Willard Teller (Harper M. Orahood, on the brief), for plaintiff in

error.

R. S. Morrison (Jacob Fillius, on the brief), for defendant in error. Before CALDWELL and THAYER, Circuit Judges, and ADAMS, District Judge.

THAYER, Circuit Judge. This is an adverse suit which was brought in the state of Colorado to recover the possession of a mining claim pursuant to the provisions of sections 2325 and 2326 of the Revised Statutes of the United States. The case having been tried and determined below in favor of John C. Jenkins, who was the plaintiff in the lower court, it was brought to this court on a writ of error by William Larned, the defendant below, and was argued and submitted for final decision at the present term. An inspection of the printed record, as well as of the transcript which was lodged in this court, fails to disclose that this court or any federal court has lawful jurisdiction of the cause. The complaint which was filed in the lower court does not show that the parties to the controversy are citizens of different states, and it is now well settled that the mere fact that an action is brought, pursuant to the requirements of section 2326 of the Revised Statutes, to determine who has the better right to the possession of a mining claim, does not in and of itself establish that it is a case of federal cognizance. Mining Co. v. Rutter, 177 U. S. 505, 20 Sup. Ct. 726, 44 L. Ed. 864; Blackburn v. Mining Co., 175 U. S. 571, 20 Sup. Ct. 222, 44 L. Ed. 276. This case seems to have been brought originally in the district court of Gilpin county, Colo., and to have been transferred to the federal court; but, as the application for removal is not contained in the printed record or in the transcript, we are not advised, as we must be before a decision on the merits is reached, that the case is one which we can rightfully determine. Under the act of March 3, 1875 (1 Supp. Rev. St. U. S. p. 83), it is made the duty of this court to examine the record in every case brought before it, and order such cases to be remanded as do not fall within our jurisdiction, although the jurisdiction is not challenged by either party. Barth v. Coler, 19 U. S. App. 646, 649, 9 C. C. A. 81, 60 Fed. 466. For this reason, when a removed case is brought to this court, either on a writ of error or by appeal, the petition for removal is an essential part of the record, without which we will not proceed to a final adjudication. It may be that the petition for removal which was filed in the case at bar will disclose jurisdiction, and, as that can be supplied if counsel suggest a diminution of the record, it will now be ordered that the submission be set aside, and that the case be placed on the calendar for further argument when it shall have been made to appear by bringing up other parts of the record that the requisite jurisdiction to hear and decide the case exists.

(109 Fed. 101.)

NORTH AMERICAN LAND & TIMBER CO., Limited, v. WATKINS et al.

(Circuit Court of Appeals, Fifth Circuit. May 31, 1901.)

No. 1,059.

1. RECEIVERS-AUTHORITY TO APPOINT-PRIVATE CORPORATIONS.

A court of equity is not authorized to appoint a receiver for a solvent private corporation by an order made ex parte, without notice, at the suit of a minority stockholder, where the management of the corporation by its officers and directors is not alleged to be fraudulent, dishonest, or ultra vires, merely on the ground that, in the opinion of the complainant, such management is unwise and detrimental to the interests of the stockholders. Upon a matter of mere judgment, a court cannot properly interfere with the management of the corporation by a majority of its stockholders.

2. SAME WHEN ONLY SHOULD BE APPOINTED WITHOUT NOTICE.

The appointment of a receiver after notice before final trial is a jurisdiction which should be exercised with great care and with studious effort to avoid mistake and oppression; and to appoint a receiver without notice is a jurisdiction and power that should be rarely used, and never except in a clear case of imperious necessity, when the right of the complainant, on the showing made by him, is undoubted, and when such relief and protection can be given in no other way. When such notice can be given, it should be given, unless there is imminent danger of loss, or great damage, or irreparable injury, or the greatest emergency, or when by the giving of notice the very purpose of the appointment of a receiver wouia be rendered nugatory; and such instances are of rare occurrence in the federal courts, because of their power, when an injunction is asked for, to grant a temporary restraining order (Rev. St. U. S. § 718), which may be served at the same time that the notice is served, to prevent action by the defendant or his agent, and to preserve the existing conditions until the application for an injunction and for a receiver can be heard.

3. SAME-GROUNDS FOR APPOINTMENT-SUIT BY MINORITY STOCKHOlder.

A bill alleged that complainant was a large stockholder in defendant, which was a foreign corporation chartered with power to buy and sell lands in the United States, and which owned in the state of Louisiana 800,000 acres of land, an irrigating canal, with pumping stations, one or more steamboats, and a large amount of other property, consisting chiefly of choses in action and cash in banks; that the corporation, over complainant's protest, had contracted to sell 155,000 acres of its lands for $3 per acre, which were worth many times such price, and upon terms very disadvantageous to the stockholders. No fraud was charged, nor any facts alleged showing the intrinsic value of the lands to be greater than the price obtained, except that oil had been discovered 20 or 30 miles distant; nor that any one else would purchase them at a greater price. The bill prayed for an injunction, and the appointment of a receiver for all the property of the corporation in the state, with authority to bring suit for cancellation of the contract. Held, that the allegations of the bill did not warrant the appointment of such receiver, either under the general principles of equity jurisprudence, or under the statute of Louisiana (Acts 1898, No. 159, p. 312, § 2) authorizing the appointment of a receiver "at the instance of any stockholder or creditor when the directors or other officers of the corporation are jeopardizing the rights of stockholders or creditors by grossly mismanaging the business, or by committing acts ultra vires, or by wasting, misusing or misapplying the property or funds of the corporation." 4. SAME.

