paid in, and has no equitable right to insist on the contribution of a greater amount of capital by the shareholders than the corporation itself could claim as part of its assets. Coit v. North Carolina Gold Amalgamating Co., 14 Fed. Rep. 12, S. C. 119 U. S. 343 (30 L. ed. 4201)."

Question 659: State the doctrine of this case.

(Note: This doctrine is not universally assented to. In some states, the knowledge of the creditor is immaterial. He can in any event enforce the stockholder's liability to pay in full either in money or money's worth.)

§ 677. (Corporations, Sec. 41.) Calls for payment.

(Note: Calls for payment are necessary to render stock due if the agreement was a subscription subject to call. Such call is made by the directors. In case of insolvency or bankruptcy no call necessary.

§ 678. (Corporations, Sec. 42.) Payment as prerequisite to corporate existence.

(Note. The statute of the state of incorporation may require a certain percentage of payment before the corporation is authorized to proceed to business.)

§ 679. (Corporations, Sec. 43.) Forfeiture of stock for non-payment.

(This is governed by statute.)

CHAPTER 86

RIGHTS OF STOCKHOLDERS

§ 680. (Corporations, Sec. 44.) In general.

(See cases following in this chapter.)

A. Rights Growing out of Stockholder's Relationship, as such.

§ 681. Stockholder's rights to dividend.

§ 682. Right to prevent ultra vires acts.

683. Right to prevent change in charter in material respects.

§ 684. Right of stockholder to inspect corporate books and records.

§ 681. (Corporations, Sec. 45.) Stockholder's right to dividend.

(See Spear v. Rockland-Rockport Lime Co., supra.)

§ 682. (Corporations, Sec. 46.) Right to prevent ultra vires acts and to sue or defend in behalf of corporation.

Case 660. Hawes v. Oakland, 104 U. S. 450.

Facts: Complainant files his bill as a stockholder of the Contra Costa Water Works Company against such company, the city of Oakland, and the directors, alleging that the company is furnishing the city of Oakland with water for all purposes free of charge whereas by its charter it is only required to furnish such city water free for putting out fires and other cases of emergency, that he has applied to the directors to stop this abuse and that they decline to take any action. The company defends by demurrer that the plaintiff as stockholder has no power to maintain such a suit.

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Point Involved: Whether a stockholder can file a bill to prevent ultra vires acts; what conditions are precedent to his maintaining such bill.

"We understand that doctrine to be that to enable a stockholder in a corporation to sustain in a court of equity in his own name, a suit founded on a right of action existing in the corporation itself, and in which the corporation is the appropriate plaintiff, there must exist as the foundation of the suit-some action, or threatened action of the managing board of directors, or trustees of the corporation which is beyond the authority conferred on them by their charter or other source of organization; or such fraudulent transaction completed or contemplated by the acting managers, in connection with some other party or among themselves, or with other shareholders as will result in serious injury to the corporation; or to the interests of other shareholders; or where the board of directors or a majority of them, are acting for their own interests, in a manner destructive of the corporation itself, or of the rights of the other shareholders; or where the majority of shareholders themselves are oppressively and illegally pursuing a course in the name of the corporation, which is in violation of the rights of the other shareholders, and which can only be restrained by the aid of a court of equity. Possibly other cases may arise in which, to prevent irremediable injury, or a total failure of justice, the Court would be justified in exercising its powers, but the foregoing may be regarded as an outline of the principles which govern this class of cases. He must

make an earnest, not a simulated effort, with the managing body of the corporation, to induce remedial action on their part, and this must be made apparent to the Court."

[The Court holds that a stockholder before filing such a bill must attempt to get relief from the directors and if possible from the stockholders, and show that his ef

forts in that regard are unavailing, and that the complainant in this case has made no such effort as is required to give him standing to file a bill.]

Question 660: (1) When can a stockholder sue or defend in behalf of the corporation?

(2) What course must the stockholder take to entitle him to represent the corporation in such a suit?

(3) A filed a bill showing that the corporation in which he was a stockholder was about to enter into an illegal trust, and asked for an injunction. Will it be granted?

Amer. Glucose Co., 182 Ill. 551.)

Case 661. Babcock v. Farwell, 245 Ill. 41.

(Harding v.

"Since Babcock could not himself have maintained the suit in his personal capacity, neither could his executor, nor appellant as his legatee. By expressly waiving his objections to the transactions now complained of, he debarred himself from seeking relief against them in his own right. He could not, therefore, indirectly obtain such relief by bringing suit in the right of the corporation or of other stockholders. A complainant cannot maintain a bill, and obtain relief unless he has himself sustained a wrong. The theory of a stockholder's suit is, that the stockholder has sustained a wrong through the injurious effect upon his stock of the wrong done to the corporation. If he has himself consented to or participated in the acts constituting such wrong, or has waived his right to object to them, he cannot afterwards maintain a bill, on account of such transactions, for the benefit of the corporation or of other stockholders. (Burt v. British Ass'n, 4 DeG. & J. 158; Brown v. DeYoung, 167 Ill. 549; Wells v. Northern Trust Co., 195 id. 288.) Neither can an assignee of stock maintain a suit in regard to transactions with the corporation done or assented to by his assignor. The purchaser of shares of stock acquires no greater rights than his vendor. He holds by the same title and subject to the same liability.

Shares of stock are merely choses in action, and the successive owners acquire only the rights held by their predecessors in title. Home Ins. Co. v. Barber, 67 Neb. 644; Venner v. Atchison, Topeka and Santa Fe Railroad Co., 28 Fed. Rep. 581; Church v. Citizen's Railroad Co., 78 id. 526; *

*

Question 661: A, as stockholder in the M corporation, acquiesces in wrongful conduct on the part of the directors in managing the corporation. A assigns to B, who then for the first time learns of the ultra vires acts, and files a bill to set aside the acts. Will such bill obtain relief?

§ 683. (Corporations, Sec. 47.) Right to prevent change in charter in material respect.

(See Section 652, supra.)

§ 684. (Corporations, Sec. 48.) Right to inspect corporate books and records.

Case 662. Venner v. Chicago City Ry. Co., 246 Ill. 170.

MR. CHIEF JUSTICE VICKERS: 66*

"There is a well recognized distinction between the right of a stockholder to inspect the books and papers of a corporation under the common law and an unlimited right given by statute. Under the former the examination can only be compelled where the stockholder asks it in good faith and for reasons connected with his rights as stockholder. Where the right is conferred by statute in absolute terms, the purpose or motive of the stockholder in making the demand for an inspection is not material and he cannot be required to state his reasons therefor. (Thompson on Corporations,-2d ed.-Sec. 4516.) The weight of American authority is to the effect that where the right is statutory the stockholder need not aver or show the object of his inspection, and it is no defense under a statute granting the absolute right to inspection to allege improper purposes or that the petitioner desires the information for the purpose of