Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/705

 CHAP. XII.] SHAREHOLDERS AND OFFICERS. [§ 689. Compe- tency of sharehold- ers to sue when the corporate manage- ment is in the hands of the guilty officers. which he has made to prevail on the corporation to sue, so that the court may judge intelligently whether his efforts have been real or simulated. 1 In fine, it must be made to appear to the court that it is necessary for the protection of the plain- tiff's interests in the corporation that he should be allowed to bring the action. § 689. The following are a few instances of cases which either hold, or proceed on the assumption, that when it is apparent that the guilty officers consti- tute the corporate management so as to render a request to the corporation to proceed against them futile, such request need not be made by share- holders before commencing suit against them. 2 An action will lie in favor of a shareholder against the president of a corporation, without previous de- mand on the directors for relief, when the following facts ap- pear from the complaint : that the corporation has made profits ; that the president does not allow them to appear on the books of the corporation ; that he is largely indebted to the corpora- tion, and has received, but not accounted for, its emoluments ; that the majority of the directors are his tools, and have sur- rendered to him the control of the corporate affairs. 3 Where a member of the board of directors, who is also secre- tary of the board and treasurer of the corporation, presents a bill for extra compensation as secretary and treasurer, he is disqualified from acting as a director on the auditing of the bill ; and if the interested director is needed to make a quorum, and by the aid of his own vote the bill is approved of, any shareholder may sue for himself and other shareholders to pre- vent its payment and to set aside the proceedings. 4 Harmerty v. Standard Theatre Co., 109 Mo. 297; Sage v. Culver, 147 N.Y. 241. See Watts' s Appeal, 78 Pa. St. 370; Brown v. Vandyke, 8 N. J. Eq. 795; Eaton v. Robinson, 18 R. I. 39(1; Gerry v. Bismarck Bank, 19 Mont. 191; Forrester v. B. & M. Min. Co., 21 Mont. 544. 1 Dannmeyer v. Coleman, 11 Fed. Rep. 97. See § 140. 2 See, e. g., Rotkwell v. Robinson, 39 Minn. 1; Smith v. Dorn, 96 Cal. 73. Other cases are cited in the last note but one, many of which are stated more at length elsewhere. See, especially, Brewer v. Boston Theatre, § 560. 3 Rogers v. Lafayette Agricultural Works, 52 Ind. 296; cf. Montgomery Light Co. ». Lahey, 121 Ala. 131. 685
 * Butts v. Wood, 37 N. Y. 317.