Passmore v. Allentown & Reading Traction Co.

Citations

• 267 Pa. 356
• 110 A. 240
• 1920 Pa. LEXIS 863

Syllabus

<p>Corporations — Stochholders—Right of stochholder to sue to redress company’s wrong — Fraud, mismanagement, etc., prejudicial to plaintiff — Notice to directors — Equity—Specific performance.</p> <p>1. Where a stockholder institutes a suit in equity in his own name to enforce a right of the corporation of which he is a member, he must set forth facts necessary to give him standing to assert rights that are ordinarily enforced by the corporation. The board of directors has the power to sue, and on them rests the burden of whether they should engage in such litigation.</p> <p>2. Before the stockholder may intervene he must use every effort to cause the directors to act. Statements should be presented to the directors, showing the wrong complained of, not necessarily in detail, but facts essential to sustain a complaint of wrongdoing. Mere general charges and blanket averments, without a statement of facts, will not be sufficient. Insolvency and fraud need not be averred, though they may be, but acts must appear which are prejudicial and harmful to the corporation’s rights. Sufficient responsible data should be given to enable them to determine the question with some hope of success.</p> <p>3. A corporation should not be put to the hazard of expensive litigation to satisfy the imaginary grievance of disappointed stockholders ; therefore, there must be something of substance on which to base the charge of wrongdoing. If the officers, through misconduct or otherwise, fail to proceed, after receiving due and sufficient notice, and there is not time to remove them and elect other officers, the shareholder, upon showing his effort to induce the corporation to proceed, and that he left nothing undone which he might have done to prevail on the corporation to bring such action, may institute proceedings in equity for relief.</p> <p>4. A bill is properly dismissed where there are no charges of wrongdoing, or injury, or acts, prejudicial to plaintiff or his comjnany, or of mis