It

chased 240 shares of the treasury stock. does not appear what amount, if any, of the remainder of the treasury stock was sold. The only information conveyed by the complaint is by the following extract therefrom: "Complainants further allege that, of the forty thousand shares of capital stock (the treasury stock), they have no information as to how much of the same was sold, but allege, on information and belief, that enough of the same was sold to have paid off any and all indebtedness that may have at any time been incurred by the defendant company, and that at the time of the institution of the suit by defendant William S. Ide, more fully hereinafter referred to, there was treasury stock in the hands of the proper officers of said company which could and should have been used for the payment of any legal or equitable indebtedness against said company." The indebtedness of the company is not averred, and there are no facts given from which it can be even conjectured what amount, if any, of this treasury stock, other than the 240 shares above mentioned, was sold. William S. Ide, J. W. Graham, George W. Allen, Thomas B. McCormack, Walter B. Brooks, John K. Sullivan, and Richard T. Clarke were designated in the articles of incorporation as directors, and were still such-according to the averments of the complaint-at the time of the institution of the present suit. September 27, 1890, five persons-W. S. Ide, R. T. Clarke, C. E. Markeson, D. L. Brownersmith, and J. W. Bradshaw-assuming to act as a board of directors of the Incas Mining Company, sitting at Columbus, Ohio, fraudulent13, as it is alleged, authorized the issuance of the following note to W. S. Ide: "$1,500.00. Columbus, Ohio, Sept. 27th, 1890. Thirty days after date, we promise to pay to the order of W. S. Ide, fifteen hundred dollars at the Fourth National Bank of this city, with interest at the rate of eight per cent. per annum, value received. The Incas Mining Company, by C. E. Markeson, its President." Default having been made in the payment of the note, suit was instituted thereon by the payee, W. S. Ide, in the district court of Lake county, Colo., December 12, 1890. Three days thereafter service of the summons was gotten upon one of the stockholders of the Incas Mining Company, John Walsh, and judgment recovered for the principal and interest of the note September 4, 1891. September 15, 1891, certain real estate of the judgment debtor, the Incas Mining Company, was levied on to satisfy the judgment, and sold October 10, 1891, to W. S. Ide. A sheriff's certificate of purchase issued, and on August 16, 1892, a sheriff's deed was made to W. S. Ide. No one of appellees prior to October 1, 1894, knew of the passing of the resolution purporting to authorize the execution of the note, or of the institution of the suit, or of the recovery of the judgment, or of any

one of the steps culminating in the issuance of the sheriff's deed to W. S. Ide. February 28, 1895, the present action was instituted against W. S. Ide and the Incas Mining Company to set aside the judgment, the certificate of sale, and the sheriff's deed. By agreement of the parties, upon facts immaterial to this ruling, W. H. Ide was substituted for W. S. Ide, one of the original defendants. The plaintiffs below (appellees) were four stockholders, who sued for themselves and all others similarly situated. The case was tried February 5, 1900. Plaintiffs had a decree. Defendants appeal, and urge as one of the grounds for reversal that the action should have been brought by the corporation, and not by its stockholders.

It affirmatively appears from the complaint that the wrongs complained of (the fraudulent note, its merger into judgment, and the sale and conveyance of defendant corporation's lands to defendant W. S. Ide) were direct wrongs to the corporation; that the directorate of the corporation consisted at the time of the institution of the present action of seven members, and has so consisted since the organization of the company, in 1881; that only two of them (Ide and Clarke) were in any wise connected with the alleged wrong. No request was made of this directorate or any of its members, nor was any effort made through the directors, to have an action instituted in the name of the corporation to redress the alleged wrongs. The only explanation offered why this was not done is the following allegation of the complaint:

"And your complainants further represent and allege that, of the seven directors first selected to manage the affairs of said company for the first year, none of the same were owners of the White Prince mine aforesaid, but were entirely selected from the owners of Across the Ocean lode mining claim, or because of their friendship to and for said Ide, and that two of the same, viz., defendant Ide and Richard T. Clarke, are of the board of directors, who have been assuming to act in Columbus, Ohio, as the directors of said company, and that a majority of said board provided for in the articles of incorporation, complainants fear, might, if notice were given them, co-operate with said Ide and those who have been assuming to act, and that it would be impracticable and dangerous to complainants' rights, as well as unavailing. for complainants to ask the parties who have been assuming to act as and for said company to join with complainants in this suit."

