The Salt Lake herald. [volume] (Salt Lake City [Utah]) 1870-1909, 1895-12-15

the company and his claims against the
company adjusted by striking out a
large part of them. l am of opinion
that the acting board of directors was
not qualified because there was not
majority who were owners OF hve
thousand shares of stock. 1t is con-
tended by counsel for the defendants
that if the books of the company show
them to be the holders of the requisite
number of shares of stock that this
is sufficient. 1 do not so conStrue the
articles of Incorporation. They require
that they shall be the owners as shown
by the books of the company of at
least 5000 shares of stock. The use of
the word owner is significant. I am of
opinion that it means that they shall
be the actual owners of the stock in
their own right. and that in addition
to that the fact of ownership shall
be made to appear by the books.
Either contingency failing. the person
is not qualified.
Thompson Corp. Sec. 1889
| l Ohio st. 81.
Cook Stockholders, Sec. SIG.
16 New. 252.
So it seems clear to me that the
treasurer. w. j. Began, is not quail
fed, both for the reason that he. is
not the owner of stock in the requisite
number of shares, and because
treasurer. 1t is claimed that these Off
GERS are de facto officers, and that this
being so the stockholders are bound by
their acts in making the assessment,
The principle of holding the acts of
de facto officers binding is founded
upon the idea of protecting third per-
sons who have relied upon them being
against such persons the corporation
will not be heard to say that persons
whom they have held out to be Off
GERS are not so. The reason does not ap-
ply in a case of this kind. This is
suit brought by stockholders to en-
join the acts of an Illegal board. They
are not third persons within the mean
ing of this principle. Where the per-
sons assuming to act as the board are
illegally constituted, the court will re-
strain an assessment made by them,
though they may be de facto officers
as to the public and as to the third
persons.
Thompson on Corps. Sec. .4524.
Moses VS.. Tompkins, Gala. easel Il
Am. & Eng. Corp. Cas-. 634.
14th Gray. 440.
And 9 New. 339.
An Unjust an Illegal Burden.
In addition to this it appears clear
to me that an attempt is being made
pany, and owner of a majority of the
stock. and by at least a majority Of
the board qualified by him and acting
| in his interest, to impose an unjust
and illegal burden upon the minority
| stockholders by means of the fictitious
claims and credits heretofore referred
to. The assessment in question is
made for the principal purpose of pay
ing the debts Of the company, among
them the claims of John Began. From
the testimony now before the court, it
would seem that upon a final hearing,
a large portion of these claims would
have to be disallowed, and in all prob
ability the corporation wound UP.
1t is insisted by the defendant COM
pany that this case comes within the
rule laid down in the case of Halves
VS.. Oakland, 104 U. S. 450, and that an
action can not be maintained by the
stockholders without showing first an
application to and refusal by the gov
erning board of the corporation to
brong suit. This question was fully
argued and considered by me and de-
termined adversely to the defendant on
the hearing upon the demurrer to the
complaint. The case of Halves VS.. Oak
land clearly excerpts a case from the
operation of the general rule where 1t
is not reasonable to require the APP
pncation to be made to the governing
board. In the case OF Porter VS.. SdDlL,
149 U. S. 473. cited by the defendant
upon the present hearing states the
general rule and refers to Halves VS..
Oakland for authority. The exception
laid down in the latter case is not con-
troverted or modified in any way.
The case at bar is one where it is
not reasonable to require the applica-
ton to be made. The persons who
occupied the position of the govern
ing board are themselves the wrongdo-
ers. It needs no citation of authority
to show that it is not reasonable to
REQUIRE so vain and idle a ceremony as
an application to these persons to bring
suit against themselves to be conduct
ed by themselves in order to compel
themselves to right the wrong they
persist themselves in doing.
18th Fed Rep, 752.
SD Fed Rep 611-614.
After carefully considering this case
[ am of the opinion that the stock
holders should not be compelled to
nav money upon assessments into the
hands of the persons assuming to act
as officers of the company so particl-
pating in and carrying out the fraud.
For these reasons, it is ordered that
fine defendants be enjoined as prayed
for in the original and supplemental
complaint, pending the final nearing
of this action - ~