Preston afterward assigned the bond and mortgage to Smith & Norton, who in turn assigned to the defendant for $1,488, advanced by him in good faith. The plaintiff brought his action, to obtain a retransfer of the bond and mortgage on payment of the $268.20, with interest.

Denio, J., in delivering the opinion of the court, reviews the decision of Chancellor Kent, in Murray v. Lylburn, and other cases, on the subject of latent equities, disapproving of the doctrine of Chancellor Kent, and coming to the conclusion, that an assignment of a chose in action takes but an equitable interest, notwithstanding the provisions of the Code which authorize him to sue in his own name. That all the assignees of the bond and mortgage in question, subsequent to the original obligee, must be regarded as holding merely equitable interests, and that, as between parties so circumstanced, priority of time confers a preferable right, 22 N. Y. R., 547, 548, following, substantially, the opinion of Chancellor Walworth in Covell v. The Tradesmen's Bank, which he cites.

He concedes that this doctrine forms a serious impediment to his negotiation of choses in action, and alludes to the difference of opinion which may exist as to the policy of encouraging their negotiation, and to the period when it was thought so impolitic, that courts of law would not recognize the rights of assignees. But in no part of his learned and exhaustive opinion, does he seek to apply its doctrine to shares in corporations, or other personal property, the legal title to which is capable of being transferred by assignment, and the free transmission of which, from hand to hand, is essential to the prosperity of a commercial people.

The question of estoppel does not seem to have been considered in that case; and perhaps it would have been inappropriate, inasmuch as the assignment upon which the estoppel could have been predicated, if at all, expressed a consideration of only $268.20 for a good mortgage of $1,400; a circumstance calculated to excite inquiry. But it is sufficient for all present purposes to say, that the reasoning upon which the decision in that case is founded, is totally inapplicable to this.

I have reviewed the authorities at much more length than usual, by reason of the difference of opinion expressed in the late Court of Appeals in this case, and for the purpose of meeting the positions, so ably maintained in the opinions, in favor of the respondent, delivered in the court below, and in the late court, on the former hearing.

My conclusion is that the Tenth National Bank must, on the facts found, be deemed to have advanced bona fide on the credit of the shares, and of the assignment and power executed by the

plaintiff, and is entitled to hold the stock for the full amount so advanced, and remaining unpaid after exhausting the other securities received for the same advance.

The points relative to the stamp and subscribing witness were fully answered in the opinions delivered on the first argument, and do not appear to have been the subject of dissent. I do not deem it necessary again to discuss them here.

The judgment of the General Term, and that entered on the report of the referee, should be modified, so as to allow the plaintiff to redeem, on payment of the balance due to the Tenth National Bank, on its advance of June 19th, 1868, and the costs of the action.

All concur except Allen and Folger, JJ., not voting.
Judgment modified.

CHAPTER XIV.

CORPORATE MEETING.

BJORNGAARD V. GOODHUE COUNTY BANK.*

SUPREME COURT OF MINNESOTA, 1892.

(59 Minn. 483)

Right to Vote at Stockholders' Meeting-Personal Interest in

Matter Under Consideration.

Gilfillan, C. J.: The defendant bank is a banking corporation The defendants, Sheldon, Perkins, Featherstone, Brooks, Boxrud and William, and Frederick Busch, and the plaintiff Hoyt, were at the times hereinafter mentioned, and now are, its directors The director defendants were and are stockholders, owning a large majority of the stock. The plaintiffs are stockholders. The defendant stockholders owned a lot and building. At a directors' meeting on July 7, 1890, all the directors being present, it was resolved, all the directors except Hoyt, who protested, voting in the affirmative, that the corporation purchase at a price specified said lot and building, and on July 11, the owners executed a conveyance to the bank. The action is brought to set aside the transaction, and to prevent the funds of the bank being used to complete the purchase, and also to prevent a ratification by the stockholders, a meeting of whom had been called for the purpose, or, rather, to prevent such a ratification by the votes of defendants. There is no doubt that, within the rule in Rothwell v. Robinson, 39 Minn. 1, 38 N. W. Rep. 772, the plaintiffs may bring such an action without first applying to the corporate

