Mumford v. Ecuador Development Co.

Citations

• 111 F. 639
• 1901 U.S. App. LEXIS 4986

Syllabus

<p>1. Corporations—Rights of Minority Stockholders.</p> <p>Although, the majority stockholders of a corporation may lawfully make a contract with the company, such contract will be scrutinized with much greater care than if made with a third party; and unless it appears that it was made honestly, and for an adequate consideration, a court of equity will interpose to prevent it from being used oppressively, and in violation of the rights of the minority stockholders, no matter in what form or by what subterfuge such rights are invaded.</p> <p>2. Same—Suit by Minority Stockholders—Sufficiency of Bill.</p> <p>A bill filed by minority stockholders, which alleges, in substance, that the majority have, by electing directors who act solely in their interests, caused contracts to be entered into by the corporation transferring all of its property to a second corporation, of which they are owners, for a wholly inadequate consideration, states a cause of action which entitles complainants to relief.</p> <p>8. Same.</p> <p>A bill filed by minority stockholders to set aside a contract made by the corporation as having been obtained by the majority stockholders in their own interest and in fraud of the rights of complainants, need not set out such contract in luce verba, especially where it is alleged to be in the possession of the defendant corporation.</p> <p>4. Same—Parties.</p> <p>In a suit by minority stockholders against the corporation and a second corporation alleged to be owned by the majority stockholders to set aside a contract between them as in fraud of the rights of complainants, a person alleged merely to have executed such contract on behalf of the second corporation, and to have represented it as agent to vote its stock in the first corporation in favor of the contract, cannot be joined as a party defendant, since lie is not shown to have any interest in tlie transaction, or to have taken any part therein except as an agent for one of the defendant corporations.