191 P. 426 | Utah | 1920
Lead Opinion
This action was instituted for the purpose of having the defendants declared trustees and as holding in trust for the use and benefit of the plaintiff a certain mining claim hereinafter referred to. The complaint is very long, and the statements therein are somewhat loose and inartificial, with many repetitions and some conclusions. The material and controlling facts alleged are as follows:
It is alleged that the Jones Mining Company of Utah, hereinafter called plaintiff, is a mining corporation, and that the defendant Cardiff Mining & Milling Company, hereinafter designated company, is a corporation; that in the year 1902 plaintiff was the owner, subject to the paramount title of the United States, and in possession of what is known as the Wrexim mining claim in Salt Lake county, Utah; that the notice of location of said mining claim was duly recorded in Salt Lake county in 1891; that the assessment or representation work upon said claim was performed up to and including the year 1901, and that the same was not open for relocation until after the 1st day of January, 1902; that ‘in September, 1902, one Thomas B. Jones, now deceased, and the defendant Reamer, were the only directors of the plaintiff. (It is, however, stated i'n plaintiff’s brief that “at the time of the commitment of the fraud [1902] Jones was a director and the only director of the company,” the plaintiff.) Then it is alleged that the number of directors provided for by the articles of incorporation of plaintiff was five; that all the other acting directors (except Jones) had died prior to 1902 and no successors had been elected; that in the fall of
The record shows that a demurrer to a former complaint had been overruled and an answer duly filed; that thereafter the case was transferred to another judge who, without a withdrawal of the answer (as he might do), entertained the demurrer now in question namely, that the complaint does not state facts sufficient to constitute a cause of action, that thé action is barred, and that the plaintiff cannot recover on account of laches, and sustained the same. It also appears from the record that a patent was obtained by Price and Reamer for the claim in question in December, 1906. In view, however, that it is expressly alleged in the complaint that Price and Reamer obtained the legal title to said claim and that in 1906 they conveyed the same to the company, who is now holding the legal title, the record referred to is of no importance except by way of explaining plaintiff’s contentions, since it is not claimed that fraud was practiced against the United States in obtaining the legal title, but plaintiff confirms the legal title obtained by Price and Reamer and conveyed to the company by them, and prays judgment that the same be conveyed to it.
The plaintiff appeals from a judgment dismissing the complaint and assigns the ruling of the court in sustaining the demurrer as error.
The statute upon which defendants rely, Comp. Laws Utah 1917, section 6468, subdiv. 4, provides that “an action for relief on the ground of fraud or mistake ’ ’ shall be begun within “three years; the cause of action in such case not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake.” In considering whether this action is barred, it is important to keep in mind: (1) The relationship of the corporation directors to their corporations; (2) the character and condition of the mining claim which is the subject-matter of this action; and (3) the dormant condition and utter inactivity of the plaintiff corporation and the stockholders for
While corporation directors are constantly spoken of as trustees, they are not trustees in the true sense of that term. They are the managing agents of the corporation, and, as such, sustain a fiduciary relation both to it and to the stockholders collectively, and in case they wrongfully deal with or appropriate the money or funds of the corporation they may be charged as trustees with respect to such
“Directors are not express trustees. The language of Special Judge Ingersol in Shea v. Mabry, 1 Lea. 319, that ‘directors are trustees,’ etc., is rhetorically sound, but technically inexact. It is a statement often found in opinions, but is true only to a limited extent. They are mandatories; they are agents; they are trustees in the sense that every agent is p, trustee for his principal, and bound to exercise diligence and good faith; they do not hold the legal title, and more often than otherwise are not the officer of the corporations having possession of the corporate property; they are equally interested with those they represent; they more nearly represent the managing partners in a business firm than a technical*457 trustee. At most they are implied trustees in whose favor the statutes of limitations do run. Hughes v. Brown, 88 Tenn. 578; Spering’s Appeal, 71 Pa. St. 11, 10 Am. Rep. 684; Morawetz on Private Corporations, section 516.”
