MOUNT, C. J., and FULLERTON, CROW, DUNBAR, RUDKIN, and ROOT, JJ., concur.

(43 Wash. 43)

NINNEMAN v. FOX et al. (Supreme Court of Washington. July 9, 1906.) 1. CORPORATIONS-STOCKHOLDERS-INJURY TO CORPORATION-RIGHT TO SUE.

Neither a stockholder of a corporation nor a person who has parted with his stock can maintain an action against third persons for injuries sustained by their fraud in the performance of a contract between them and the corporation.

[Ed. Note.-For cases in point, see vol. 12, Cent. Dig. Corporations, §§ 777, 783.] 2. DAMAGES-PROXIMATE RESULT-REMOTE

NESS.

A corporation of which plaintiff was manager contracted to sell its output to defendants, in performance of which defendants and their agents defrauded the corporation out of a large sum by means of false tally lists and deception and concealment as to the quantity and value of lumber delivered. The stockholders became dissatisfied, and forced the plaintiff to resign and transfer his stock to other stockholders, whereupon he sued for the depreciation in value of his stock, for one-fifth of the amount out of which the corporation had been defrauded, and for damages resulting from his enforced resignation and injury to his reputation. Held, that such damages were too remote to be recovered, whether defendants' acts be regarded as a breach of contract between them and the corporation or as a tort against the corporation.

Appeal from Superior Court, Spokane County; Wm. A. Huneke, Judge.

Action by William F. Ninneman against A. M. Fox and another. From a judgment dismissing the action after the sustaining of a demurrer to the complaint plaintiff appeals. Affirmed.

Charles L. Heitman, R. L. Edmiston, and William I. Birdsall, for appellant. Cullen & Dudley, for respondents.

RUDKIN, J. The legal sufficiency of the complaint is the only question presented on this appeal. The pleading itself is somewhat voluminous, but we think the following statement will sufficiently disclose the nature of

the plaintiff's demand. Between the years 1901 and 1904 the Hope Lumber Company, a corporation of the state of Idaho, was engaged in the manufacture and sale of lumber, and during that period the plaintiff was its manager at a salary of $1,200 per year. The capital stock of the company was $25,000, and the plaintiff was, during the times complained of, the owner of one-fifth of the capital stock. In March, 1902, the company entered into a contract with the defendants whereby the company agreed to sell, and the defendants agreed to buy, the entire output of manufactured white and yellow pine lumber from the company's mills for the period of one year. In March, 1903, this contract was extended for an additional year, or until March, 1904. Between March, 1902, and March, 1904, the defendants and their agents defrauded the Hope Lumber Company out of the sum of $11,390.25, by means of false tally lists and by deception and concealment as to the quantity and value of the lumber delivered under the above contract. The complaint avers that by reason of this fraud the business of the company diminished in value, the dividends on its stock were lessened, and the stockholders suffered injury and loss. It is further

averred that the stockholders became dissatisfied with the small dividends received, and concluded that the plaintiff was not a competent person to manage the affairs of the company; that the stockholders requested and demanded that the plaintiff resign as manager, and that he assign his stock to the other stockholders, and that by reason of this request and demand the plaintiff did resign and did transfer his stock to the other stockholders. The damages claimed may be itemized as follows: (1) Loss arising from the depreciation in the value of the plaintiff's stock, $7.000; (2) one-fifth of the amount out of which the defendants defrauded the Hope Lumber Company, the same being a hidden asset of said company at the time the plaintiff transferred his stock, $2,278; (3) damages resulting from the enforced resignation of plaintiff and injury to his reputation, $15,000. A general demurrer to this complaint was sustained, and from the order of dismissal the present appeal is prosecuted.