The reasons as we understand this paragraph assigned for not making application to the board are that its members were selected in 1881 from the owners of the Across the Ocean lode mining claim, or because of their friendship for said Ide. No fact is stated why having been owners of the lode mentioned would cause them to violate their

duty as directors, and countenance the alleged fraud against the corporation of which they are trustees. Nor is any fact alleged from which we are justified in concluding that their friendship for Ide in 1881 would prevent them from doing their duty as directors in 1895.

It is further alleged in the above paragraph that appellees feared, if notice were given of the intended suit, it would be dangerous to their rights. The mere fact that appellees entertained this fear does not justify us in concluding that grounds existed for it. The facts upon which such fear is grounded are not alleged. There are no allegations in the complaint of an application to the stockholders of appellants to take steps to right the alleged wrong. There are no allegations explaining why an application was not made to the stockholders. The capital stock of the company consisted of 200,000 shares. Eighty thousand shares were issued, as above stated, to the owners of the White Prince mining claim. Eighty thousand shares issued to "Wm. S. Ide and his former associates in the Across the Ocean lode mining claim." We have no definite information as to the disposition made of the 40,000 shares left as treasury stock, except as to the 240 shares sold to William M. Morrison, one of appellees. It thus appears that 80,000 shares of the issued stock were at the time of the institution of this suit in the hands of the former owners of the White Prince mining claim. Two hundred and forty shares owned by William M. Morrison, one of appellees. As it does not appear that more than 80,000 other shares had been issued, we assume, for the purpose of this ruling, that only 160,240 shares of stock of the company were outstanding at the time of the institution of this suit. These last-mentioned 80,000 shares were issued in 1881 to appellee Ide and his then friends. What were the relations between Ide and these friends at the time of the institution of this suit, we are not advised. Where and in what amounts this stock was held at such time, the complaint does not allege. It is not alleged in the complaint that some of these last-mentioned stockholders would not have co-operated with appellants to right the frauds alleged in the complaint, nor are facts alleged from which it appears that they would not have done so. To sum up, no request was made of the directors to take this proceeding. No excuse is offered for the failure of appellees to do so. No request was made of the stockholders to hold a meeting and remove the directorate, or take steps for a righting of the alleged wrong; nor is any explanation offered in the complaint for not having requested the stockholders to act. So far as we are advised by the complaint, all of the stockholders, except Clarke and Ide, might have co-operated in efforts to redress the wrongs complained of. The complaint does not inform us the number of shares of stock

held by Clarke and Ide. Knowledge of the wrong was had October 1, 1894; this suit was not instituted until practically five months thereafter; and yet during this interval there does not appear to have been any effort made to induce corporate action, and, so far as the complaint advises us, longer time might have been taken, if necessary, to obtain corporate action to redress the wrongs, without prejudice to the rights of the corporation. "Where the complaining shareholders do not sue to redress grievances peculiar to themselves, but proceed in right of the corporation, or, what is the same thing, in right of all shareholders, then the failure or refusal of the corporation itself to demand redress is a condition precedent to the right of the shareholders to sue or to appear as plaintiffs, unless a state of facts is alleged and proved which makes it apparent that such a demand would be futile." Commentaries on the Law of Corporations, Thompson, vol. 4, § 4500. In Foss v. Harbottle, 2 Hare, 461, the bill was by two shareholders of the company, suing for themselves and all other shareholders except the defendants. The defendants were five directors, one shareholder-not a director-and the solicitor and architect of the company. The charge was the fraudulent misapplication of assets of the company. The prayer of the bill was that defendants might be decreed to make good the shortage to the company arising from the act complained of. The appointment of a receiver to wind up the affairs of the company was also prayed. In ruling, the court, inter alia, said: "The possibility of convening a general meeting of the shareholders for the purpose of considering the acts of the board of directors was not, however, excluded by the allegations of the bill; and it was held that, in the absence of such an averment, plaintiffs could not maintain the action,