That statement is approved and quoted by Mr. Fleteber in bis recent work entitled Fletcher’s Cyc. Corps, (volume 4, section 2261). The doctrine is also approved by Mr. Thompson, in his work on Corporations (2d Ed. vol. 2, section 1176). The doctrine is also throughly supported in 3 Clark and Marshall, Private Corps., section 747, in these words:
“It is sometimes said that the directors, trustees, and other officers of a corporation are trustees for the corporation, or for the stockholders collectively, and in a certain sense that is true. They are not ‘trustees,’ however, in the strict sense of the term. Properly speaking, the relation is that of principal and agent, and the liability of directors and other officers of the corporation for mismanagement is determined by substantially the same principles which determine the liability of any other agent to his principal for failure to perform the duties which he has undertaken. ‘The liability of officers to the corporation for damages by negligent or unauthorized acts rests upon the common-law rule which renders every agent liable who violates his authority or neglects his duty to the damage of his principal.’ ”
In section 755, subdiv. f, the authors further say:
“Some of the courts have held that the relation between the directors and other officers of a corporation and the corporation or the stockholders collectively is that of trustee and cestui que trust to such an extent that the statute of limitations does not run against a suit in equity against them to compel them to account or pay damages for misapplication of assets or mismanagement, at least until they have ceased to occupy the relation. This view, however, is contrary to the weight of authority. Properly speaking the relation between a corporation and its officers is not that of trustee and cestui que trust, but is that of principal and agent, and in most jurisdictions the statute of limitations applies both to actions at law and suits in equity to compel officers to account for assets misappropriated by them, or to hold them liable for losses caused by their wrongful or unauthorized acts, or by their negligence. The statute, when applicable, will not begin to run until the corporation has knowledge of the fraudulent or wrongful acts and the knowledge of the guilty officers is not imputable to it.
"An action by a corporation against its officers to hold them*458 liable for losses on the ground of mismanagement may be barred by laches or the corporation may be estopped by having consented to or acquiesced in the acts complained of. And individual stockholders may be estopped to sue by reason of the participation or acquiescence, or by laches.”
In 1 Beach on Trusts and Trustees, section 191, the author lays down. the doctrine that directors may be charged as “constructive trustees.” To the same effect is 1 Perry on Trusts, section 430. Indeed, there is not a single text-writer, so far as the writer is advised, that does not lay down the same rule.
Plaintiff, in its brief, states:
“At the time of the commitment of the fraud, Jones was a director and the only director of the company.”
That did not make him a trustee of an express trust. Tie was not such by virtue of his office, and there certainly are no facts alleged from which such a relationship can be deduced. There is therefore no question of an express trust in this case, and the statute of limitations is applicable here precisely as in any other fiduciary relations out of which constructive or implied trusts arise. In all such cases the statute begins to run from the time the complain-
While' in actions at law the statute of limitations absolutely fixes the time within which actions may be brought,
“It is a familiar doctrine that, apart from any question of statutory limitation, courts of equity will discourage laches and delay in the enforcement of rights. The general principle is that nothing can call forth the court of chancery into activity hut conscience, good faith, and reasonable diligence. Where those are wanting, the court is passive and does nothing. The dnetrine is founded principally on the equity maxims, ‘he who seeks equity must do equity,’ ‘he who comes into equity must come with clean hands,’ and ‘the laws serve the vigilant, and not those who sleep over their rights,’ and is based on considerations of public policy. Its object is in general to exact of the complainant fair dealing with his adversary, and the rule was adopted largely because after great length of time, from death of parties, loss of papers, death of witnesses, change of titles, intervention of equities, or other causes there is danger of doing injustice, and there can be no longer a safe determination of the controversy.”
The doctrine of laches, therefore, rests upon the purest principles of equity.
