Kessler v. Ensley Co.

Citations

• 123 F. 546
• 1903 U.S. App. LEXIS 4921

Syllabus

<p>1. Corporations—Stockholders’ Suits—Grounds for Relief.</p> <p>To entitle a stockholder to relief in a. court of equity against a corporate act which is within the charter powers of the corporation, he must show either fraud or adverse interest on the part of the governing body, or equivalent facts which render such body incompetent to act in the interest of the corporation, as distinguished from mistakes or errors of judgment; and even then, if the case will admit of delay, he must have appealed from the decision of the directors to the body of the stockholders, and the facts must plainly put them in the wrong in refusing to take action.</p> <p>2. Same—Transaction in Fraud of Corporation—Ratification.</p> <p>All of the property of a land company which owned a town site and surrounding lands was sold under two judgments against it for a price of about $16,000, but leaving the company the right to redeem within two years. The company owed in all about $120,000, and by a subsequent arrangement, assented to by its stockholders, the property, together with the right of redemption, was vested in trustees with power to make sales, to pay all debts, and to hold or pay over the surplus, if any, to the company. Four years afterward certain stockholders applied to two successive boards of directors, and also to a meeting of the stockholders, asking that'proceedings be instituted to.set aside the conveyances and to recover the property. Such action having been refused by the directors and also by the stockholders by a very large majority vote, minority stockholders brought suit for such relief in behalf of the corporation, alleging that the sale under the judgments was brought about through the fraud of a majority of the directors, who controlled the judgments, and who formed another company which purchased certain of the lands from the trustees; that by concealing such facts they obtained the approval of all such transactions by the stockholders. It further appeared from t