After stating the facts above, the opinion of the court was delivered by PARDEE, Circuit Judge.
The bill in this case is brought by a stockholder of an incorporated company in his own name, to prosecute and vindicate the rights of the corporation, and, of course, the ninety-fourth equity rule must be complied with or a case made showing such compliance unnecessary. The pledge to the savings bank and the subsequent sale complained of were within the chartered powers of the improvement company— in no sense ultra vires. The bill charges that the president of the improvement company, without any authority from any meeting of the stockholders, and without any authority conferred upon him at any meeting of the board of directors, ratified the sale complained of, giving details of the bargaining and ratification. The thirteenth paragraph of the bill is as follows:
“Your orator further avers and charges that during the time of the occurrence of the matters herein complained of the following named persons, named as defendants to this bill, constituted, and still constitute, the hoard of directors of the said improvement company, to wit: Joy Morton, president, and' J. P. Soper, E. P. Ripley, W. S. North, William A. Fuller, William P. Smith, A. T. Ewing. Your orator avers and charges, on information derived from a certain bill hereinafter more particularly referred to, filed by said the American Trust & Savings Bank, as trustees for said certificate holders and in its own behalf, and on information and belief, that each and all of said persons constituting the said board of directors of the improvement company were at the time of the matters herein complained of large holders of said collateral trust certificates, and indorsers on said obligations of the said company of the said railroad company, by reason of which their individual interests as such certificate holders became antagonistic to the interests of your orator and other [590]*590stockholders of said improvement company who were not holders of said collateral trust certificates. Your orator further avers apd charges that during the time of the occurrence of the matters herein complained of the said Joy Morton, president of said improvement company, was also first vice president of the said the American Trust & Savings Bank, by reason of which his interests became and were still more antagonistic and adverse to the interests of the stockholders of the improvement company.”
In the nineteenth paragraph it is said:
“Your orator further avers and charges that by reason of the premises the said sale made by said the American Trust & Savings Bank of said collaterals to the said Atlantic Coast Line Company was unfair and unjust, and constitutes a fraud upon the rights of the said improvement company and upon the rights of your orator and other stockholders thereof similarly situate, and that the attempted ratification of said sale made by said Joy Morton on behalf of the said improvement company was without authority, and void.”
The affidavit verifying the bill recites:
“Deponent further says that he was a shareholder of the stock of the Illinois & Georgia Improvement Company (owning the shares of said stock stated in said bill as owned by him) at the time of the transactions of which he complains in said bill, and that he still owns said stock, and that this suit is not a collusive one to confer on a court of the United States jurisdiction of a case of which he would not otherwise have cognizance.”
It is claimed that these matters so alleged in connection with the whole case made by the bill dispensed the complainant from applying to the board of directors and to the stockholders for relief.
In the leading case of Hawes v. Oakland, 104 U. S. 450, 26 L. Ed. 827, which was immediately followed by the ninety-fourth equity rule, it is laid down:
“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 itself 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 a 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 the other shareholders; or where the board of directors, or a majority of them, are acting for their own interest, 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. But, in addition to the existence of grievances which ball for this kind of relief, it is equally important that, before the shareholder is permitted in his own name to institute and conduct a litigation which usually belongs to the corporation, he should show to the satisfaction of the court that he has exhausted all the means within his reach to obtain within the corporation itself the redress of his grievances, or action in conformity to his wishes. 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. If time permits or has permitted, he must show, if he fails with the directors, that hq has made an honest effort to obtain action [591]*591by the stockholders as a body, in the matter of which he complains. And he must show a case, if this is not done, where it could not be done, or it was not reasonable to require it”
In Corbus v. Goldmining Company, 187 U. S. 455-463, 23 Sup. Ct. 157, 160, 47 L. Ed. 256, the court, after quoting approvingly the above from Hawes v. Oakland and reciting the ninety-fourth equity rule, says:
“It must not be' understood that a mere technical compliance with the foregoing rule is sufficient and precludes all inquiry as to the right of the stockholder to maintain a bill against the corporation. This court will examine the bill in its entirety and determine whether, under all the circumstances, the plaintiff has made such a showing of wrong on the part of the corporation or its officers and injury to himself as will justify the suit. The directors represent all the stockholders, and are presumed to act honestly and according to their best judgment for the interests of all. Their judgment as to any matter lawfully confided to their discretion may not lightly be challenged by any stockholder, or at his instance submitted for review to a court of equity. The directors may sometimes properly waive a legal right vested in the corporation in the belief that its best interests will be promoted by not insisting on such right.