The damages claimed by the appellant may be divided into two classes: First, damage; resulting to him as a stockholder; and second, damages resulting from the loss of employment and injury to his reputation. All the authorities agree that a stockholder, as such, cannot maintain an action against a third person, either for a breach of a contract between such third person and the cor poration of which he is a stockholder, or for an injury to the corporation or its property All such wrongs must be redressed by the corporation itself and in the corporate name The rule is thus stated in 26 Am. & Eng. Enc. of Law (2d Ed.) p. 970: "A stockholder,

merely as such, cannot have an action in his own behalf against one who has injured the corporation, however much the wrongful acts have depreciated the value of his shares. Thus, he cannot sue at law to recover for goods sold by the corporation, or in equity to enforce specific performance of its contracts; nor can be maintain an action of replevin in his own name to recover corporate property. The rule applies to wrongful acts committed by directors, officers, or majority stockholders of the corporation, as well as to those committed by strangers. And the fact that the complaining stockholder has become the owner of all the capital stock, or that the corporation has done no business for a number of years, and has no property excepting the claim sued upon, does not enlarge his rights in this respect." We have no reference now to suits brought by a stockholder where the corporate authorities refuse to act. No such case is presented here. On the contrary, it is admitted that the defendants made full reparation to the Hope Lumber Company after the appellant ceased to be a stockholder. It is manifest therefore that the appellant has no cause of action against the respondents for the loss of dividends or for damages resulting from the depreciation in the value of his stock. He had no such right of action as a stockholder, and it will not be maintained that he occupies a stronger position since he transferred his stock.

We think it is equally well settled that the other damages claimed by the appellant are too remote, and this, whether we view the acts of the defendants as a mere breach of contract or as a tort against the corporation. In Roddy v. Missouri Pacific Ry. Co., 104 Mo. 234, 15 S. W. 1112, 12 L. R. A. 746, 24 Am. St. Rep. 333, the court said: "The right of a third party to maintain an action for Injuries resulting from a breach of a contract between two contracting parties has been denied by the overwhelming weight of authority of the state and federal courts of this country and the courts of England. To hold that such actions could be maintained, would not only lead to endless complications, in following out cause and effect, but would restrict and embarrass the right to make contracts by burdening them with the obligations and liabilities to others, which parties would not voluntarily assume. Winterbottom Wright, 10 Mees. & W. 109; Burdick v. Cheadle, 26 Ohio St. 393, 20 Am. Rep. 767; Maguire v. Magee (Pa.;. April 23, 18SS), 13 Atl. 551; Necker v. Harvey, 49 Mich. 518, 14 N. W. 503; Savings Bank v. Ward, 100 U. S. 195, 25 L. Ed. 621; Deford v. State, 30 Md. 195; Marvin Safe Co. v. Ward, 46 N. J. Law, 19; Sproul v. Hemmingway, 14 Pick. (Mass.) 25 Am. Dec. 350; Mann v. Chicago, etc., Ry. Co., 86 Mo. 347; Lampert v. Laclede Gaslight Co., 14 Mo. App. 376; Gordon v. Livingston, 12 Mo. App. 267. The rule is put upon two grounds, either of which is un

v.

