37 W. Va. 73 | W. Va. | 1892
This was a suit in equity brought in the Circuit Court of Taylor county by Janies Boyce against the Montauk Gas Coal Company, Henry G. Davis, Thomas Edward Hamble-ton, John A'. Ilambleton, Thomas Edward Hambleton, executor of Augustus McLaughlin, deceased, John T. White aud David F. Hotchkiss, for the purpose of foreclosing a mortgage and obtaining a decree for. the sale of certain lands, coal and coal privileges situated in said county.
The plaintiff in his bill alleged that on the 21st day of December, 1880, the defendant the Montauk Gas Coal Company, a corporation duly organized under the laws of the state of New York, by deed of mortgage of that date conveyed to him certain tracts of land, coal land and. coal rights and privileges situate at or near Elemington, in Taylor county, in the State of West Virginia, which were conveyed to the said company by John White and Cornelia L. White, his wife, by‘deed dated the 6th day of November,
After describing said lands, coal lands and coa-1 privileges more particularly, as to their locality etc., the plaintiff further alleged that said coal and land, with the right to mine aud remove the same,asset forth in said several deeds, was the property of the said the Montauk Gas Goal Company,
The plaintiff further alleged that on the 22nd day of October, 1880, said company entered into a written contract with him, by which he was to take charge of the coal mines and manage the mining operations and the business of the said company, situate in the county of Taylor,'in the State of West Virginia; — that ho should have exclusive control and management of the business, mining and operations, together with the principal office of the said company, in the city and State of Yew York; that possession and full control thereof were given him by said company on the 22d day of October, 1880, in pursuance of said contract; that the mining, shipping and selling of coal should he carried on under the exclusive control of the plaintiff, and the coal mined and shipped from the said defendant’s mines should he sold, hilled and shipped in the name of the plaintiff, who should collect the proceeds of all sales, but in the shipping thereof said coal should be designated as “Montauk Gas Goal Company’s Goal;” — that among other things the plaintiff’ was to have for wharfage, labor and all expenses attending the receiving, shipping and hilling of coal at the city of Baltimore, the sum of twenty five cents per ton on all coal shipped under said contract;- — -that the payment of the indebtedness of said defendant then existing, or that might thereafter be contracted during the continuance of said contract, should he under the exclusive management, supervision and settlement and control of the plaintiff; — that the plaintiff should be allowed interest at the rate of six per centum per annum on all moneys advanced by him for mining operations, freights or the liquidation of the liabilities of the said company, which then or thereafter might exist;
The plaintiff further alleged that in pursuance of said original contract, and said extension thereof, he took possession aud control of said co'al fields and mines, and proceeded to work and develop the same in accordance with the provisions of said contracts, aud invested from time to time, in the management and working of said mines, and in the payment of the liabilities of said company from the 20th day of October, 1880, to the 31st day of December, 1882, the aggregate sum of six hundred and ninety four thousand three hundred and seventeen dollars and eighty cents, and from said 31st day of December, 1882, to the 1st day of January, 1884, the aggre
The plaintiff furthur alleged that from the sale of coal and all other sources from November 16, 1880, to Decern--her 31, 1882, he received in pursuance of said contracts, six hundred and fifty four thousand four hundred and eighty six dollars and seventy cents — that from December 31, 1882, to .January 1, 1885, he also received eighty nine thousand nine hundred and ninety dollars and eighty eight cents — that from January 1, 1885, to the 1st of September, 1885, he received from coal, etc., ninety two dollars and eighty four cents — which aggregate receipts, with interest computed to 1st of September, 1885, amounted to seven hundred and eighty six thousand three hundred and eighty nine dollars and eighty one centsthus leaving due and wholly unpaid to the plaintiff the sum of one hundred and fifty thousand three hundred and sixty seven dollars and sixty six cents en the 1st of September, 1885, which is due the plaintiff" from said company.