While courts may not approve of what may have been done, if done wrongfully, they, nevertheless, refuse relief because the complainant did not exercise reasonable diligence in enforcing his rights and has permitted them to become stale and unenforceable. The doctrine is enforced in the -case of Patterson v. Hewitt, 195 U. S. 309, 25 Sup. Ct. 35, 49 L. Ed. 214. In that case there was an express trust which related to a mining claim, Mr. Justice BROWN, speaking for the court, in referring to the diligence that is required upon the part of claimants of mining property, and in discussing the doctrine of laches, at page 321 of 195 U. S., at page 38 of 25 Sup. Ct. (49 L. Ed. 214), used the following language:
“There is no class of property more subject to sudden and violent fluctuations of value than mining lands. A location which to-day may have no salable value may in a month become worth its millions. Years may be spent in working such property apparently to no purpose when suddenly a mass of rich ore may be discovered, from which an immense fortune is realized. Under such circumstances, persons having claims to such property are bound to the*460 utmost diligence in enforcing them, and there is no class of cases in which the doctrine of laches has been more relentlessly enforced.”
Counsel for plaintiff, however, strenuously insist that the statute of limitations has no application in this case and that laches cannot be invoked against their client because of its legal status. They, in their brief, assert: ‘ ‘ The company [plaintiff] had existence, but it was absolutely paralyzed.’-’ Further, that because there were no directors or officers the plaintiff was utterly impotent, and, while it always retained its rights as a corporation, yet no duty was imposed upon it, nor upon the stockholders, to act, and no notice of any kind or character can be imputed to it or to them. This contention is based upon the alleged fact that plaintiff was without directors and officers and had éntirely tjeased to transact business. That fact, however, did not deprive it from being a corporation ¿nd continuing to exist as such. In 2 Mor. Priv. Corp. section 1004; the law is stated to be:
“The company still continues to be a corporation, in the eye of the law, and may sue and be sued in that capacity.”
In 5 Thomp. Corp. section 6479, it is said:
“It has been many times decided by the various courts of this country that there is no dissolution by death, ineligibility or withdrawal of the corporate officers, or by a failure to elect officers for any period of time, so long as there are members having the power under the charter or governing statute to elect officers.”
To the same effect are sections 6487, 6489, and 6492.
Now, if, as is contended by plaintiff’s counsel, the stockholders had the power to elect new officers in 1917, they necessarily possessed that power all the time from 1901, when, it seems, there already were vacancies on the board of directors. It is utterly untenable to insist that the stockholders had such power in 1917, but were impotent during all of the preceding years from 1901 forward. If the corporation had a legal existence for. the purpose of keeping intact all of its legal rights, it of necessity must also have existed for the purpose of enforcing them by suing in the
“There are acts and facts which do not in themselves constitute a dissolution. A dissolution is not effected by a failure to elect officers; * * * by a cessation of all corporate business and acts; nor by the death of its stockholders. * * * ”
In Carnaghan v. Exporters’ & Producers’ Oil Co., 11 N. Y. Supp. at page 174,
“The company still continues to be a corporation in the eye of the law, and may sue and he sued in that capacity. * * *" (Italics mine.)
To the same effect is Evarts v. Killingworth Mfg. Co., 20 Conn. 447. In 4 Fletcher, Cyc. Corp. section 2930, after stating that a “want of officers does not affect the capacity of the corporations to be sued,” it is further said:
“Obviously the total lack of officers would produce a state of inability to sue due to the want of corporate organs. Either a stockholder’s suit in behalf of it or one of the last-elected officers holding over would seem to be the proper practice in such a case.”