questionably sound. One ground is given by the court in the opinion in Winterbottom v. Wright, 10 Mees. & W. 109, as follows: 'If we were to hold that plaintiff could sue in such a case, there is no point at which such actions would stop. The only safe rule is to confine the right to recover to those who enter into the contract; if we go one step beyond that, there is no reason why we should not go fifty.' The other ground is thus stated in the New Jersey case above cited: "The object of parties in inserting in their contracts specific undertakings with respect to the work to be done is to create an obligation inter sese. These engagements and undertakings must necessarily be subject to modifications and waiver by the contracting parties. If third persons can acquire a right in a contract, In the nature of a duty to have it performed as contracted for, the parties will be deprived of control over their own contracts.' Plaintiff, not being a party to the contract, cannot maintain this action on account of injuries resulting from any breach of duty defendant owed Pickle, arising purely out of the terms of the contract between them." See, also, Buckley v. Gray, 110 Cal. 339, 42 Pac. 900, 31 L. R. A. 862, 52 Am. St. Rep. 88. If it be claimed that the acts of the respondents amounted to a tort against the corporation, the same rule applies. Dale et al. v. Grant et al., 34 N. J. Law, 142; Anthony v. Slaid, 11 Metc. (Mass.) 290; Rockingham M. F. Ins. Co. v. Bosher, 39 Me. 253, 63 Am. Dec. 618; Insurance Co. v. Railroad Co., 25 Conn. 265, 65 Am. Dec. 571; Carpenter v. Penn. R. R. Co., 13 App. Div. 328, 43 N. Y. Supp. 203. -In Insurance Co. v. Railroad Co., supra, the court said: "An individual slanders a merchant and ruins his business: is the wrongdoer liable to all the persons who in consequence of their relations by contract to the bankrupt, can be clearly shown to have been damnified by the bankruptcy? Can a fire insurance company who have been subjected to loss by the burning of a building resort to the responsible author of the injury, who had no design of affecting their interest, in their own name and right? Such are the complication of human affairs, so endless and far reaching the mutual promises of man to man in business and in matters of money and property, that rarely is a death produced by human agency which does not affect the pecuniary interest of those to whom the deceased was bound by contract. To open the door of legal redress to wrongs received through the mere voluntary and factitious relation of a contractor with the immediate subject of the injury would be to encourage collusion and extravagant contracts between men, by which the death of either, through the involuntary fault of others, might be made a source of splendid profits to the other, and would also invite a system of litigation more portentous than our jurisprudence has yet known. So self-evident is the prin

ciple that an injury thus suffered is indirectly brought home to the party seeking compensation for it, that courts have rarely been called upon to promulgate such a doctrine." Where a contract is entered into for the benefit of a third person, or where a tort is committed against one person for the purpose of maliciously injuring another, a different rule applies, but no such case is presented here.

The demurrer was properly sustained, and the judgment is affirmed.

MOUNT, C. J., and FULLERTON, HADLEY, DUNBAR, CROW, and ROOT, JJ., cou

cur.

(3 Wash. 110)

CITY OF PUYALLUP v. LACEY et al. (Supreme Court of Washington. July 17, 1906.) 1. EMINENT DOMAIN-PROCEEDINGS-APPEAL -DECISIONS REVIEWABLE-DISMISSAL PETITION.

OF

Laws 1905, p. 102, c. 55, § 50, providing that the procedure under the act authorizing cities to exercise the right of eminent domain, and in relation to the taking of appeals, shall be the same as in other civil actions, does not restrict the right of review in eminent domain proceedings to the question of damages, but the right is regulated by Ballinger's Ann. Codes & St. § 6500, subd. 1, providing that an appeal from any final judgment shall bring up for review any order made in the action, either before or after judgment, and a city may appeal from an order dismissing a petition in proceedings to condemn land.

[Ed. Note.-For cases in point, see vol. 18, Cent. Dig. Eminent Domain, §§ 660-664.] 2. SAME DELEGATION OF POWER-STATUTESCONSTRUCTION.

Laws conferring the right of eminent domain must be strictly construed.

[Ed. Note.-For cases in point, see vol. 18, Cent. Dig. Eminent Domain, §§ 25, 30.]

3. SAME-POWER OF MUNICIPAL CORPORA

TIONS.

A municipal corporation cannot exercise the right of eminent domain beyond its corporate limits without express legislative authority.

4. SAME STATUTES-CONSTRUCTION.

Ballinger's Ann. Codes & St. § 938, authorizing cities of the third class to improve rivers flowing through or adjoining the same, and section 944, providing that when it shall become necessary for the city to take private property for the purpose of straightening the channel of a stream, and the council cannot agree with the owner, the city may proceed to acquire the same in the manner provided by title 21, c. 5, art. 3, relating to the erection of wharves, authorize a city of the third class to condemn land, within and without its corporate limits, for the purpose of straightening a stream forming a part of its boundary. 5. SAME-PROCEEDINGS TO CONDEMN LANDPETITION-SUFFICIENCY.