A federal court of equity is not warranted in appointing a receiver for a corporation at suit of a minority stockholder, for the purpose of

having such receiver bring a suit to set aside a contract made by the corporation for a sale of lands under the statute of Louisiana (Merrick's Rev. Civ. Code 1900, arts. 2589-2591), which permits a vendor to obtain a rescission of a contract of sale of real estate when it has been sold for less than half its just value, where the corporation is solvent and the only ground for impeaching the sale is the alleged inadequacy of the price, which is satisfactory to a majority of the stockholders.

Appeal from the Circuit Court of the United States for the Western District of Louisiana.

This is an appeal from an interlocutory order, rendered ex parte and without notice, appointing a receiver of all the property of the appellant corporation situated in the state of Louisiana. It is alleged in the bill that the appellant is an English corporation, chartered with power to buy and sell lands in the United States, and with other powers not material to mention. The capital stock of the corporation is about $630,000, of which the complainant holds $178,000. The property of the corporation consists of about 800,000 acres of land situated in Louisiana, which it has owned since 1883. It also owns a canal for the purpose of irrigating its lands, canal pumping stations, one or more steamboats, and large amounts of choses in action, due to the corporation as the price of land sold by it; and it also holds cash on deposit in a bank or banks at Lake Charles and elsewhere in Louisiana, and other property. In 1897 the directors of the company appointed A. V. Eastman as manager of the company in the state of Louisiana. He is compensated by a salary, the amount of which is not stated, and by commissions upon the sales of real estate made by him. The officers of the corporation do not exercise personal supervision in Louisiana over the affairs of the company in Louisiana. Walter S. B. McLaren, chairman of the board of directors of the corporation, paid a visit in March, 1901, to the parish where part of the lands is situated, and remained there several days. He had frequent conversations and interviews while on that visit with the appellee Watkins. In one of these conversations he admitted that the contracts of sale, which will hereafter be stated, "had not displayed good business judgment, and that he knew that great losses had been made in the premises." The sales referred to are described in the bill as follows: "That your orator, whose business takes him to different places in the United States, but whose interests in the parishes of Calcasieu and Cameron, through his ownership of stock in the defendant corporation and otherwise, are very large, reached Lake Charles, in the parish of Calcasieu, on the forenoon of the 6th day of February, 1901, and during that day heard, as a matter of common rumor on the streets of Lake Charles, that the North American Land & Timber Company, Limited, had sold or contracted to sell about one hundred and three thousand (103,000) acres of its land to one P. Higgins at a price of only three dollars ($3) per acre. That your orator, although he held no official position in the management of the corporation, had a large proprietary interest in its stock as aforesaid, and did, therefore, after assuring himself of the probable truth of said rumors, and that the lands referred to consisted of the said very valuable tract of land lying in the parish of Cameron, along the east shore of Sabine Pass, and that the sale of the same at any such vile price as three dollars ($3) per acre would be most disastrous to him, as well as to the other stockholders in said corporation, at his own expense sent a cable dispatch to J. W. Chalkley, secretary of the North American Land & Timber Company, Limited, at London, England, in the following words, to wit: 'Sale one hundred thousand acres disastrous. Do not approve. Land worth many times price named. Timber Company. Answer quick.' That to this telegram the management of the company has up to this date vouchsafed no answer, either by telegram or by letter, to your orator. That your orator has since learned that said lands were not only contracted to be sold as aforesaid to said Higgins at the absurdly low price of three dollars ($3) per acre, but that said contract of sale was made on the remarkable terms of only five thousand one hundred and thirty-nine 45/100 dollars ($5,139.45) in cash, and the balance on a credit of twelve months. That said contract of sale to