as, under

the circumstances, there was nothing to prevent the company, in its corporate capacity, from obtaining the redress asked by the plaintiff." Approved, Miller v. Murray, 17 Colo. 408, 30 Pac. 46. In Miller v. Murray, plaintiff owned 330 shares of capital stock of the Denver Fire Brick Company, organized under the laws of Colorado by plaintiff, Murray, and defendants Schwartz and Lynn and one Sheik. The par value of the capital stock of the company was fixed at $100,000, of which $33,000 was paid in by the plaintiff, Murray, his wife and daughter, $31,000 by defendants Schwartz and Lynn, and $21,000 by Sheik. The remaining $15,000 in stock was held in trust for the company, and never sold. Sheik was manager of the company, and defendant Miller acting clerk. In 1886 a board of directors was elected, and Miller was made director, secretary, and general manager of the company. In May, 1887, there was outstanding against the company, in addition to an indebtedness of $15,000 and accrued interest, secured by a trust deed

on the property, a further indebtedness of $5,000, secured by a second trust on the property. In 1887 the company's property was sold under the second trust deed to one Keener, who soon thereafter transferred the same to defendant Miller, who secured a release of the first trust deed. Miller organized a new company, adding the word "Manufacturing" to the name of the old company; calling the new company "The Denver Fire Brick Manufacturing Company." Thereupon Miller conveyed the property to the new company, which elected a board of directors, and Miller was made president. The action was by Murray, as stockholder of the old company, to set aside the sale to Miller and the new company, upon the ground that the purchase by Miller was fraudulent, and in violation of his trust as a director of the old company. Schwartz, president of the company, and Lynn, vice president, were both charged with conspiring with Miller. The defendants were Miller, the late company, its board of directors elected in 1886, the new company, and its board of directors, and the mortgagees, Crippen, Lawrence & Co. The plaintiff had a decree, which on appeal was reversed, the court holding that a majority of the stock of the old company was held by plaintiff and those acting with him: that they could have held a meeting of the stockholders, removed the old directors, and have elected a directorate that would have ordered the suit in the name of the corporation; and that therefore it was not necessary to institute the suit in the names of the stockholders. In the course of the opinion it is said: "Among other requisites of a bill of this nature, in addition to the grievances which would warrant this kind of relief to the company, it was held that, before the shareholder could be allowed to conduct a litigation, he should satisfactorily show that he had exhausted all the means within his reach to obtain, within the corporation itself, redress of his grievances. In addition to making an earnest effort to induce the managing body of the corporation to seek relief, he must further show, if he fails with the directors, that he has made an honest effort to obtain relief through the stockholders as a body, if time permits or has permitted him to do so. And if this be not done, he must show cause why it could not be done, or that it would be unreasonable to require it." As stated in a number of the authorities, "to maintain such a suit the stockholder must be able to show that otherwise there will be a failure of justice." Miller v. Murray. In Morgan v. King, 27 Colo. 539, 551, 63 Pac. 416, 419, it is said: "The usual rule is that an action cannot be maintained by stockholders on behalf of the corporation unless it appears that the party bringing the action has exhausted the means of putting the corporation in motion." In Hawes v. Oakland, 104 U. S. 450, 26 L. Ed. 827, the action was by a shareholder in the Contra 72 P.-5

Costa Waterworks Company, in behalf of himself and other shareholders, against the city of Oakland, the Contra Costa Waterworks Company, and its board of directors, to right a wrong to the corporation in furnishing to the city of Oakland an excessive amount of water, to the prejudice of plaintiffs and other stockholders. Relief was denied because it did not appear affirmatively that proper effort had been made by the shareholders to induce corporate action. In the course of the opinion the court said: "The efforts to induce such action as complainant desires on the part of the directors, and of the shareholders, when that is necessary, and the cause of failure in these efforts, should be stated with particularity.