Under Laws 1905, p. 84, c. 55, authorizing cities of the third class, etc., to condemn land for any public use after just compensation is first made or paid into court for the owner, a petition by a city to condemn land for a public use need not allege the failure to agree as to the price to be paid, though Ballinger's Ann. Codes & St. § 944, only authorizes condemnation after failure to agree, the power to condemn being

conferred by section 944, while the procedure is regulated by the act of 1905.

[Ed. Note.-For cases in point, see vol. 18, Cent. Dig. Eminent Domain, § 514.] 6. SAME COMPENSATION-PREPAYMENT.

The damages assessed in a proceeding under Laws 1905, p. 84, c. 55, authorizing cities to condemn land, must be paid by the city instituting proceedings to condemn land before the same can be taken.

[Ed. Note.-For cases in point, see vol. 18, Cent. Dig. Eminent Domain, § 198.]

Appeal from Superior Court, Pierce County; Thad Huston, Judge.

Condemnation proceedings by the city of Puyallup against Michael Lacey and others. From an order dismissing the petition, the city appeals. Reversed and remanded.

A. R. Titlow and B. F. Jacobs, for appellant. H. G. & Dix H. Rowland, for respond

ents.

RUDKIN, J. The city of Puyallup is a municipal corporation of the third class; the Puyallup river forming its northerly boundary. On the 20th day of September, 1905, the city passed an ordinance, “providing for the institution of an action for the purpose of condemning a right of way across certain described lands for the purpose of straightening the course of the Puyallup river, along, in front of, and adjoining the city of Puyallup, and for the purpose of appropriating certain lands for said right of way, ascertaining the value thereof, and the damages sustained by the abutting and adjoining owners by reason of said appropriating and taking." Pursuant to this ordinance, a petition was filed in the superior court of Pierce county, for the purpose of appropriating and condemning certain lands therein described, owned by the respondents and others. A portion of the land sought to be appropriated lies within and a portion without the corporate limits of the city. The nature of the improvement and the object to be accomplished can best be described by reference to the following plat or map, which appears in the record:

A

The crooked lines represent the present channel of the river. The lands sought to be appropriated consist of a strip 200 feet in width between the points A and B, B and C, and D and E, respectively. It will thus be seen that the strips lying between the points A and B and D and E lie wholly without the corporate limits of the city. A demurre interposed to the petition in the court below was sustained. The petitioner elected to stand on its petition, and the present ap peal is taken from the order of dismissal. At the hearing in this court the respondeut

moved to dismiss the appeal, for the reason that the order is not appealable, and this court has no jurisdiction. This contention is based on Western American Co. v. St. Ann Co., 22 Wash. 158, 60 Pac. 158, and numerous other cases in this court following that decision. The appeal in Western American Co. v. St. Ann Co. was prosecuted under section 5645, Ballinger's Ann. Codes & St., which provides as follows: "Either party may appeal from the judgment for damages entered in the superior court to the Supreme Court of the state within thirty days after the entry of judgment as aforesaid, and such appeal shall bring before the Supreme Court the propriety and justness of the amount of damages in respect to the parties to the appeal;" and the court held that on such appeal it could only review questions affecting the propriety or justness of the damages claimed or allowed. The appeal in this case is prosecuted under the act of March 3, 1905 (Laws of 1905, p. 84, c. 55), which especially applies to cities. Section 50 of that act provides as follows: "Except as herein otherwise provided, the practice and procedure under this act in the superior court and in relation to the taking of appeals and prosecution thereof, shall be the same as in other civil actions, but all appeals must be taken within thirty days from the date of rendition of the judgment appealed from." It will thus be seen that the act of 1905 does not restrict the right of review to the question of damages alone, but such right is regulated and controlled by subdivision 1 of section 6500, Ballinger's Ann. Codes & St., which provides that "An appeal from any such final judgment shall also bring up for review any order made in the same action or proceeding either before or after the judgment, in case the record sent up on the appeal, or any supplementary record sent up before the hearing thereof, shali show such order sufficiently for the purposes of a review thereof." The motion to dismiss the appeal is therefore denied.

