Court
Circuit Court of the United States for the Northern District of Illinois
Decided
Judge
WOODS, Circuit Judge
Posture
Bill dismissed for want of equity after demurrers sustained
Plaintiff/Stockholder (1)
William Ziegler
S. P. Shope, T. S. McClelland
v.
Defendant/Corporation (1)
Lake Street Elevated Railroad Company
Knight & Brown, Dupee, Judah & Willard, S. P. McConnell, John A. Rose
Other parties: John J. Mitchell — Defendant/Officer, Metropolitan West Side Elevated Railroad Company — Defendant, Chicago and South Side Rapid-Transit Railroad Company — Defendant
Overview
The decree of the circuit court is affirmed.
Case summary
William Ziegler, a stockholder of Lake Street Elevated Railroad Company, filed an equity suit to enjoin various contracts and appoint a receiver. The bill challenged multiple agreements including those from December 1894, agreements with Columbia Construction Company and West Chicago Street-Railroad Company, and a proposed mortgage scaling agreement. After amendments adding defendants, the circuit court sustained demurrers and dismissed the bill for want of equity. On appeal, the Seventh Circuit affirmed on two grounds: (1) the bill was multifarious because it joined separate and independent matters not proper for one suit, and (2) the plaintiff failed to show he had sought corporate action to redress the alleged wrongs before filing suit, as required by equity rules for stockholder derivative actions.
Abstract
A stockholder filed an equity suit seeking to enjoin various corporate contracts and appoint a receiver, challenging agreements with construction and railroad companies as well as a proposed mortgage. The circuit court dismissed the bill for want of equity after sustaining demurrers, and the appellate court affirmed on grounds that the bill was multifarious for joining separate matters and that the plaintiff failed to first seek corporate redress before suing derivatively. The decree dismissing the suit was affirmed.
Opinion of the court
Majority
opinionWOODS, Circuit Judgejoined by JENKINS, Circuit Judge, BUNN, District Judge
opinionWOODS, Circuit Judgejoined by JENKINS, Circuit Judge, BUNN, District Judge
- Bill was multifarious
- Stockholder failed to comply with equity rule requirements for derivative suits
- Even if merits were doubtful, dismissal was proper due to procedural defects
Jurisdiction
not challengedSubject matter
Federal circuit court appeal from dismissal of equity suit
Jurisdictional facts
- Appeal from Circuit Court of the United States for the Northern District of Illinois
Procedural posture
Posture at trial
Bill dismissed for want of equity after demurrers sustained
Posture on appeal
Direct appeal from dismissal order
Preserved issues
- Multifariousness of bill
- Stockholder's right to sue for corporate wrong
Legal categories
Business
Case record
Full case name
ZIEGLER v. LAKE ST. EL. R. CO.
Docket number
Not specified
Court
Circuit Court of Appeals, Seventh Circuit
Trial court
Circuit Court of the United States for the Northern District of Illinois
Trial court judge
Not specified
Decided
Opinion author
WOODS, Circuit Judge
Opinion type
published
Precedential status
precedential
Judges on panel
WOODS, Circuit JudgeJENKINS, Circuit JudgeBUNN, District Judge
Issues & holdings
2
Issues raised
2
affirmed
2
Holdings
1
Whether the bill was properly dismissed as multifarious
affirmed
Standard of review
Not specified (implied de novo for legal issue)
Disposition rationale
Bill joined separate and independent matters not proper for one suit
Preservation
Issue preserved for review
2
Whether plaintiff stockholder could maintain suit without showing effort to have corporation redress wrong
affirmed
Standard of review
Not specified (implied de novo for legal issue)
Disposition rationale
Plaintiff failed to comply with equity rule requiring effort to seek corporate action
Preservation
Issue preserved for review
Holdings of the court
Multifariousness
Bill was properly dismissed as multifarious because it joined separate and independent matters not proper for one suit
Agreements with Columbia Construction Company, West Chicago Street-Railroad Company, and proposed mortgage scaling agreement were distinct from each other and from loop road contracts; contract about trolley wires involved only specific companies
unanimousbinding precedent
Stockholder's derivative suit requirements
Stockholder cannot maintain suit for corporate wrong without showing effort to have corporation redress wrong, application to directors, or that such effort would be useless
Equity rule 94 requires full compliance; vague allegations of director complicity do not excuse failure to seek corporate action
unanimousbinding precedent
Error analysis
- Circuit court erred in dismissing bill as multifarious — procedural · no error foundNot applicable · not applicable
- Circuit court erred in dismissing bill for plaintiff's failure to seek corporate action — procedural · no error foundNot applicable · not applicable
Statutory interpretation
1Statute
Equity rule 94
Question
Requirements for stockholder to maintain suit for corporate wrong
Court's reading
Stockholder must show effort to have corporation redress wrong, application to directors, or that such effort would be useless; vague allegations of director complicity do not excuse compliance
Canons applied
Rule well settledPrecedent application
Standards of review
- Multifariousness of bill — de novo Legal determination of whether bill improperly joins distinct matters