All this simply goes to show that the stockholders of the corporation may not permit it to become and remain dormant and insist that their own inaction constitutes an answer to the plea of the statute of limitations or of laches. Such a doctrine would necessarily result in permitting the stockholders not only to successfully defend as against all laches, but they could at will extend the statute of limitations for any length of time they desired. If the corporation exists as a legal entity and possesses the right to invoke the aid of the courts at all times, as pointed out by the authorities, but fails or is impotent to do so by reason of the lack of directors and the stockholders may at any time elect the necessary agents to institute an action, or, if they choose, may bring one in their own name or in the name of any one of them in behalf of the corporation, it must necessarily fol
By what I have just said I have not been unmindful of the fact that it is alleged that the Miller heirs did not know that their father was a stockholder in the company and that they did not learn of that fact until the books were found, and that substantially the same excuse for the Jones heirs is alleged. It is also alleged that Miller and Jones “ practically owned all of the stock” of the company. If it be conceded that the Miller heirs can excuse themselves for not investigating into their, father’s affairs for more than fifteen years after his death, no such excuse is available on behalf of the Jones heirs. Plaintiff’s counsel have, however, failed to account for all of' the stockholders. No doubt they attempt to do that by alleging that Miller and Jones “practically owned all of the stock.” As a pleading the term “practically owned all of the stock” is not only a very loose and unsatisfactory way of stating a fact but it is very uncertain. All that can be asserted with any degree of certainty with respect to it is that it means less than all. It may, however, mean a considerable quantity less than the whole and it may even mean much less, all depending upon whether the capital stock was divided into a large or a small number of shares. In case the capital stock were divided into a million or more shares, 800,000 or 900,000 or 950,-000 shares might be considered as “practically all.” Be that as it may, however, we must take judicial notice of the fact that under our statutes Mr. Miller and Mr. Jones could not have been the sole incorporators of the Jones Mining Company and thus could not have subscribed for or owned all of the stock. There must have been some additional stockholders who are not accounted for. The attempt is made, however, to make that fact immaterial by the allegation that by reason of the fact that Mr. Price and Mr. Reamer had
If therefore it is desired to arrive at a just and equitable result in this case, it is important to keep in mind the real facts and circumstances and the true relationship of the parties. The controlling fácts and circumstances of this ease, as they are alleged in the complaint, and as conceded in counsel’s brief, relating to the question of diligence, are in substance as follows: Mr. Jones, in 1902, was the sole director of the plaintiff corporation. For how long a time prior thereto he was such is not disclosed. It is alleged, however, that one Thomas Miller was the principal stockholder of such corporation, that is, that he owned the majority of the stock and that he died in September, 1901. If, as is conceded, there was but one director in the year 1902, we may well assume that that condition existed during the latter part of Mr. Miller’s life and that the stockholders, even during that period, no longer'complied with oiir statute in electing directors but permitted the corporation
It is alleged that the plaintiff was the owner of a certain
If the boundaries and description of the claim as relocated by the defendants Reamer and Price, and for which a patent was obtained, are identical with those of the original location and the relocation notice was recorded as provided by law, then there was absolutely no concealment either attempted or effectuated by them in making the location. A mere casual examination of the records would at once have disclosed that the new location covered precisely the ground covered by the original location. The plaintiff and the stockholders certainly were charged Avith notice of the description
It is true that, in case certain legal relations exist between the applicant for a patent and the one claiming either the whole or only an interest in the mining claim, such as tenant in common, or as a trustee of an express trust, or where a claimant furnished the money to the applicant for the patent and the latter agreed to or legally is required to act for the claimant in obtaining it, no adverse claim need
Nor was there any agreement, either expressed or implied, so that the plaintiff had a right to assume that what was being done should inure to its benefit. If Reamer and Price were wrongdoers, their acts were open and were such that all the world could know them, including plaintiff. What is true respecting the acts of Reamer and Price in that regard is also true of the defendant company. Moreover, the applicant for patent paid the government price for the land. All expenses incident to obtaining the patent and the expenses of placing the necessary improvements upon the mining claim after relocation to entitle the claimant to a patent, had been paid by such claimant. The plaintiff now comes into a court of equity, and, without alleging facts eonstitut-
In this connection it is, however, also alleged as an excuse on behalf of the stockholders and why they did not act sooner that “the books and records of said plaintiff company became lost about the year 1901 and were not found until about the year 1917.” This statement, like numerous others in the complaint, is about as uncertain as it well could be made. In whose possession were the books prior to and in “about the year 1901”? In whose possession were they found, and by whom? “Was there any search of any kind ever made for the books? If so, by whom, when, and in what place or places? As the statement stands it might all be true and yet the books might have been accessible at any time if any reasonable effort had been made to find them. Indeed, they might have been in the possession of a stockholder 9 all of the time or at the place where they had been kept prior to 1901. In the absence of any statement of diligence or of any search of any kind, the statement as it stands is without force or effect.
