The Leavenworth weekly times. [volume] (Leavenworth, Kan.) 1870-1880, 1879-01-16
By THE COURT.


By THE COURT. HORTON, C. j
l The directors of a corporation are Its
primary agents and In reference To the cor
porate property act in the relation Of Irus tees
The character of their relation requires OF
them the highest and most scrupuious good
faith in their transactions for the corpora
ton and the stockholders. The law does not
permit them TO manage the affairs of tue
cooperation Tor their personal ana private ai-
vantage, nor pecuniarily to be Interested
in contracts which other parties make with
| the corporation, through there influence and
direction.
.. An association of fifteen persons, consis-
ting among Others, Of tWo oil the dIrec.
tors OF a railroad corporation one of whom
was Its president, and the other its treasurer,
was formed To obtain a contract for the con
stIuctiOn of the railroad OF said CORPORA lou I;
| to gain the control of the corporation, by is
suance To the association, as part pay meut of
the work to be done, of a majority OF The
stock of the corporation; TO depreciate and
render valueiess the shares of certain stock
holders and acquire for the association the
property and effects of the corporation AT
a meeting Of a bare quorum of the directors
of the corporation, at which the president,
and treasurer attended, a proposal was
received from C., VINO was a member of the
and his associates, whose names
were concealed, to construct the road. The
directors referred the matter TO the president
of the corporation. he made the contract
therefor with Z. as previously arranged by
the association, but In fact for the joint In ter
est OF all the members of the association,
which iuded the president and treasurer
To further conceal the true character of this
arrangement, transferred the contract IN g.
& Co.. and under the latter name the work
was done. This transfer was merely colora-
bl. the work was performed, expenses paid
and prOrts divided by the association. The
name Of q. a Co., was only another style for
the association. With the majority OF stock
issued under the contract, seven of the a>so-
citation were chosen dire tors of the corpara-
tisn, constituting majority OF that body.
Ever since, majority OF the directors has
been selected from the association. The presi-
dent who executed the contract has been con-
tinued In Office H a director ami president.
Held, That the said contract, made by the
with for the benefit of himself and his as
sOciates, l. fraudulent and void. And, Held
That the corporation may call its officers TO
account for their wilfull abuse of their trust,
or for any misapplication Of the funds OF the
corporation or for any profits realized under
the fraudulent contract And, further Held
That an the persons who participated with
the directors and officers Of the corporation
in their fraudulent and unlawful transac.
tons with the knowledge of the facts, are
equally liable with said officers.
lied in ls6s, under chBpter Is, Gen. Stat, re-
lating to private corporations; Held That by
virtue OF the powers conferr.d ''y the provis-
ions OF said net, ,e corporation had the right
In December, 1865, To purchase and hold such
real estate and personal e tate tn pur
poses OF the corporation required. and in the
dD>cuCt Ol any suO~luk ID the contrary.
purchase OF stock in y connecting railroad
line will be presumed to be requisite for the
purposes Of The corporation: ana, Held, That
subdivision Of section Of said charter u
does not limit the power Of railroad corpora
I Ons to take md bold only such real estate
and other property as are obtained without
4. As the corporation itself holds its prop
erty ~ trustee for the stockholders, who nave
a joint interest n all It's property, and effects
and each OF whom Is relsted To 1t as cesfui que
count BY proper legal proceedings, its direct |
orr and officers who are abusing their trust, |
the funds OF the corporation and |
receiving profits from contracts made by
other rites ~ th the corporation, through
their aid, or IL such corporation is still und-r
the controlsOf those VIII, necessarily must be |
made defendants in such proceedings SO that |
1t would be mockery TO require or permit q |
suit against them 70 b brought and prOsecu-
ted under their management, the stock mold |
ers who are the real parties in interest, Ut q |
make such officers and all parties who have
par, icipated with said officers In heir unlaw-
Iul transactions account Ior their WRONGS and |
frauds, and the corporation Is proper party |
). Where one Railroad Corporation is the |
owner OF large amount of stock in q con.
corporations are under the actual potential
,On troll Of the same persons as officers of the /
corporations, and the officers of the connect
ng line OF road are gui ~ OF a misapplication
Ii, the stockholders of the former corpora
ion, or part OF tuem. may irstil ute u suit
20 cOmpe the CmcerS to account for such
and. he'd. that where the
tocK OF the first corporation In the connect
ng road has been fraudulently cancelled by
he officers OF the two corporations and like
amount OF stock in the connecting road issued
Eithuut consid ration to 3. and n. as Trus-
ees, for the former corporation, and such cor
1oration Is The equitable owner of the same |
he stockholders OF sad first corporation, or
part OF them, may m aiDtain a suit 10 COM
>el the Officers Of such connecting corpora
ion TO restore to said corpor alton the funds
md property wrongfuliy taken by them,
Without inst bringing an action to compel q
ransfer Of the stock from 3. and n. TO the
corporation equitably owning the same, If
10Th Of said corporations and s. and n. are
oined as defendants in the suit, and
md n. have refused on reques; to institute a
nit 10 protect the property and interests of
he corpoI alton equitaply owHing the stock
n the names Of ). and y. as Trustees
6. As incident TO shares Of stock in q cor
,Oration, Is the right to receive all the diyl-
lends by the owner and holder Of the same
fter the purchase thereof; that Is their pro-
share Of all profits not divided when
UGH purchase Is completed, and II IL imma |
erial at what times or from what sources
hese profits have been earned The assign
nent Of Q share Of stock from one owner to
mother conveys and transfers not only the
took, but as incident thereto the right TO |
hare in the profits Of the corporation in the
roportion which the stock so transferred
Enterprise for which the corporation vas or
aniZed. l.
T. The claims of stockholders in q CORPORA
lon are subordinate in the claims Of credi-
ors, and the stockholders are not entitled to