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After stating the facts above, the opinion of the court was delivered by PARDEE, Circuit Judge.
The bill in this case is brought by a stockholder of an incorporated company in his own name, to prosecute and vindicate the rights of the corporation, and, of course, the ninety-fourth equity rule must be complied with or a case made showing such compliance unnecessary. The pledge to the savings bank and the subsequent sale complained of were within the chartered powers of the improvement company— in no sense ultra vires. The bill charges that the president of the improvement company, without any authority from any meeting of the stockholders, and without any authority conferred upon him at any meeting of the board of directors, ratified the sale complained of, giving details of the bargaining and ratification. The thirteenth paragraph of the bill is as follows:
“Your orator further avers and charges that during the time of the occurrence of the matters herein complained of the following named persons, named as defendants to this bill, constituted, and still constitute, the hoard of directors of the said improvement company, to wit: Joy Morton, president, and' J. P. Soper, E. P. Ripley, W. S. North, William A. Fuller, William P. Smith, A. T. Ewing. Your orator avers and charges, on information derived from a certain bill hereinafter more particularly referred to, filed by said the American Trust & Savings Bank, as trustees for said certificate holders and in its own behalf, and on information and belief, that each and all of said persons constituting the said board of directors of the improvement company were at the time of the matters herein complained of large holders of said collateral trust certificates, and indorsers on said obligations of the said company of the said railroad company, by reason of which their individual interests as such certificate holders became antagonistic to the interests of your orator and other [590]*590stockholders of said improvement company who were not holders of said collateral trust certificates. Your orator further avers apd charges that during the time of the occurrence of the matters herein complained of the said Joy Morton, president of said improvement company, was also first vice president of the said the American Trust & Savings Bank, by reason of which his interests became and were still more antagonistic and adverse to the interests of the stockholders of the improvement company.”
In the nineteenth paragraph it is said:
“Your orator further avers and charges that by reason of the premises the said sale made by said the American Trust & Savings Bank of said collaterals to the said Atlantic Coast Line Company was unfair and unjust, and constitutes a fraud upon the rights of the said improvement company and upon the rights of your orator and other stockholders thereof similarly situate, and that the attempted ratification of said sale made by said Joy Morton on behalf of the said improvement company was without authority, and void.”
The affidavit verifying the bill recites:
“Deponent further says that he was a shareholder of the stock of the Illinois & Georgia Improvement Company (owning the shares of said stock stated in said bill as owned by him) at the time of the transactions of which he complains in said bill, and that he still owns said stock, and that this suit is not a collusive one to confer on a court of the United States jurisdiction of a case of which he would not otherwise have cognizance.”
It is claimed that these matters so alleged in connection with the whole case made by the bill dispensed the complainant from applying to the board of directors and to the stockholders for relief.