Of the same character is the statement that neither the plaintiff nor any of the stockholders had any knowledge or means of knowledge that the mining claim was being claimed by Price and Reamer. ¥e must take judicial notice of the law that lands of the United States bearing metalliferous ores can be acquired only by means of development, and improvements must be made annually either on the partic
“True, I have done nothing; I have not complied with the mineral laws and regulations of the United States, and have made no effort to do so; I have in no way developed the mineral resources of the government as contemplated hy law, hut I am, nevertheless, entitled to have the legal title which the government has conveyed to another declared to he held in trust for me.”
A mere statement of the proposition is its best refutation.
I have shown, however, that the acts of the defendants were done in such a manner as to impute constructive notice to the world. If that be true, how can plaintiff or the stockholders escape? Can the stockholders, who are the beneficiaries of the corporation, permit it to go to sleep and continue to slumber peacefully for a period of fifteen years and then revive it for the sole purpose of “winding up its affairs,” as is alleged, and after such a revival go into a court of equity and claim the property and in doing so defeat the pleas of the statute of limitations and laches by claiming want of knowledge on the part of the corporation of the alleged wrongful acts for the sole reason that it, like Rip Van "Winkle, slept while others toiled? If such is the law, then the longer the stockholders permit the corporation in which they are interested to remain dormant the better is their chance to reap a rich reward. The longer they wait the more likely it will be that something will happen which will make the property in which the corporation claims an interest either directly or indirectly more valuable. Suppose
I most respectfully submit, therefore, that the rule contended for is a most dangerous one, since it opens the doors of our courts of equity to all enterprising stockholders who were either too careless or too indolent to keep their corporations alive and going concerns. The doctrine does not encourage activity and vigilance, but places a premium on indolence and carelessness. Moreover, it makes a court of equity a sort of prize court where one may reap where he has not sown. While I most heartily concur in the proposition that corporation directors are to be held to a very high degree of integrity and fidelity in the discharge
In any view that can be taken, therefore, this action is clearly barred by the statute of limitations, and hence the judgment should be affirmed. In view' that the majority of the court concur in the foregoing views, the judgment is affirmed, with costs.
Reported in full in tbe New York Supplement; reported as a memorandum decision without opinion in 57 Hun. 588.
Dissenting Opinion
(dissenting). The defendants separately demurred to the amended complaint on the following groundsj (1) The complaint does not state facts sufficient to constitute a cause of action. (2) The cause of action attempted to be stated is barred by the statute of limitations and laches. The district court sustained the demurrer of each defendant on the ground that it affirmatively appears from the complaint that the cause of action is barred by the statute of limitations and that plaintiff is chargeable with laches.
The following controlling facts appear from the allegations
(a) In the year 1902 plaintiff was tbe owner and in possession, subject to tbe paramount title of tbe United States, of tbe mining claim in question. Tbe notice of location of said mining claim was recorded in tbe county recorder’s office of Salt Lake county in 1891, and tbe annual assessment work upon said claim had been performed to and including the year 1901.
(b) In tbe year 1902 Thomas B. Jones, now deceased, was a director, and the sole director .(unless the defendant Reamer was a. director), of tbe plaintiff.