- Stockholder's right to sue — de novo Legal determination of compliance with equity requirements
Timeline
4
Events
657
Days, incident to ruling
—
Span
factual eventcited in opinion
Agreement made (one of the challenged contracts)
Multifariousness
factual eventcited in opinion
Agreement made (one of the challenged contracts)
Multifariousness
rulingcited in opinion
Circuit court entered order sustaining demurrers and dismissing bill for want of equity
Outcome: Bill dismissed
Final judgment appealed from
All issues
appeal event
Circuit Court of Appeals decision affirming dismissal
Outcome: Affirmed
Final disposition of appeal
All issues
Facts & evidence
Key facts
5 facts- Plaintiff William Ziegler, a stockholder, sued Lake Street Elevated Railroad Company and others to enjoin certain contracts and appoint a receiver
- Multiple contracts were challenged: agreements of December 18 and 28, 1894; agreements with Columbia Construction Company; agreement with West Chicago Street-Railroad Company; proposed agreement for scaling mortgage debt
- Bill was amended multiple times, adding defendants
- Defendants filed general and special demurrers
- Circuit court sustained demurrers and dismissed bill on July 3, 1895
Disputed questions
- Whether the challenged contracts were proper subjects of attack in one suit
- Whether plaintiff properly sought corporate action before suing
Procedural history
6 steps- Original bill filed against Lake Street Elevated Railroad Company, its directors, officers, and John J. Mitchell
- Bill amended, then amended and supplemental bill filed
- Further amendments added Metropolitan West Side Elevated Railroad Company and Chicago and South Side Rapid-Transit Railroad Company as defendants
- Demurrers filed and sustained on July 3, 1895
- Bill dismissed for want of equity
- Appeal to Circuit Court of Appeals
Evidence in the record
Documentary
- Contracts of December 18 and 28, 1894
- Agreements with Columbia Construction Company
- Agreement with West Chicago Street-Railroad Company
- Proposed agreement for scaling mortgage debt
Challenged
- Evidence type: Various contracts and agreements · Challenge basis: Multifariousness - improper joinder in one suit · Trial court ruling: excluded · Reasoning: Separate and independent matters not proper for single suit · Challenged on appeal: true · Appellate outcome: affirmed
Objects of relevance
Trolley wires attached to timbers beneath trackLoop road construction
Authorities
Cited authorities (4)
Ziegler v. Lake St. El. R. Co., 69 Fed. 176
followedprecedentCircuit court opinion providing fuller statement of case
Watson v. United States Sugar Refinery, 34 U. S. App. 81, 88, 15 C. C. A. 662, 666, and 68 Fed. 769, 772
followedquotedprecedentCited for same equity rule requirement for stockholder suits
Brewer v. Proprietors, 104 Mass. 378
followedprecedentCited for equity rule requirement that stockholder must seek corporate action
Dodge v. Woolsey, 18 How. 331
followedprecedentCited for equity rule requirement that stockholder must seek corporate action
Related cases (4)
Ziegler v. Lake St. El. R. Co., 69 Fed. 176
lower court decisionBill dismissed for want of equity
Watson v. United States Sugar Refinery, 34 U. S. App. 81, 88, 15 C. C. A. 662, 666, and 68 Fed. 769, 772
prior appealCited for same equity rule requirement
Brewer v. Proprietors, 104 Mass. 378
precedentCited for equity rule requirement
Dodge v. Woolsey, 18 How. 331
precedentCited for equity rule requirement
Statutes
- Equity rule 94
Standards & doctrines
- Equity rule 94 for stockholder suits
- Doctrine against multifariousness in pleading
Legal principles applied
- Equity rule requiring stockholder to seek corporate redress before suing
- Prohibition against multifarious bills joining distinct matters
Notable quotes
“The rule Is well settled that a stockholder cannot maintain a suit for a wrong to the corporate body without showing either an effort to sot the corporation in motion to redress the wrong, an application made to the board of directors to that end, or that such effort or application would he useless”WOODS, Circuit Judge — Explaining equity requirements for stockholder derivative suitsCore legal principle applied in case
“A failure to seek action on the part of the corporation itself cannot be excused by vague and general averments of complicity on the part of the directors in the wrongs against which relief is sought.”WOODS, Circuit Judge — Applying equity rule to plaintiff's allegationsSpecific application of general principle to facts
Index terms75
Summary terms
Legal mechanisms
Various actions
Various actors
Legal concepts
Legal outcomes
Legal issues
Legal procedures
Legal remedies
Legal evidence
Legal arguments
Legal defenses
Legal penalties
Legal procedural steps
Geo locations
Judges
Attorneys
Procedural terms
Substantive offenses
Entities and documentation
Legal actions
Action type
affirmed
Target
decree of the circuit court
Appealed from
Circuit Court of the United States for the Northern District of Illinois
Context
Circuit Court of Appeals affirms dismissal of bill for want of equity
Scope
full
Disposition vote
unanimous
Action type
dismissed
Target
bill in equity
Appealed from
Circuit Court of the United States for the Northern District of Illinois
Context
Circuit court sustained demurrers and dismissed bill for want of equity on July 3, 1895
Scope
full
Search facets
Parties
Judges
Bunn
Courts
Locations
Statutes cited