said Higgins therefore practically amounts to nothing more than the payment by said Higgins of less than five cents per acre in cash upon said lands as a consideration for an option to purchase the same in twelve months, and that this contract of sale was made at a time when lands far less advantageously situated than those so contracted to be sold to said Higgins were rising so rapidly in value in Calcasieu and Cameron parishes, as also throughout the territory supposed to be an oil territory in Southern Louisiana and Southeastern Texas, that property owners were absolutely declining to tie up their lands by granting options upon the same for periods of more than a few hours or a few days at most. That, notwithstanding the telegram so sent by your orator to said corporation, your orator was surprised and alarmed to further learn about two weeks later that on or about the 11th day of February, 1901, said corporation had contracted to sell about fifty-one thousand seven hundred (51,700) acres more of its land at the same price of three dollars ($3) per acre, and upon the same terms, to the same purchaser, the said Higgins. That in and by each of said contracts of sale it is also agreed that said Higgins may pay at any time for the lands in any particular township at the rate of three dollars ($3) per acre, and receive a warranty deed for the same, without waiting for the expiration of the time of credit above set forth, so that said agreements further allowed and empowered said Higgins to cull and select the best lands at said absurd price, leaving in the hands of the company any of said lands, if any exist, which are of value less than three dollars ($3) per acre." It is alleged that in January, 1901, a well was sunk near Beaumont, in the state of Texas, to a depth of about 1,000 feet, and struck a vein of petroleum or natural oil, and that this discovery created a great excitement, and tended to increase the value of real estate. It is alleged that the lands owned by the appellant are situated between 20 and 30 miles from Beaumont, "and a theory and belief" is asserted that oil would be found generally in the direction of these lands. The bill contains many other averments, some of which may be referred to in the opinion. The object of the bill is to restrain any further sales of the real estate, and to stay the sales described if they are incomplete or unexecuted, and to secure their cancellation by suit to be brought by the receiver if they are found to be executed. The bill contains a prayer for an injunction and for the appointment of a receiver. The court below granted the prayer of the bill, and made an order appointing a receiver of all the property of the corporation situated in the state of Louisiana; conferring on such receiver the usual powers to prosecute and defend suits, and also to carry on the business of the corporation. The appeal is taken from this order. It is assigned here that the court erred in appointing the receiver without notice to the appellant, and that it erred in appointing a receiver because it appeared from the bill of complaint that the company was a solvent, going concern, and "that the matters complained of were such as a majority of the stockholders, acting with the officers of the company, had authority to control and determine."

Joseph Paxton Blair (Pujo & Moss and Denegre, Blair & Denegre, on the brief), for appellant.

E. B. Kruttschnitt (E. H. Farrar and B. F. Jonas, on the brief), for appellees.

Before PARDEE, MCCORMICK, and SHELBY, Circuit Judges.

SHELBY, Circuit Judge, after stating the case as above, delivered the opinion of the court.

It is a general rule that courts of equity will not interfere in questions of corporate management or policy. They are reluctant to undertake the management of private corporations, and, in the absence of fraud, usurpation, or gross negligence and mismanage ment equivalent to fraud, they generally refuse to interfere, and

allow the majority of the stockholders to rule, leaving dissatisfied stockholders to redress their grievances by ordinary corporate methods. The complainant in this case is a minority stockholder. He seeks to devest the directors, representing a majority of the stockholders, of the possession and control of the corporate business and property. He has obtained an ex parte order that has that effect. No ultra vires act is alleged in the bill, and there is no averment of fraudulent conduct on the part of the directors. It is not charged that either of the directors or the agent, Eastman, is acting fraudulently or in combination with the purchasers of the land. The real cause of the litigation is the sale by the directors, through their agent, Eastman, of 154,700 acres of land. The purchase price was $3 an acre, amounting in the aggregate to $464,100. Of this the sum of $7,735 was paid in cash, and the remainder was to be paid in 12 months. It is not stated whether the deferred payment bears interest or not. It is not alleged that P. Higgins, the purchaser, is insolvent. It is alleged, indirectly and not positively, that the real estate sold is worth "many times the price" for which it has been sold. It is not averred, however, that any one has offered or is willing to pay more for it. The bill shows that a high value is placed on the land by the complainant because of the discovery of oil 20 or 30 miles from it. It is not averred that it has any value for farming purposes or for grazing, or on account of timber or otherwise, or that it has any rental value. Unless oil should be discovered on it, it is not apparent from the bill that it is worth more than the price at which it has been sold. Barring a general and indirect assertion of its value, no facts are stated from which the court can determine its value, or that it is intrinsically worth more than the sum for which it has been sold. What it cost the company is not averred, and it may be that the sale is for a large profit on its cost. The company is organized to buy and sell lands. In addition to the land sold, it owns 645,300 acres in Louisiana. If it be true that these lands are worth greatly over $3 an acre, it may be the honest opinion of the directors that it is to the company's interest to sell them for that price, no better price being now offered, so that the development of the lands sold would increase the value of the lands retained by the company. This is a matter of corporate policy and management. The price at which the company will sell its lands must necessarily be fixed by the directors, officers, or agents of the company selected by the stockholders. A minority stockholder should not, on the facts here alleged, be aided by the court to control the action of the directors, and himself be allowed to fix the price. The substantial controversy between the complainant and the defendant corporation, as presented by his bill, is as to the sale of these lands. But for that sale, and the probability of other sales, the bill would not have been filed. The complainant thinks it greatly to the detriment of the company to sell the lands at $3 an acre. The directors think that the sale at that price is to the company's interest. In such controversy, in the absence of fraud and collusion, if the directors are acting within the power conferred on them by the charter, the 48 C.C.A.-17