(c) In the year 1902 tbe said Jones, together with tbe defendants Reamer and Price, entered into a fraudulent conspiracy to relocate tbe mining claim in tbe name of Reamer with a view of defrauding plaintiff of its interest therein. Said Jones died in 1905.
(d) One Miller, who died in 1901, and whose family resided in tbe state of New York, owned a majority of tbe capital stock of the plaintiff company and was its first president.
(e) Tbe fact of tbe plaintiff’s interest in this mining property was concealed from both tbe Miller and Jones beirs (1) by Jones in 1903 when be advised one of the Miller beirs, who was temporarily in Utah, that tbeir interests would be protected; (2) by Reamer in failing as the executor of Jones’ will to report to the court or to tbe beirs of tbe estate that tbe estate owned any stock in plaintiff company or bad any interest in this mining property.
(f) The defendants Reamer and Price, and likewise the defendant mining company, were cognizant at all times of tbe plaintiff’s interest in the mining property and of tbe fraudulent conspiracy entered into in 1902 by Jones and tbe defendants Reamer and Price to deprive plaintiff of such interest.
(g) Tbe fraud or conspiracy was not discovered until the year 1917.
(h) There has been no change in the property by reason*473 of the expenditure of money so as to render the claim of the plaintiff inequitable or unjust as against the claims of the defendants.
(i) No evidence of the transactions has been lost by the lapse of time.
(j) The stockholders of -plaintiff had no knowledge of their interest in the mining property, and the fact that they had any such, interest was withheld from them by the fraudulent acts of the defendant Reamer and the director Jones, his eoconspirator.
(k) No innocent third parties have acquired any interest in the property, or, if so, their interest is not superior to the equity of the plaintiff.
Whatever diversity of opinion may have been expressed by the courts and text-writers respecting the relationship of directors to corporations, it is agreed by all that that relationship is one of a fiduciary character.
The conclusions deducible from the authorities is succinctly stated by the author in 4 Fletcher, Cyc. Corps. 3509, as follows:
“But whether or not directors and other corporate officers are strictly trustees, there can he no doubt that their character is that of a fiduciary so far as the corporation and the stockholders as a body are concerned. In other words, it is unquestionably true that, as agents intrusted with the management of the corporation for the benefit of the stockholders collectively, they occupy a fiduciary relation, and in this sense the relation is one of trust.”
It is alleged that neither the director Jones nor either of the defendants ever, at any time, renounced the trust or gave any notice to the plaintiff or its stockholders that they were claiming the mining property adversely to the interests of plaintiff company, unless the relocation in 1902 by Reamer under the conspiracy alleged be held to constitute such renunciation. Jones, standing in a fiduciary relationship to the plaintiff, and to that extent being a trustee of this property, and the defendants Price and Reamer, with knowledge of that fact, having entered into a conspiracy with Jones to defraud the plaintiff, it follows that Reamer and Price took such property burdened with the same trust in favor of the
“Where a person purchases property from the trustee, with notice of the trust, he is charged with the same trust in respect to the property as the trustee from whom he purchased.”
See, also, 2 Pom. Eq. Jur. (4th Ed.) section 688; Gautier v. Douglass Mfg. Co., 13 Hun (N. Y.) 514.
It may be stated as a general principle upon which there is no conflict of authority that—
“Whenever a person obains the legal title to land by any artifice or concealment, or by making use of facilities intended for the benefit of another, a court of equity will impress upon the land so held by him a trust in favor of the party who is justly entitled to them, and will order the trust executed by decreeing their conveyance to the party in whose favor the trust was created.” Felix v. Patrick, 145 U. S. at page 328, 12 Sup. Ct. 865 (36 L. Ed. 719).