The reason of the rule requiring an earnest and reasonable effort to induce corporate action to be pleaded and proven before the stockholder can maintain an action to right a direct wrong to the corporation is thus stated in Miller v. Murray, supra: "The vast and increasing importance of the business transacted by corporations, and the immense number of stockholders in many of these companies, require that courts should closely scrutinize actions brought by stockholders, where the cause of action is primarily one belonging to the company. If it be once conceded that such companies may be embarrassed and subjected to cost and expense by every stockholder who thinks he has a grievance, the usefulness of corporations would be seriously crippled. Corporations can act only through agents and officers appointed for that purpose in pursuance of the statute. Every stockholder knows this when he purchases his stock, and it is not unreasonable to require him to seek redress for his grievances through the company, or to show some reason why he does not do so. In the absence of such a showing, he ought not to be allowed to maintain an action as a stockholder, where the right of action properly belongs to the company." In Commenta. ries on the Law of Corporations (vol. 4), Thompson, § 4500, it is said: "The reason is that if every shareholder were allowed to bring such suits at pleasure the directors might find themselves harassed by a multiplicity of suits and by endless litigation. The principle is that the stockholder or stockholders seeking to maintain the action must show that they have used, in good faith, reasonabie efforts to obtain redress at the hands of the corporation."

When the principles of law so announced are applied to the facts appearing from the complaint herein, it fails to state a cause of action. It does not there affirmatively appear that appellees used reasonable efforts to obtain redress at the hands of the corporation before instituting this action. We have not considered the other grounds urged for a reversal, and intimate no opinion as to them.

Judgment reversed, with instructions to

ADJOINING LOT OWNERS-BUILDINGS-PARTY HALLS INJUNCTION-SUIT BY TENANT-PARTIES- STATUTES CONSTRUCTION - ARBITRATION-ESTOPPEL.

1. Where a common hallway, affording entrance to two hotels erected on separate lots and owned by different parties, had been used in common by the proprietors of such hotels under an agreement, and thereafter defendants, by the construction of fireproof shutters in the hallway, prevented plaintiff, a lessee of the other hotel, from obtaining access thereto, plaintiff's landlord, was not a necessary party to a suit to enjoin defendants from maintaining such shutters.

2. 2 Ballinger's Ann. Codes & St. § 5433, provides that an injunction may be granted to restrain the malicious erection of any structure intended to spite or annoy an adjoining proprietor, and, where any owner or lessee has maliciously erected such a structure with such intent, a mandatory injunction will lie to compel its abatement. Held, that the word "proprietor," as so used, meant the person occupying the premises either as tenant or owner.

3. A contract for the joint use of a party hall between two hotel buildings provided that all matters in dispute should be left to arbitration. Held, that where a complaint by a tenant of one of the hotels against the owner of the other building alleged that defendant had wrongfully obstructed the hallway by placing therein fireproof shutters, to prevent plaintiff and his guests from using such hallway, and that plaintiff had often removed the obstruction, but defendants nad replaced the same, defendants were estopped to allege that plaintiff could not sue to enjoin such acts until arbitration had been proposed and refused.

Appeal from Superior Court, King County; Boyd J. Tallman, Judge.

Action by Thomas Winsor against the German Savings & Loan Society and others. From a judgment in favor of defendants, plaintiff appeals. Reversed.

Chas. A. Kinnear and J. M. Epler, for appellant. Fred H. Peterson, for respondents.