The plaintiff also alleged that in view of the large and necessary expenditures in the preparation for mining and shipping coal, and the payment of debts and liabilities of said defendant, said company on the 21st day of December, 1880, executed and delivered to him a mortgage on all the land, coal, coal rights, and coal privileges before mentioned, to secure him the payment of all moneys thereto
The said Montauk Gas Coal Company, being a non-resident, was proceeded against by order of publication; and on the 26th day of March, 1886, .the cause was heard upon the process executed upon the defendent Henry G. Davis, and the bill taken for confessed as to him. On order of publication duly executed as to the other defendants, proceedings at rules regularly taken and matured, and cause set for hearing, on motion of plaintiff the joint and separate answer of defendants, Ilenry G. Davis, Thomas E. Ilam-bleton, John A. llambleton and Thomas E. Hambleton, executor of Augustus McLaughlin, s the deposition of James Boyce, Jr., Albert P. Goedecke, John P. Ayers, ’William H. Worley, and James Boyce, the exhibits referred to in and made part of said depositions, the exhibits filed with and made paid of the bill, the court proceeded to foreclose said mortgage; and, it appearing to said court that thei'e were no other liens upon said propérty, it was decreed that unless the plaintiff's claim of one hundred and fifty thousand and sixty dollars and thirty two cents with interest thereon from the date of said decree, and the costs of said suit, be paid to the plaintiff in sixty days from that date, special commissioners thereby appointed, after giving bond in the penalty of fifty thousand dollars conditioned as required, should sell said property to satisfy the plaintiff’s claim aforesaid, and the costs of said suit, upon the terms
The said special commissioners also filed their report of sale of said property, which report was excepted to by said company, upon consideration whereof the court reserved its opinion as to whether or not said sale should be confirmed and referred the cause to a commissioner to ascertain and report what amount, if anything, said company owed the plaintiff, and whether the same was alien or not- upon the real estate of said defendant, and, if a lien, the nature, character, and priority of the lien, together with the property upon which it was a lien.
The Montauk Gas Coal Company, in its answer, alleged that it was a corporation under the laws of the state of blew 'York, and was therefore a non-resident of the State of West Virginia, but denied that on the 21st day of December, 1880, it convoyed by deed of mortgage any of its lands in Taylor county to plaintiff, and said it was informed that certain persons claiming to act for respondent did on the 21st clay of December, 1880, attempt to execute a mortgage on certain portions of its real estate, coal lands and coal privileges situate in Taylor county to plaintiff*; but it utterly denied the authority of said David T. Hotchkiss, who pretended to execute said deed on the part of said company, to so act, and alleged that neither the board of directors nor said Hotchkiss, as president thereof, could legally mortgage its lands for the purposes therein expressed, without the consent of the stockholders first given; and it denied that any such consent was given.
It further alleged that the paper filed with said pretended mortgage, purporting to be the consent and assent of the stockholders, was fraudulent; — that the plaintiff signed said paper, representing himself as the owner ,of five thous-
Said company also denied that it owned said Davis land, or that it ever bought the same from plaintiff or any one else, and said plaintiff attempted to sell said land to respondent at the exorbitant price of sixty five thousand dollars, and got a mortgage on all of its land to secure the payment, but that said company never purchased it, never took any conveyance of it, never executed any obligations to buy it or pay for it, never had possession of it, and that the plaintiff still has the title and possession of it.
And said respondent alleged it was a fraudulent scheme on the part of plaintiff to annoy, cheat and defraud the stockholders of the defendant company, by attempting to so manipulate the affairs of the said company as to make the company’s property liable for a parcel of land, at more than twice its value, which the company did not need and was in no condition to buy, intending thereby to get the entire property for nothing; — -that plaintiff, well knowing the value of all of said lands, as well as the condition* of the company, knew the company could not pay said sum of sixty five thousand dollars, and he also knew that very soon said sum of sixty five thousand dollars, with its interest and the costs attending a foreclosure of the mortgage, would consume the entire property of the company covered by said pretended mortgage.
