People ex rel. Township of La Grange v. State Treasurer

Citation24 Mich. 468
CourtSupreme Court of Michigan
Decision Date16 April 1872
PartiesThe People on the relation of the Township of La Grange v. The State Treasurer

Heard April 10, 1872

Application for mandamus.

Writ granted as prayed.

Ashley Pond and Theodore Romeyn, for the respondent.

Daniel Blackburn, for the relator.

Campbell J. Christiancy, Ch. J., and Cooley, J., concurred. Graves J., did not sit in this case.

OPINION

Campbell, J.:

The relator having obtained an order on respondent to show cause why certain municipal bonds, deposited with him under the railroad aid laws, should not be delivered up, he returns that he has been served with a subpoena in a cause in equity, issued out of the circuit court of the United States for the eastern district of Michigan, under a bill filed by Joseph E. Young, of Chicago, Illinois, against respondent, relator, and the Michigan Air Line Railroad Company, to obtain the same bonds for the company.

And this return being demurred to, respondent relies on two principal grounds: First, that mandamus is not a proper remedy in such cases; and, second, that the pendency of the chancery suit should stay it. The latter question is first in order of importance.

It is not claimed that the pendency of a suit like that referred to can, in any way, operate as a bar to these proceedings. There is no authority for any such doctrine, and all practice is against it. The only argument insisted on, is that in such cases comity requires that this court should await the final action in that suitor at least that such delay is proper and desirable, and should be granted as a matter of customary policy. To ascertain how far it would be proper to do this, each class of cases must be examined as it arises, and it is not possible that there can be any uniform rule on the subject. It must always be remembered that in considering such questions, it is not usually the court where action is had, but the parties who are taking it, that must be regarded. Courts, except by appellate process, never interfere with each other's proceedings, and deal with the party themselves.

When we look at the nature of the bill which has been filed in the United States circuit court, we find its purpose so clearly in violation of legal principles, as settled generally (and as emphatically by the United States supreme court as anywhere), that we cannot hesitate to regard it as one over which the court where it is pending will not assume jurisdiction to grant relief. Its objects are not within the jurisdiction of any court of equity, as that jurisdiction has thus far been declared, and it is not very likely that any tribunal will entertain it.

We shall not consider any jurisdictional questions which depend on other than recognized and generally accepted grounds; and we shall abstain from deciding what effect might be due to the fact that it was filed in some haste, after notice of this application had been given to the railroad company, and before relators had put their papers on file here.

The bill is filed for the purpose of getting relief for a corporation created by virtue of the laws of Michigan. Complainant, although a stockholder, does not claim any immediate or personal right in, or control over, the property in controversy. He does not, and could not lawfully, seek to get possession of it. His bill rests upon the ground that it belongs to the corporation, which alone has a title and claim to it. Stockholders and creditors can only claim through the corporation itself.

It is not within the power of any court--except in proceedings to divest the corporation of its charter franchises--to take away the management of its affairs from the hands of the directors lawfully invested with that management, and give it into the hands of other managers. The corporate functions must be performed by corporate officers. The bill does not seek to divert this management of funds in possession, but it seeks to enforce a supposed corporate demand without the intervention of the directors.

It is perfectly evident from the whole structure of the bill (and it is only on this ground that any attempt can be made to sustain it at all), that the suit is really one in favor of the railroad company, and against the other defendants. It is as plainly a suit in their behalf as if brought in their name. That is the whole theory of the bill.

If the suit had been brought by the proper officers of the corporation, and in the corporate name, no jurisdiction could have existed except in one of the courts of the state of Michigan; because all the parties are domiciled here, and citizens and subjects of the state jurisdiction. And had the suit been brought here, there is no right involved which could lawfully invoke the appellate jurisdiction of the United States supreme court. There is no claim involved which could authorize any revision of a state decision.

In order to transfer into a court of the United States a controversy between Michigan citizens, under Michigan laws, some substantial ground must be presented which comes within some recognized rule of jurisdiction. Any merely colorable attempt would be a fraud which no court should tolerate or sanction, and in Yawkey v. Richardson, 9 Mich. 529, a judgment was reversed for a similar device in fraud of the courts of the United States.

The only ground relied on, is the one recognized in Dodge v. Woolsey, 18 How. R., 331, in which it was held, on the facts of the case, that a refusal by the directors of a company to prosecute a claim which they believe to be valid, and which was valid, and where there was no exercise of discretion properly involved, would justify a court in allowing a stockholder to file a bill on the ground that their conduct in not suing was fraudulent as against him, and in derogation of his rights and interests as a stockholder, which they had no right to abandon when they knew their duty.

The grounds on which that case was decided are fatal to this. The right there involved was one secured by the constitution of the United States, and settled by an unbroken course of decision from the Dartmouth College Case down. Although the corporation suit must have been brought in the state courts, by reason of the citizenship of the parties, yet the state decision, if against the right, was subject to review in the United States supreme court. The controversy was one which was necessarily of United States jurisdiction sooner or later, and it was a controversy directly arising under the constitution and laws of the United States.

The doctrine that the jurisdiction in favor of the stockholder does not exist, except as dependent on the culpable negligence of the directors, and that it cannot exist at all except in an extreme case, is not only very clearly laid down in Dodge v. Woolsey, but it has never been relaxed. In Memphis City v. Dean, 75 U.S. 64, 8 Wall. 64, Nelson, J., uses this language in deciding the cause, after speaking of the right referred to in the former case, where the stockholder is prejudiced by the refusal of the directors to sue: "This refusal of the board of directors is essential in order to give to the stockholder any standing in court, as the charter confers upon the directors representing the body of stockholders, the general management of the business of the company. There must be a clear default, therefore, on their part, involving a breach of duty, within the rule established in equity, to authorize a stockholder to institute the suit in his own behalf, or for himself and other stockholders who may choose to join." And it was held in that case that failure to bring a superfluous suit would not be a ground of complaint, and would not support jurisdiction for relief.

In Bronson v. La Crosse Railroad Co., 69 U.S. 283, 2 Wall. 283, the same judge, speaking for the court on the same subject, says: "The remedy is an extreme one, and should be admitted by the court with hesitation and caution; but it grows out of the necessity of the case, and for the sake of justice, and may be the only remedy to prevent a flagrant wrong." And in that case, as in the later one, the stockholders intervening were refused relief.

As the only claim involved...

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