"A contract entered into by a corporation, by the authority or direction of its truste es with themselves, and for their benefit, or a transfer of its property by the authority to the trust es to themselves may be set aside, in case it injures any public interest or the private interest of any shareholder or creditor, even though the contract or transfer was executed in good faith by the trustees. Duncomb v. Railroad Co., 84 N. Y. 190. But this rule is not broad enough to condemn as void on the ground of public policy all contracts and transfers executed by a purely private business corporation with or to its trustees in good faith,in case no public or private interest is harmed thereby. Such contracts are not void, but voidable at the election of those who are affected by the fraud." Skinner v. Smith, 134 N. Y. 240, per Follett, C. J., citing Oil Co. v. Marbury, 91 U. S. 587; Thomas V. Railroad Co., 109 U. S. 522; Risley v. Railroad Co., 62 N. Y. 240; Barnes v. Brown, 80 N. Y. 527; Munson v. Railroad Co., 103 N. Y. 58; Barr v. Railroad Co., 125 N. Y. 263.

authorities to bring it. The directors against whom complaint is made, are not only a majority of the directors, but they own a majority of the stock, so that any application either to the board of directors or to the body of stockholders to bring the action would be equivalent to asking the alleged wrongdoers to bring suit in the name of the corporation against themselves. The law does not require of the minority stockholders to do so absurd a thing as a condition of seeking relief against the wrongful acts of the directors and majority stockholders. The court below decided the case in favor of the defendants on the proposition that, although the act of the board of directors was voidable, it was not ultra vires, and was capable of ratification; and where a majority of the stockholders have power to ratify the unauthorized act of the directors, courts will not interfere. We see no reason to think this purchase was ultra vires,-that the corporation had not power to make it. And, that being so, it may be conceded that the board of directors had authority to make a purchase for the corporation. And it is undoubtedly true that, where a corporation has power to do a certain thing, though the authority to do it is not in the directors, the stockholders may ratify their act if they assume to do it on behalf of the corporation. But this transaction is not voidable because ultra vires,-because there was no authority in the directors to purchase; but it is voidable under the rule that one having authority from another to purchase or sell for him cannot purchase from nor sell to himself. To do so is in law a fraud. The rule is absolute, and the matter of fraud in fact is immaterial.. The party for whom the purchase or sale is made need not allege nor prove fraud or injury but may dissaffirm without taking any risk. The rule is inflexible, in order to prevent fraud on the part of one holding a fiduciary relation, by making it impossible for him to profit by it, thus removing temptation from his way. This court has steadily adhered to and applied the rule since it first enunciated it in Baldwin v. Allison, ‍4 Minn. 25, (Gil. 11.) But in all cases of the kind the principal may, with full knowledge of the facts, ratify what has been done. The act of the defendant directors was a violation of this rule, and the purchase was not binding on the corporation until ratified. The question is therefore presented under the allegation and relief asked in the complaint, had the defendants a right to vote as stockholders at the stockholders' meeting called for the purpose upon the question of ratification? While stockholders in a corporation owe the duty of good faith to each other in the management of the affairs of the corporation they do not stand to each other in a fiduciary relation within the rule we have stated. They are not trustees nor agents for each other in the matter of voting upon any proposition that may come before a meeting of the

stockholders. In voting, each must be guided by his own judgment as to what is for the best interest of the corporation. The fact that he may have a personal interest, separate from the others or from that of the corporation in the matter to be voted upon, does not affect his right to vote. It is not to be understood that the majority stockholders may use their power of voting for the purpose of defrauding the minority. It was said in Gamble v. Queens Co. Water Co., 123 N.Y. 91, 25 N.E. Rep. 201, in which the right of a stockholder in such a case to vote was affirmed: "In such cases it may be stated that the action of the majority of the shareholders may be subjected to the scrutiny of a court of equity at the suit of the minority shareholders." And in Transportation Co. v. Beatty, L. R., 12 App. Cas. 589, in which the same thing was held, it was said, in effect, that in such case the ratification must not be brought about by unfair or improper means, nor be illegal or fraudulent or oppressive towards those shareholders who oppose it. A rule excluding stockholders from the right to vote merely because they might be personally interested to vote in a particular way, contrary to the interests of the other stockholders, would be likely to lead to great confusion. The rule laid down in the two cases cited is sufficient to secure the exercise of the good faith which one stockholder owes to the others. Judgment affirmed.