True it is that courts will not encourage nor lend aid to the enforcement of stale claims; but that aid is refused, not because the courts condone the wrongs out of which the claims arose, but because it is often and is generally more inequitable to disturb present vested rights than to leave stale claims unenforced. The grounds on which such refusals are usually based are loss of evidence, expenditure of money, change in the condition of the property, innocent parties having acquired an interest in the property, or, possibly, such increase in its value by reason of improvements that it would be inequitable to enforce prior existing rights. 16 Cyc. 152 et seq. Under the allegations in this action, which this court must accept as true with all necessary intendments, none of these elements exist. If the allegations of the complaint are true, the property is still in the same state of nature as it was at the time of the alleged conspiracy. No innocent third
It is provided in the statute quoted in the opinion of Mr. Justice FRICE that a cause of action for relief on the ground of fraud or mistake is not deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake. It is affirmatively and repeatedly alleged in the complaint that the alleged fraud was not discovered until the year 1917. If therefore the action is to be defeated, it must be upon the ground of laches. The defense of laches in every case must be determined by its own particular facts. There is no conflict in the- authorities upon that point. The defense of laches "rests upon the ground that the equity of the respondent arising from the acts or acquiescence of the plaintiff is greater than the equity set up in the complaint.” In 4 Pom. Eq. Jur. (4th Ed.) section 1442, the author quotes with approval the following language from Wilson v. Wilson, 41 Or. 459, 69 Pac. 923:
“If, however, upon the other hand, it clearly appears that lapse of time has not in fact changed the conditions and relative positions of the parties, and that they are not materially impaired, and there are peculiar circumstances entitled to consideration as excusing the delay, the court will not deny the appropriate relief, although a strict and unqualified application of the rule of limitations would seem to require it. Every case is governed chiefly by its own circumstances.”
In section 1447 of the same volume the author again quotes
“A person cannot be deprived of bis remedy in equity on the ground of laches, unless it appears that he had knowledge of his rights. As one cannot acquiesce in the performance of an act of which he is ignorant, so one cannot be said to neglect the prosecution of a remedy when he has no knowledge that his rights have been invaded; excepting always that his want of knowledge is not the result of his own culpable negligence. It is not a little difficult to determine what knowledge is necessary to place the party in the position of negligently delaying his action.”
See, also, section 1448 of tbe same volume.
None of the elements usually invoked to defeat stale or ancient claims are present in this action. To affirm the judgment of the district court closes the door not only against the Cardiff Mining Company but against Reamer and Price as well. If the allegations of the complaint are true, these two defendants have valuable property which ought to be the property of plaintiff and its stockholders. They were both active in concealing from the plaintiff the information that it or its stockholders had any interest in the property in controversy. No third party would be in any way affected or disturbed in requiring these defendants to account to the plaintiff for. any gain realized by them growing out of the conspiracy entered into with the director of the plaintiff company. These defendants are still living. They can easily explain their acts, if there is an explanation, in connection with obtaining this property, and no injury would be done to any innocent party by permitting the court to hear the testimony and determine the facts.
The record, in my judgment, does not warrant the statement that the plaintiff now coolly comes into court and demands the title to. the mining claim in question without offering to do equity. True it is that in the prayer the complaint asks that the defendant mining company be adjudged to hold the property in trust for the plaintiff, but, at the same time, the prayer is that if that cannot be granted the defendants Reamer and Price be required to account to the plaintiff for any stock they may have received from their
It is not contended by any one that the statute of limitations has not defeated plaintiff’s cause of action unless the acts of the defendants have prevented it from running. Counsel for the plaintiff make no contention that the possession of this property would not defeat plaintiff’s claims if the defendants had not entered into a conspiracy and concealed the fraud by which they obtained possession. True, obtaining a patent from the government is notice to all the world of that fact, but what court has ever held that a party who was not advised that he had any interest in the property for which patent was being obtained, and where the fact that he had such interest had been concealed from him by the party obtaining title, that such notice would put the statute of limitations in action? It is of little moment to argue and recite facts which would cause the statute of limitations to run. No one disputes that or makes any contention to the contrary, but I do contend that there is no authority to make such notice binding upon any one who is not cognizant of his interest and who has been kept in ignorance by the fraudulent acts of the conspirators who obtained the property. The facts in Patterson v. Hewitt, 195 U. S. 309, 25 Sup. Ct. 35 (49 L. Ed. 214), cited in support of the opinion of the court, are different from the facts here. In that case the plaintiffs knew of their interest in the property in question but did nothing to assist in the development work, and only attempted to assert their rights after valuable ore had been discovered by great labor and expenditure of money
“True, lapse of time is one of the chief ingredients, hut there are others of almost equal importance. Change ih the value of the property between the time the cause of action arose and the time the bill was filed; complainant’s knowledge or ignorance of the facts constituting the cause of action, as well as his diligence in availing himself of the means of knowledge within his control, are all material to be considered upon the question whether the suit was brought without unreasonable delay.”