Said respondent denied that it owed plaintiff anything, and demanded proof of every item of his account. It also denied that it should pay anything on account of said Davis laud; that it should be charged with either of the notes of David T. .Hotchkiss, of seven thousand five hundred dollars each, exclusive of interest, or that it should be charged with the salary of James Boyce, Jr., for pretend
Said company also alleges that the board of directors of said company had no knowledge of the existence of this suit until about the first of July, 1886 ; that notwithstanding said James Boyce, Jr., at the time pretended to be treasurer of said company, and was demanding pa,y for his services as such, and that his deposition was taken by plaintiff in the case on the 12th.day of March, 1886, yet he never informed any of the officers or directors of the company of the proceedings, but, as respondent charges, fraudulently withheld all information, in order to aid his father, the plaintiff, in securing judgment against respondent without its knowledge of the pendency of said suit; and said company denies the allegation that it is insolvent.
■ Ezra J. Stirling, a stockholder of said company ou the 18th day of November, 1889, tendered his petition and asked leave to file the same, which unis objected to by counsel for the plaintiff. The objection was overruled, and said petition was allowed to be filed, in which the same points were made as in the answer of said company, alleging’that said mortgage was never properly and legally executed, and that the making of said contracts and the execution of said mortgage were to the prejudice of the stockholders of said company.
On the 25th day of April, 1891, a decree was rendered in said cause setting aside the decree of sale made therein at the March term, 1886, and the sale made in pursuance thereof, and directiug'that the costs of said sale, and expenses thereof, be paid by plaintiff; dismissing the plaintiff’s bill; quashing the attachment which had been sued out by plaintiff and levied on the property of said company;
The defendant the Montank Gas Coal Company, by its answer, attempted to put in issue the validity of the mortgage which the plaintiff', by his bill, sought to enforce, claiming that neither the board of directors nór said Hotch-kiss as president could legally mortgage said respondents’ lands for the purposes therein expressed without the consent of the stockholders of said company first given ; and, it denies that any such consent was given, and says that the paper filed in this cause with said pretended mortgage purporting to be the consent and assent of the stockholders is fraudulent; — that the plaintiff signed said paper representing himself as the owner of five thousand nine hundred dollars shares of stock in said company, when in fact he did not own one share; that many of the stockholders’ names were signed to said paper by David T. Hotchkiss without any authority whatever ; and that said paper is fraudulent and void.
But when we examine the evidence we find that plaintiff did own five thousand nine hundred shares of said stock, and that said Hotchkiss was authorized to sign the names he did sign to said papers.
But while it is true that a New York statute provides that “any corporation formed under the act passed February T7, 1848, or of the acts amending or extending the said act, may secure the payment of any debt heretofore contracted or which may be contracted by it in the business for which it was iucorp'orated, by mortgaging all or any part of the real or personal estate of such corporation, and every mortgage so made shall be as valid, to all intents and purposes, as if executed by an individual owning such real or personal estate, provided that the written assent of the stockholders o wiling at least two thirds of the capital stock of such corporation shall first be filed in the office of the clerk of the county where the mortgaged property is
Lu the case of Beecher v. Rolling Mill Co., 45 Mich. 103, (7 N. W. Rep. (195) under a statute which forbade a manufacturing company to mortgage its property unless authorized thereto by vote of stockholders holding three fifths interest, and notified of the object of the meeting called to obtain such vote, and which provides that without such notice proceedings shall not be valid, where notice was given of a meeting to authorize the issue of bonds to the extent of one hundred thousand dollars, secured by mortgage, and the meeting actually authorized au issue to the amount of one hundred and fifty thousand dollars, it was held that, so long as the corporators raised no objection to the proceedings, no one else could. Judge Cooley. delivering the opinion of the court, says :
“The statute now under consideration was passed to protect the interests of stockholders in mining companies. It intends that their mining property shall not be conveyed away or mortgaged except by their deliberate action, after they have been notified of a proposal to do so, and have had time to deliberate upon and fully consider it. But the matter docs not concern the public at large.
No principle of public policy is at stake. No wrong, direct or indirect, is done to any human being, if conveyance is made or mortgage given without the exact notice required, unless it be a wrong to the stockholders themselves ; and, as others are not concerned, why should the statute give them the right to raise questions of regularity which the stockholders elect to waive ? We are .satisfied such was not its purpose.”
2 Beach. Priv. Corp. p. 1161, § 740, says: “Acorpora-
In section 744, p. 1166, of the same volume, said author says: “The corporators and no one else, can raise objections to proceedings under acts restricting the power of the directors to mortgage.”
