Baker Et Al. v. Allen Et Al‪.‬

RUGG, Chief Justice. This is a suit by minority stockholders of the Boston-Montana Mines Company (hereafter called the corporation),
a business corporation organized under the laws of Montana and having a usual place of business at Boston within this Commonwealth,
in behalf of themselves and other stockholders who may become parties, for the benefit of the corporation, against its directors,
to recover for damages sustained by the corporation in consequence of breaches of their fiduciary duties by the directors.
The corporation and its two subsidiaries are joined as defendants. The directors are charged by the allegations of the bill
with causing damage to the corporation by culpable neglect, by mismanagement of its business and failure to exercise ordinary
intelligence in carrying it on, by failure to safeguard its rights, by wasting corporate assets, by illegal and ultra vires
issues of capital stock, by permitting payment of excessive salaries to three defendants, by the payment of money under the
guise of expenses when such expenses were not incurred or not properly incurred, by issuing false and misleading reports as
to the condition of the corporation, by neglecting to make fair reports of the condition of the corporation, by disbursing
money without proper vouchers, by refusing to allow the plaintiffs to examine the list of stockholders and the books of account
and records until compelled to do so by proceedings in mandamus, by permitting the defendant Allen as president to handle
the monies of the corporation as if they were his own, to deposit them in his own name and to use them for his own purposes,
and by subjecting the real estate of the corporation and its subsidiaries to loss and peril of complete loss by failure to
provide for the payment of taxes. These allegations are summarized in paragraph 23 of the bill, with respect to the directors,
as 'their failure to perform and their dereliction in performance of their fiduciary duties' as directors of the corporation.
There are allegations as to the necessity for stockholders to institute the suit. The bill was filed October 7, 1932. The defendants on October 19, 1933, were permitted to file an amendment to their answer
previously filed. This amendment was in effect a plea setting up that, after consideration of a plan outlining the financial
difficulties of the corporation and means for solving them, pursuant to appropriate votes duly adopted by its directors on
November 9, 1932, and by its stockholders on November 30, 1932, the corporation on June 1, 1933, by deeds and instruments
of transfer duly executed, sold and conveyed to the National Boston Montana Mines Company, a corporation organized under the
laws of Montana, 'all and singular the real, personal and mixed property of the defendant Boston-Montana Mines Company,' and
that thereby the cause of action set forth in the plaintiffs' bill 'has now vested in the National Boston Montana Mines Company,'
and that the latter corporation or its officers and stockholders alone have the right further to prosecute that suit. That
corporation was permitted to intervene and to file an answer.