It is doubtless true that the party defrauded must be diligent in making inquiry; likewise, that means of obtaining knowledge of facts that would put a prudent person upon inquiry is equivalent to knowledge, but “none of the cases holds, nor are we aware of any case elsewhere which holds, that a man must be so keenly on the scent of effort to defraud him that, without knowledge of any facts which would lead a prudent man to suspect that he has been defrauded, he is bound to make investigations which he is not obliged to make for other purposes, merely because it is within his power to make such investigations.” Raymond v. Sohriever, 63 Neb. 722, 89 N. W. 309.
In the opinion of the court the allegation respecting the loss of the books is discussed. The books, I assume, would naturally be in the hands of the officers of the company, since they are the legal custodians of the records of the company, and presumably were in the possession of the officers of the company in the year 1902. I regard that allegation as wholly immaterial, but the query naturally arises why should any stockholder who is not aware of the fact that he is interested in the corporation attempt to hunt up its records and be charged with laches by failing so to do ?
It is suggested in the opinion of the court that if relief were granted to this plaintiff there may be others, even hundreds of corporations, which would shortly come to life and demand recognition in the courts in attempting to enforce some imaginary right. I assume that if there are other corporations which have been, by the fraudulent acts of their directors, deprived of their property, and the acts have been
In this state the powers of a corporation are exercised by a board of directors. Comp. Laws Utah 1917, section 871. It is a matter of common knowledge that in the management of corporate property the stockholders frequently know very little of the actual property owned and controlled by such corporation. This is especially true of mining companies. The promoters usually retain a majority of the capital stock of such companies. The remaining or treasury stock is sold to purchasers of small blocks and often in widely separated localities. Such stockholders seldom have any absolute knowledge of the location or nature of the property controlled by the company. The title to the land is usually in the general government, and a failure to do the annual assessment work leaves the property open to relocation. In such cases, if the directors and other officers are permitted to disregard the interests of the company and its stockholders, a gateway is left wide open for dishonesty. The facts alleged in this action are illuminating as illustrating the injustice that may follow any relaxation of the inflexible rule announced by all the courts that absolutely fair dealings by the directors in their relationship to the corporate property, either as agents or trustees, must be insisted upon. Parties fraudulently dealing with any one standing in the relationship that a director does to his corporation should be bound by the same rules that apply to the director.
It is insisted by respondent that the plaintiff is a corporation and that any acts of the defendants in concealing from its stockholders the fact that they owned stock or were interested in the corporation cannot be invoked as an excuse or justification on the part of the corporation for failing to institute this proceeding at an earlier date. True it is that the plaintiff is a corporation and as such has a legal entity independent of its stockholders, but it is likewise true that
-The ultimate rights of the parties are not before this court for consideration in this appeal. The only question is whether, accepting as true the facts stated in the complaint, the action is barred by the statute of limitations or by laches of the plaintiff. In my opinion it is not. The allegations are such that the chancellor ought to hear the testimony and determine the rights of the parties from the facts so developed. I therefore dissent.