In the case of Bissell v. Railroad Co., 22 N. Y. 259, the Court holds: “The plea of ultra irires, according to its just meaning, imports, not that, the corporation could not, and did not in fact, make the unauthorized contract, but that it ought not to have made it. Such a defence, therefore, necessarily rests upon the violation of trust or duty towards the shareholders, and is not to be entertained where its allowance will do a greater wrong to third parties. The. acquiescence of the shareholders in the abuse will prevent the interposition of such a plea. * * * It is a good defence to a corporation, when sued upon a contract, that in making such a contract it exceeded its corporate powers; this defence being allowed not for the sake of the corporators, but for that of the public. The corporation would, however, be estopped from setting up the defence in a case where the other party to the contract could not be presumed to be cognizant of the excess of power.”
In the case of Monument Nat. Bank v. Globe Works, 101 Mass. 58, the Court holds: “When want of power is apparent upon comparing the act done with the terms of the charter, the party dealing with the corporation is presumed to have knowledge of the defect, and the defence of ultra vires is available against him. But such a defence would not be permitted to prevail .against a party who can not be presumed to have had any knowledge of the want of authority to make the contract. Hence, if the question of authority depends not merely upon the law under which the corporation acts, hut upon the existence of certain extrinsic facts resting peculiarly within the knowledge of the corporate officers, then the corporation would be estopped from denying that which by assuming to make the contract it had virtually affirmed.”
jNTow, when we refer to the mortgage which the plaintiff
When, however, we look beyond the instrument itself, and examine the minutes of the board of trustees, a copy of which is filed in the cause, it is found that the said trustees, at a meeting held at their office in the city of New York on the 21st day of December, 1880, authorized the president and treasurer of said company to execute said mortgage; and on the same day a paper signed by more than two thirds of the stockholders of said company, assenting to the execution of said mortgage, appears to have been filed with the clerk of the county of New York and clerk of the Supreme Court of said state for said county. So that, if any of the stockholders were ignorant of the fact that said mortgage had been authorized, they need not have been, if they had taken the trouble to inform themselves.
On the 18th day of November, 1889, Ezra T. Stirling tendered his petition in this cause, representing therein that on the 20th day' of October, 1880, and continuously since that time, he has been the owner of two hundred shares of stock in the Montauk Gas Goal Company; denying that said company ever made the contracts set forth hi the bill with the plaintiff; — that it ever purchased from him the Davis land ; and denying that said mortgage was ever properly executed, for the reason that the assent of two thirds in value of the stockholders had never been filed in the offices required by statute.
Said petitioner gave his deposition in the case, and, when asked if he was a stockholder in said company, answered,
If he had seen proper to look after his interests, and make himself acquainted with the transactions of said company, the opportunity -was afforded him ; but he sees proper to wait nearly nine years after these contracts were made and this mortgage was executed, and then files his petition in this cause, asking it to be treated as an answer attacking the legality of said contracts and the validity? of said mortgage. He, however, does not show, by his deposition or otherwise, that he was the owner of any stock in said company at the date of the execution of said mortgage and contracts.
It was held by the Supreme Court of the United States, in the case of Dimpfell v. Railway Co., 110 U. S. 209 (3 Sup. Ct. Rep. 573) that in order to give standing in a court of equity to a small minority of stockholders, contesting as ultra vires an act of the directors, against which a large majority makes no objection, it must appear that they have exhausted all the means within their reach to obtain redress of their grievances within the corporation itself, and that they were stockholders at the time of the transactions complained of, or that the shares have devolved on them since by operation of law.
This petitioner, Stirling, however, so far from seeking any? redress in the corporation, appears to have paid no at-., tontion to the practical operation of said company, never attended any? of its meetings, or informed himself as to its place of business, and did not even know who was the president of said company.
In Morawitz on Private Corporations., section 630 we find the doctrine laid down : “If a shareholder fails to take the trouble of inquiring into the affairs of the corporation of which he is a member, or to attend its meetings, it seems no more than just that his supiness should be construed as an acquiescence in the proceedings of the majority.”
