Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1915-04-13
RESCR|PT FROM
THE Law COURT

Dominion Company.
Rescript by Savage, G. j.
/. A ratification Of the acts of di
rectors by the stockholders in meet
ing assembled is ineffective when it does
not appear that the stockholders gen.
orally had any knowledge of the acts
claimed to have been ratified
2. Ratification of ultra wires acts Of
directors, or of acts done in manifest
disregard of the duties Of the corpora
ton to its stockholders, and of the
legal rights of minority stockholders,
is nugatory.
3. A stakeholder seeking a remedy
for corporate wrongs must first make
applica ton for relief through corpor-
ate channels, or allege and provo
sufficient reasons why such an applica-
ton would be futile. But such APP
plication is not necessary where it is
alleged. and the case shows, that APP
plication would be useless.
4. Wrongs begun before a stock
holder became such, but continued at
ter, may be redeemed at his suit.
5. When it is sought by bill in
equity to require a Maine corporation,
which owns stock in New Jersey cor
poration, the certificates whereof have
been transferred in blank, to have the
same transferred Of record to itself on
the books of the New Jersey corpora
ton, the latter corporation is not an
Indispensable party to the bill.
g. The court is Of opinion that the
laws Of New Jersey authorize stock in
a corporation of that state to be owned
and held by a corporation of another
state, when empowered by it's own
state to do so.
I. Courts will not undertake to con-
troll the discretionary powers of the
directors of corporations or of the
majority of the stockholders expressed
in stockholders meetings as to acts
intra vires, except in cases of fraud,
OF in cases of such acts as are breach
implied by the very nature of the cor
pOrate relations.
s. Courts can and will control cor
porations with respect to such acts as
tend to the destruction of the cor
porate franchises and such as are in
violation of or inconsistent with, the
charter They may and will prevent
the abuse. misuse or misapplication of
corporate power prejudicial to the
stockholders and amounting to a
breach of trust.
8. The relation between a corpora
ton and it's stockholders is essentially
contractual. The corporate authority
is considered to have been conferred
by the stockholders upon trust and
confidence that it will be exercised to
efectuate the purpose of the charter.
10. 1t is cOntractual duty of IL
corporation and in the nature of a
trust, arising from the corporate re-
lations of stockholders among them
selves and with the corporation that
1t will perform its corporate functions,
according to and within the meaning
CT its charter. To abdicate it's cor
porate functions and utterly abandon
the performance of its corporate du-
ties, to the prejudice of stockholders,
is breach Of duty and trust
IL. The defendant is a holding cor
poration. More than one half it's as
sets consist of shares Of stock in New
Jersey corporation. These shares con-
stitute more than one half of the issued
capital stock Of that corporation.
These shares are represented by GER
ti1cates of stock standing in the name
OF two of its directors but in fact
transferred in blank and placed in the
defendants vault. For ten years, and
from its very organization, it has ne
elected to have the shares transferred
OF record to itself. 1t has not voted
upon the shares. It has not directed
those in whose name the stock stands
OF record how to vote. It has taken no
corporate action whatever with respect
to the stock. The two directors have
voted this stock as they pleased. Held
that the corporation has been guilty of
a breach Of trust to it's stockholders.
II. When holding corporation in
tentionally, persistently and unreason-
ably deprives itself of the exercise of
the highest function and privilege Of a
stakeholder, and so proposes to con-
tinue, it is such breach Of its duty
TO its stockholders, and so far removed
from any characteristics of internal
management and control, that a mi
nority stakeholder may successfully
invoke the Intervention of the court.
1t is essentially breach of trust. It
Is perversion Of the spirit of tho
chartered corporate purposes.
Decree below affirmed with addition
al costs.