MOUNT, J. This action was brought by the appellant to enjoin the respondents from closing up an entrance to a hallway, elevator, and stairway affording access to a hotel occupied by appellant in the city of Seattle. A demurrer to the complaint was sustained by the court below, and, plaintiff electing to stand on the allegations of his complaint, the cause was dismissed. Plaintiff appeals.

The complaint alleges, in substance, that the plaintiff is a lessee from the owner and in possession of lot 3 of block 10, Maynard's addition to Seattle, on which lot is located a building known as the "Richelieu Hotel." and used as such by the plaintiff; that the defendants are in possession of lot 4, being an adjoining lot in the same block, on which

lot is located a hotel known as the "Palmer House"; that these two buildings have a common entrance, the same being a hallway 14 feet wide, located on the ground floor on the line dividing said lots 3 and 4, and running back to an elevator on lot 3, and to a stairway on lot 4, at the end of the common hall; that the elevator and stairway lead to a hall above, which is also a common hall, affording ingress and egress to both buildings; that in this hall there is constructed an archway through which oc cupants must pass going to and from the buildings by the elevator and stairway; that the defendants have placed at said arch in said hall, on the property in possession of plaintiff, fireproof shutters, and have fastened and locked the same, solely for the purpose of preventing the plaintiff and his guests from making ingress and egress to and from plaintiff's hotel; that the placing of the shutters in said hall was a trespass; that plaintiff has often removed the same, but defendants have replaced and locked the same, thereby annoying the plaintiff and his guests, and damaging his business; that, when said shutters are closed and locked, the guests of plaintiff's hotel are unable to reach the elevator or stairway, and are thus put to such annoyance as to quit said hotel as guests; that plaintiff has no adequate remedy at law; and that, unless defendants are restrained from doing the acts above named, plaintiff will suffer irreparable injury. Plaintiff then prays for a temporary restraining order, etc. The plaintiff, in his complaint, also set up the party-wall agreement entered into between the original owners of the buildings at the time the same were constructed, in which agreement the common use of the halls, elevator, and stairways was provided for. This agreement contained the following clause: "In case the parties hereto cannot agree on the value of that portion of said party wall to be used in the extension of said second party's said brick building, or in case of any other matter of disagreement between them under this agree ment, all such matters shall be left to arbitration and each of said parties shall select a reputable person who is a resident landowner in said city, who together shall determine the matter of difference between the parties, so submitted for arbitration to them; and in case said arbitrators cannot agree, they shall select a third of same qualifications who, acting with the other two, shall determine such matter of difference so submitted, and an award made under this agreement shall be final between the parties hereto." Subsequent to the filing of the complaint, the plaintiff, by leave of the court, filed a supplemental complaint, in which it was alleged that plaintiff had offered, subsequent to the filing of the complaint, to arbitrate the differences on account of the obstructions named, and that defendants had refused to arbitrate.

1. The points raised by the demurrer and argued in the brief are (1) that the owner of the building leased to plaintiff is a necessary party; and (2) that the plaintiff cannot maintain this action because the agree ment for the use of the halls in common provides for arbitration. Whether the plaintiff's landlord is a necessary party depends upon the nature of the action. This action, it seems to us, is one where plaintiff seeks to maintain the peaceable and quiet possession of property wrongfully disturbed by the defendants, and nothing more. The plaintiff alleges that he is a tenant in possession of the property, and that his possession has been disturbed by a wrongdoer. It is not necessary that the owner of the real property shall be made a party to an action by the tenant to maintain his right of possession against a wrongdoer. Taylor's Landlord and Tenant (8th Ed.) §§ 178, 200. Furthermore, the allegations of the complaint bring the plaintiff within the statute which provides, at section 5433, 2 Ballinger's Ann. Codes & St., as follows: "An injunction may be granted to restrain the malicious erection, by any owner or lessee of land, of any structure intended to spite, injure, or annoy an adjoining proprietor. And where any owner or lessee of land has maliciously erected such a structure with such intent, a mandatory injunction will lie to compel its abatement and removal." Under this section the proprietor may maintain the action. The word "proprietor" means the person occupying the premises either as tenant or owner.