In the leading case of Hawes v. Oakland, 104 U. S. 450, 26 L. Ed. 827, which was immediately followed by the ninety-fourth equity rule, it is laid down:
“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 itself 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 a 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 the other shareholders; or where the board of directors, or a majority of them, are acting for their own interest, 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. But, in addition to the existence of grievances which ball for this kind of relief, it is equally important that, before the shareholder is permitted in his own name to institute and conduct a litigation which usually belongs to the corporation, he should show to the satisfaction of the court that he has exhausted all the means within his reach to obtain within the corporation itself the redress of his grievances, or action in conformity to his wishes. 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. If time permits or has permitted, he must show, if he fails with the directors, that hq has made an honest effort to obtain action [591]*591by the stockholders as a body, in the matter of which he complains. And he must show a case, if this is not done, where it could not be done, or it was not reasonable to require it”
In Corbus v. Goldmining Company, 187 U. S. 455-463, 23 Sup. Ct. 157, 160, 47 L. Ed. 256, the court, after quoting approvingly the above from Hawes v. Oakland and reciting the ninety-fourth equity rule, says:
“It must not be' understood that a mere technical compliance with the foregoing rule is sufficient and precludes all inquiry as to the right of the stockholder to maintain a bill against the corporation. This court will examine the bill in its entirety and determine whether, under all the circumstances, the plaintiff has made such a showing of wrong on the part of the corporation or its officers and injury to himself as will justify the suit. The directors represent all the stockholders, and are presumed to act honestly and according to their best judgment for the interests of all. Their judgment as to any matter lawfully confided to their discretion may not lightly be challenged by any stockholder, or at his instance submitted for review to a court of equity. The directors may sometimes properly waive a legal right vested in the corporation in the belief that its best interests will be promoted by not insisting on such right. They may regard the expense of enforcing the right or the furtherance of the general business of the corporation in determining whether to waive or insist upon the right. And a court of equity may not be called upon at the appeal of any single stockholder to compel the directors or the corporation to enforce every right which it may possess, irrespective of any considerations. It is not a trifling thing for a stockholder to attempt to coerce the directors of a corporation to an act which their judgment does not approve, or to substitute his judgment for theirs. As said in Dodge v. Woolsey, 18 How. 344, 15 L. Ed. 401: ‘The circumstances of each case must determine the jurisdiction of a court of equity to give the relief sought’ ”
If we assume that under the facts averred in the thirteenth paragraph of the bill given above the.complainant gives some reason for not applying to the managing directors of the improvement company and from setting forth with particularity his efforts to secure such action as he desires, yet we find nothing in the bill to excuse him from failure to apply to the shareholders. Counsel argues that complainant was excused from applying to the shareholders because the bill charges fraud; but the fraud charges are general and do not reach the shareholders as parties thereto. If 'for no other reason, it would seem that the bill should be dismissed on this ground.
If we pass by the ninety-fourth equity rule we find that the bill is without sufficient equity to warrant relief to the complainant. This want of equity is particularly pointed out in the second, third, fourth, and fifth assignments of error, each one of which seems to be well taken. There can be no doubt that under the chartered .powers of the improvement company the assets acquired from the Macon, Dublin • & Savannah Railroad Company could be lawfully pledged and sold as required to meet the business management or the necessities of the company. The improvement company did pledge the assets in question in the regular course of business. The bill neither attacks the pledge nor suggests bad faith in relation thereto. Three years after the pledge, and after long standing default, the pledgee, with the consent of the managers of the improvement company, sold the assets to pay the secured debt. The complaint is that this sale wras [592]*592made without due corporate consent of the pledgor. The articles of pledge granted to the pledgee the power to sell on default at public or private sale, and, if they had not so provided, the sale as made, if wrongful, was- one that could be validated by the ratification of the improvement company. It is not alleged that a majority or even a considerable minority of the improvement company’s shareholders disapprove. As counsel well say:
“This bill is not brought to enjoin the consummation of any sale or the carrying out of an alleged unauthorized act. It avers the act complained of to have been completed, the property delivered, proceeds of sale received, and all but a small part thereof to have been applied to the payment of the corporate •debts. It is brought avowedly to set aside the executed sale, no matter what the board of directors or any majority of the stockholders, however large, may think. There is no pretense in the bill that the directors and a great majority of the stockholders do not approve and ratify the sale and would ■so vote on a submission to them. The bill practically charges that they would approve. No averment is made why the stockholders, other than complainants or the board of directors, should not exercise their judgment and ratify the act if they deem that course wisest. The act complained of being one capable of authorization by the board or a given majority of the shareholders, a minority who would be bound by such action, if taken, cannot, under the allegations of this bill, have the sale set aside.”