The principal objection urged against the petition is that a municipal corporation of the third class has no power to exercise the right of eminent domain or condemn lands, for the purpose of straightening or diverting the channel of a stream, outside of and beyond its corporate limits. The respondents contend that laws conferring the right of eminent domain must be strictly construed, and that a municipal corporation cannot exercise such right beyond its corporate limits, without express legislative authority. these general propositions we fully agree, but is there express legislative authority for the proceedings now under consideration? Subdivision 11 of section 938, Ballinger's Ann. Codes & St., provides that cities of the third class shall have power "to improve rivers and streams flowing through such city, or adjoining the same; to widen, straighten, and deepen the channel thereof, and re

With

move obstructions therefrom; to improve the water front of the city, and to construct and maintain embankments and other works to protect such city from overflow." Section 944 provides that whenever it shall become necessary for such city to take or damage private property for the purpose of widening, straightening, or diverting the channel of a stream or the improvement of the water front, and the city council cannot agree with the owner thereof as to the price to be paid, the city council may proceed to acquire, take, or damage the same in the manner provided by cuapter 5, art. 3, tit. 21, Code. There is, therefore, express legislative authority for straightening and diverting the channels of streams flowing through or adjoining cities of the third class, and for acquiring, taking, and damaging lands for that purpose. The respondents contend, however, that the operations of the city in straightening or diverting the channel of a stream must be confined to the side of the stream within the corporate limits, whenever such stream forms the boundary line of the city. This, in our opinion, is a narrow and unwarranted construction of the statute, and would in many instances wholly defeat the object the Legislature had in view. In some cases, no doubt, the channel might be straightened or diverted by works constructed wholly on the city side of the stream, but in other cases the result could only be accomplished by works constructed wholly on the opposite side, while in many instances, such as the case at bar, the object in view could only be accomplished feasibly by works constructed on both sides of the stream. We are therefore of opinion that section 944, supra, expressly authorizes the appropriation of the property in controversy in this proceeding.

The respondents further contend that section 944 only authorizes proceedings to condemn, in case the city council cannot agree with the owner as to the price to be paid, and that the petition, failing to allege such inability to agree, fails to state a cause of action. While it is true that section 944 only authorizes condemnation after failure to agree, yet the right or power to condemn is conferred by that section and the procedure is regulated by the act of 1905, supra, under which the proceedings in question were instituted. The latter act authorizes proceedings under it, "to condemn land and other property and damage the same for any other public use within the authority or such city after just compensation having been first made or paid into court for the owner in the manner prescribed by this act"; and the failure of the parties to agree on the price is not a condition precedent to the institution of proceedings under the act. It is further argued that section 20 of the act of 1905 is void, because the mode prescribed for paying the damages assessed is in violation of article 1, § 16, of the Constitution;

but that question does not arise in this case. Whatever damages are assessed in this proceeding must be paid by the city, before the property can be taken or damaged as in other cases.

The judgment of the court below is therefore reversed, with directions to overrule the demurrer, and for further proceedings not inconsistent with this opinion.

MOUNT, C. J., and HADLEY, FULLERTON, CROW, and ROOT, JJ., concur.

(43 Wash. 141)

FARWELL v. CITY OF SEATTLE et al. (Supreme Court of Washington. July 19, 1906.) 1. MUNICIPAL CORPORATIONS - POWERS GENERAL.

IN

A municipal corporation is limited in its powers to those granted in express words or to those necessarily or fairly implied in or incident to the powers expressly granted, and also to those essential to the declared objects of the corporation.