2. This court, in Van Horne v. Watrous, 10 Wash. 525, 39 Pac. 136, said: "Courts will enforce contracts to arbitrate disputes and make the decision of arbitrators final where the parties to a contract make it clearly to appear that such was their intention; but, whenever they leave it doubtful whether such a method of settling a disputed question was intended to be left to the final decision of arbitrators, the construction is in favor of the right to resort to the courts for redress in the usual manner." And this was quoted with approval in Zindorf Construction Co. v. Western American Co., 27 Wash. 31, 67 Pac. 374, where the decisions of this court upon that question are reviewed. But conceding this rule, and also conceding that it clearly appears from the contract for arbitration that the use of the hallway, elevator, and stairway by tenants is a matter which shall be left to arbitration, still the defendants cannot claim that right in this case; for, if it be true, as alleged, that they have unlawfully and wrongfully taken possession of the hallways, elevator, and stairway, and forcibly deprived plaintiff of the use thereof, they at least by these acts have waived the arbitration clause in the agreement, and cannot now be heard to say that "we are in possession wrongfully, but, before you have any rights which may be enforced, you must propose an arbitration, and then, if we refuse, you may

An agree

resort to the courts for redress." ment for arbitration necessarily implies that the property over which the dispute arises must remain in statu quo pending the arbitration. Where one of the parties to a contract of arbitration willfully violates the contract, and wrongfully dispossesses the other, he cannot be heard to say that the other must propose an arbitration before his right of action accrues. Arbitration will not be enforced at the instance of a party who willfully violates the contract, who is a wrongdoer, and who by his wrong changes the status quo of the parties or property in dispute. The complaint alleges, in substance, that the defendant wrongfully obstructed the hallway by placing therein fireproof shutters solely for the purpose of preventing the plaintiff and his guests from using the said hallway; that plaintiff has often removed these obstructions, but defendants have replaced the same. Under this allegation, it

was not necessary for appellant to offer to arbitrate.

For these reasons, the judgment of the lower court is reversed, and the cause remanded, with instructions to overrule the demurrer.

FULLERTON, C. J., and HADLEY, DUNBAR, and ANDERS, JJ., concur

(31 Wash. 386)

SNIPES et al. v. KELLEHER et al. (Supreme Court of Washington. March 25, 1903.)

MORTGAGES-FORECLOSURE-BILL TO REDEEM -LACHES-FRAUD-EQUITABLE RELIEF.

1. In 1894 plaintiff permitted defendant's decedent to foreclose a mortgage held by him on plaintiff's land, relying on decedent's alleged promise to execute a declaration showing that he held the property in trust for plaintiff. Decedent failed to execute the declaration, but, according to plaintiff's bill, promised to do so at diverse times up to 1901. In March, 1901, he refused to execute it. In July decedent died. In October plaintiff filed his bill to redeem. Held, that the bill was barred by laches.

2. A bill filed by a mortgagor to obtain the right to redeem from a foreclosure sale after the statutory period for redemption has expired, which shows that at the time of foreclosure there was a second mortgage on the property, and judgments against the mortgagor, which were a lien thereon; that the mortgagee foreclosed at the request of the mortgagor, and prayed judgment for more than the amount due. with an understanding that he would execute a declaration of trust in the mortgagor's favor: and that the mortgagor suffered default, and allowed the entry of the excessive judgmentdiscloses a fraudulent attempt on the mortgagor's part to defeat the claims of other creditors, and states no cause of action in equity.

Appeal from Superior Court, King County; Boyd J. Tallman, Judge.

Bill by Ben E. Snipes and others against Daniel Kelleher, as administrator of John W. Thompson, deceased, and others. Demurrer sustained, and plaintiffs appeal. Affirmed.