See Foss v. Harbottle, 2 Hare, 461-488; MacDougal v. Gardiner, 1 L. R. Ch. Div. 13; Flagg v. Manhattan Railway Co. (C. C.) 10 Fed. 413; North American Land & Timber Co. v. Watkins, 109 Fed. 104, 48 C. C. A. 254; Metcalf v. American School Furniture Co. (C. C.) 122 Fed. 115.
In MacDougal v. Gardiner, supra, James, L. J., said:
“I am of opinion that this demurrer ought to be allowed. I think it Is of the utmost importance in all these companies that the rule which is well known in this court as the rule in Mozley v. Alston, 1 Phil. Ch. 790, and Lord v. Copper, Miners’ Company, 2 Phil. Ch. 740, and Foss v. Harbottle, should be always adhered to; that is to say, that nothing connected with internal disputes between the shareholders on behalf of himself and others, unless there be something illegal, oppressive, or fraudulent, unless there is something ultra vires on the part of the company qua company, or on the part of the majority of the company, so that they are not fit persons to determine it, but that every litigation must be in the name of the company, if the company really desire it. Because there may be a great many wrongs committed in a company, there may be claims against directors, there may be claims against officers, there may be claims against debtors, there may be a variety of things which a company may well be entitled to complain of, but which, as a matter of good sense, they do not think it right to make the subject of litigation; and it is the company, as a company, which has to determine whether it will make anything that is wrong to the company a subject-matter of litigation, or whether it will take steps itself- to prevent the wrong from being done.”
And Mellish, L- J-, said:
“In my opinion, if the thing complained of is a thing which in substance the majority of the company are entitled to do, or if something has been done irregularly which the majority of the company are entitled to do regularly, or if something has been done illegally which the majority of the company are entitled to do legally, there can be no use in having a litigation about it, the ultimate end of which is only that a meeting has to be called, and then ultimately the majority gets its wishes. Is it not better that the rule should be adhered to that, if it is a thing which the majority are the masters of, the majority in stibstanee shall be entitled to have their will followed? If it is a matter of [593]*593that nature, it only comes to this: that the majority are the only persons who can complain that a thing which they are entitled to do has been done irregularly, and that, as I understand it, is what has been decided by the cases of Mozley v. Alston and Foss v. Harbottle.”
Now, in this case, it appears by the record that since the bill was filed and before the hearing in the Circuit Court at an annual meeting held on February 20, 1905, after full report and discussion, the stockholders of the improvement company by a large majority in num'ber and stock voted down a motion to disapprove the sale complained of, and, instead, voted to ratify and approve the same. The facts asserted in the bill and shown on the hearing do not show fraud nor negligence and mismanagement equivalent to fraud, nor the doing of any act ultra vires, nor even any unwise or injurious act, though as to this last opinions may differ. The pledge was valid, the debt was due, the pledgee would not renew, the pledgor was unable to pay, except through an advantageous sale of the pledged assets, and to secure and effectuate such sale the directors of the pledgor company did the best they could under the circumstances. The complainant as a minority stockholder has no just and equitable ground of complaint nor any equitable, right to represent the company in a suit attacking the sale satisfactory to the majority and by which the company is unquestionably, bound.
In North American Land & Timber Co. v. Watkins, supra, this court (Shelby, J.,) said:
“Even where the management of the majority appears to be unwise and injurious, equity will not interfere if such management be not dishonest or ultra vires, but will require the complaining stockholder to seek relief within the corporation. When the management is not shown to be fraudulent or dishonest, and when it is a matter of opinion whether it is wise or unwise, advantageous or disadvantageous, if the acts complained of be intra vires, there is no authority for equity to interfere. To do so would be to place the control indirectly in the hands of the minority whenever interference removes from control the officers selected by the majority. There is certainly no presumption that a minority stockholder is right, and a majority stockholder is wrong, in opinion as to the values and the management of the corporate property.”
We find no equity in complainant’s bill. None developed on the hearing. There is no case for an injunction to preserve the status of assets.
The interlocutory decree of the Circuit Court granting an injunction is reversed, and the cause is remanded, with instructions to dismiss the bill.