[Ed. Note.-For cases in point, see vol. 36, Cent. Dig. Municipal Corporations, §§ 144, 149.]

2. MUNICIPAL CORPORATIONS-WATER SUPPLY -SUPPLY TO OTHER MUNICIPALITIES.

Ballinger's Ann. Codes & St. § 739, and the charter of a city of the first class gave it power to acquire waterworks and to supply the city and its inhabitants with water. Laws 1897. p. 326, c. 112, § 1, in defining the powers of cities to construct and operate waterworks confines the purpose to the furnishing of such city, the inhabitants thereof and "any other persons" with a supply of water. Held, that the phrase "any other persons" only applies to persons within the corporate limits, and a city of the first class has no authority to supply water to another municipality.

Appeal from Superior Court, King County: Arthur E. Griffin, Judge.

Action by P. W. Farwell against the city of Seattle and others. From a judgment in favor of defendants, plaintiff appeals. Reversed and remanded.

John W. Roberts, for appellant. Scott Calhoun, for respondents.

HADLEY, J. This is an action to enjoin the authorities of the city of Seattle from entering into contracts to furnish water to the city of Ballard, and to cancel an existing contract on that subject. The corporate capacity of both cities is alleged, and it is shown that the plaintiff is a resident citizen and taxpayer of the city of Seattle; that he is a user and consumer of water furnished from the city water system of said city, and that he and other inhabitants pay for water supplied to them a fixed rate or charge established by the city; that the plaintiff brings this action in his own behalf, and of any and all taxpayers of said city who may desire to join with him by intervention or otherwise. It is averred that prior to March 15, 1902, said city by virtue of its authority under the laws of Washington constructed a water system gen

erally known as the "Cedar River Water System," for the purpose of furnishing said city and its inhabitants with an adequate supply of water; that said system was at the above-mentioned time, ever since has been, and now is owned and operated by said city and is the source of its water supply; that on said 15th day of March, 1902, the city of Seattle by ordinance directed its board of public works to enter into a contract with the city of Ballard, whereby the former city should agree to furnish the latter one a supply of water at and for the price of $60 per 1,000,000 gallons for all water so furnished; that such a contract was afterwards entered into between the two cities, and the city of Seattle did furnish water to the city of Ballard upon the terms named, until on or about the 8th day of June, 1905; that on the last-named date the city board of public works, having been directed so to do by ordinance of the city of Seattle, entered into another contract with the city of Ballard, which by its terms extends until June 1, 1913; that by said contract the city of Seattle has sought to bind itself to furnish to the city of Ballard continuously and uninterruptedly a supply of water at rates varying according to the amount of water supplied in any calendar month, and that the same has since been continuously, and is now, being SO supplied from the said Cedar river water system. It is further alleged that the municipality of Ballard is a nonresident of the city of Seattle, and is not an inhabitant thereof; that it does not transact any of its corporate business or any business within the corporate limits of the city of Seattle; that the water being so furnished and so agreed to be furnished is being, and will be, furnished and delivered outside and beyond the corporate limits of the city of Seattle, and within the corporate limits of the city of Ballard. It is also alleged that in order for the city of Seattle to comply with the terms of its said agreement, it became necessary for the city to expend, and that it did expend, large sums of money in extending and building its water mains without and beyond the corporate limits of the city of Ballard, for the sole and only purpose of delivering water outside of the corporate limits of Seattle, and to a municipal corporation not an inhabitant of Seattle; that large sums of money have been expended, and are being expended, to maintain such extended water system, to the great damage of the taxpaying and waterconsuming inhabitants of Seattle. It is alleged that the city of Seattle is about to enter into further contracts with the city of Ballard whereby the former city shall bind itself to further extend its water system without and beyond the corporate limits of Seattle and within the corporate limits of Ballard; that the city council of Seattle is threatening to pass, and unless restrained