Justice Field, in delivering the opinion of the court in the case of Dimpfell v. Railway Co., 110 U. S. 210 (3 Sup. Ct. Rep. 573) says: “During these three years and eight months the earnings of the new road went into the treasury of the company, and the bonds issued upon the mortgage of that- road, executed by the payment of its purchase passed into the hands of parties who bought them on the faith of contracts which had been carried out without complaint from any one. Objections now come with bad grace from parties who knew at the time all that was being done by the company, and gave no sign of dissatisfaction.”
Bo we may say, with propriety, in regard to Ezra J. Btirling, who, if he owned his stock on the 20th day of October, 1880, and has owned it continuously ever since, as he alleges in his petition — but fails to prove — -had the opportunity of knowing, and should have known, what was being done by the company; and a court of equity-will not allow- him to stand by for nine years, while the plaiutiffin this case was expending thousands of dollars in the purchase of adjoining coal lands and in developing the coal lands already owned by the company, and shipping and marketing coal, and allow him to reap the profits if any- are realized, and, on the other hand, repudiate the contracts if the venture proves unsuccessful. The doors of a court of equity- are ever open to receive the complaints’of the diligent, and redress their wrongs, but they are closed to those who are slothful and sleep upon their rights.
In the case of Alexander v. Searcy, 81 Ga. 545 (8 S. E.
“In the case of Peabody v. Flint, 6 Allen, 54, a delay of three and a half years was held to be a bar. In the case of Gregory v. Patchett, 33 Beav. 595, six years were held to be a bar. In the case of Ashhurst’s Appeal, 60 Pa. St. 290, seven years were held to be a bar.”
The general rule which we deduce from these authorities, and others which we might cite, is that while a minority of the stockholders of a corporation may maintain a hill in equity, in behalf of themselves and other stockholders, for fraud, conspiracy, or acts ultra vires, agaiust a corporation, its officers, and others who participated therein, when the minority stockholders have been injured or damaged by said acts, thej’ must act promptly, and not wait an unreasonable length of time If they postpone their complaint for an unreasonable time, they forfeit their right to equitable relief. Nothing will call a court of equity into activity but conscience, good faith, and reasonable diligence. When these are wanting, the court is passive, and does nothing. Smith v. Clay, 3 Brown, Ch. 639, note.
But returning again to the question as to the due and proper execution of said contracts and mortgage : If the proofs presented by the plaintiff are to be regarded as insufficient to establish the fact that the requisite consent of two thirds in value of the stockholders of said company was regularly given, and properly filed, and that all preliminary acts necessary to authorize the execution and acknowledgment thereof were duly complied with, yet this Court, in the case of Fidelity Ins., T. & S. B. Co. v. Shenandoah Val. R. Co., 32 W. Va. 257 (9 S. E. Rep. 180) has held that the rule is well settled that “if a contract purport to be sealed
Now, it appears that no secret was made of the execution of this mortgage, but it, with all of its recitals in regard to the sale of the Davis tract, was duly admitted to record in Taylor county, W. Va., on the 26th day of January, 1881, giving at least constructive notice to the world of its existence. Said Stirling then had notice of its existence, and could have made inquiry as to its validity,if he had seen proper ; and it appears that a majority of the stockholders had ■ notice at the time of the execution of said mortgage, and did not,object.
In the case of Fidelity Ins., T. & S. D. Co. v. Shenandoah Val. R. Co., above cited, it will be perceived that it was not quite six years’ time, and yet this Court held that acquiescence was sufficient to work an estoppel.
Again, the attachment sued out in this case was a foreign attachment, which was levied upon, and created a valid lien upon, all of the real estate in the hill mentioned.
The claim asserted by the plaintiff' was fully proven, and, so far as the evidence discloses, contains no usury, and equity had jurisdiction to enforce said attachment lien.
For these reasons the court erred in dismissing the plaintiff'’shill and (plashing said attachment; and the decree complained of must be. reversed, and the cause remanded to the Circuit Court of Taylor county tor further proceedings to be had therein, with costs to the appellant.
REVERSED. Remanded.