oil Creek, etc., R. R. Co., 12 Phila. (Pa.) 374. When a board of mining directors lease a mine to a party acting in the interests of the minority of share- holders, in order to withdraw it from the control of a board about to be elected, and thereby perpetuate the control of the minority, the corpo- ration may set the lease aside by a bill in equity. Mahany Mining Co. v. Bennett, 5 Sawyer, 141. A court of equity, however, will not set aside these improper contracts at the suit 41 of parties (shareholders and direct- ors) to them. Weed v. Little Falls, etc., R. R. Co., 31 Minn. 154. 2 Panama, etc., Telegraph Co. v. India Rubber, etc., Telegraph Works Co., 32 L. T. N. S. 517. 3 Ryan v. Leavenworth, etc., R'y Co., 21 Kan. 305 ; Gilman, etc., R. R. Co. v. Kelly, 77 111. 426 ; Wardell v. Railroad Co., 103 U. S. 651 ; Thomas v. Brownsville, etc., Ry Co., 1 Mc- Crary, 392. See Abbot v. American Hard Rubber Co., 33 Barb. 578. Cf. Santa Fe E. Co. v. Hitchcock, 9 N. Mex. 156; Barnes v. Lynch, 9 Okl. 156. 641