123 Wis. 647 | Wis. | 1905
Lead Opinion
The following opinion was filed November 15, 1904:
As indicated in the statement, this court has twice held in this case that by rules in previous decisions made here the circumstances alleged to have occurred constitute a good cause of action in favor of the corporation against the defendants, enforcible at the suit of the plaintiffs as stockholders, to recover of the former the profits obtained in buying the land at one price and selling it to the corporation at another. The cases where the controlling principles -have been proclaimed and applied are numerous, the most significant being Pittsburg M. Co. v. Spooner, 74 Wis. 307, 42 N. W. 259; Fountain S. P. Co. v. Roberts, 92 Wis. 345, 66 N. W. 399; Franey v. Warner, 96 Wis. 222; Hebgen v. Koeffler, 97 Wis. 313, 72 N. W. 745; Milwaukee C. S. Co. v. Dexter, 99 Wis. 214, 74 N. W. 967; Zinc C. Co. v. First Nat. Bank, 103 Wis. 125, 79 N. W. 229; Spaulding v. North
While, as counsel for appellants claim, the findings are indefinite, being so framed at some points that they might be taken one way or another, they follow the complaint in that regard. Why this indefiniteness, we need not go far to discover. A misunderstanding by counsel of language used in Spaulding v. North Milwaukee T. S. Co. supra, or inability of counsel to satisfactorily gather the purport thereof is very plainly portrayed in both complaint and findings. It is probable the learned trial court allowed counsel to phrase the decision as it appears in the records, and if it were not for that which, though sanctioned by practice, in the judgment of the writer, cannot be too strongly condemned) — if the court had-responded fully to the commands of the statute to state in writing its decision, instead of permitting the stating thereof' to be done by one viewing the case from a one-sided standpoint, — the uncertainty complained .of would not exist, and' we would not have before us a decision as to facts, under any circumstances requiring careful consideration to determine-its meaning in advance of pronouncing the legal effect thereof.
It is of course conceded that if the findings will reasonably admit of a construction harmonizing with and responding to the allegations of the complaint, as it was viewed here on the-former occasion, on their face they will support the judgment. The view that we take of this case renders unnecessary any examination in detail of the numerous criticisms of the findings made by appellants’ counsel, or deficiencies therein suggested.
It must be conceded that the following situation is well within the language of the complaint and the language of the-findings, as well as supported by the evidence: Those against:
Time, the complaint is so framed as to suggest that some, at least, of the plaintiffs were stockholders at the time the corporation was organized and the land conveyed to it, and were not then deceived as to the real nature of the transaction, true, the findings are so drawn as to suggest the same thing, and true, the evidence shows clearly that none of the plaintiffs were members of the corporation when the transaction occurred between it and the promoters whereby they obtained, substantially without consideration, 1,472 shares of its stock; that when the corporate proceedings were had respecting the
Counsel for appellants contend that the contingency above suggested as to the law is ruled in their favor by Spaulding v. North Milwaukee T. S. Co. 106 Wis. 481, 81 N. W. 1604;— that every member of the corporation, as matters stood when the land was transferred to it and the promoters came into possession of the profits sought to be regained, was fully advised in respect thereto; that no one was then deceived, so the prime essential of a cause of action in favor of the corporation is wanting; that if, after the consummation of the deal between the promoters and- the corporation, deception was practiced by any defendant, inducing any plaintiff to take stock, supposing he was obtaining it on the same terms as the promoters, it is personal to himself. Those views are based on this language used in that case:
“The liability of promoters of a corporation is predicated -on fraud, the essential element of which is deceit. It does not matter that the corporation received property at a higher price than it cost the promoter, to give the corporation. .a right to rescind or recover bacFprdfits made. It must have been deceived info paying such price or the corporation cannot be ■deceived, save as some of the individuals composing it are.’7
No serious fault can be found with that. Generally speaking, it is correct. It was used as regards a situation where all the stock of a corporation had been taken. Certainly the
The law does not permit any such transaction as -the one-above suggested to go necessarily unredressed. Persons who act as promoters of a corporation do not necessarily cease to he such when the corporation is organized to do business. They may retain their fiduciary relation thereto till its shai’o capital shall have been taken and the corporation provided' with a board, or some reasonably efficient means of protecting its interests. So long as there are prospective original sub
The foregoing will be found well supported in authorities. If a corporation has been organized and persons promoting it up to that time continue to act for it by inducing persons to come in and subscribe for its capital stock, their relations as promoters continue. Alger, Law of Promoters, § 20. In the leading English case of Erlanger v. New Sombrero P. Co. L. R. 3 App. Cas. 1236, Lord Cairws said in substance: — ■
Promoters have in their hands the creation and molding of the company; they have power to define how and when and in what shape and under what supervision it shall start into existence and begin business. If they are doing all this in order that the company may, at the outset become, through its managing directors, a purchaser of property from themselves it is incumbent upon them to provide it with a board of directors, who will meet them at arm’s length in arranging the business transaction.
The circumstances in that ease were quite similar to those in this one. There was an attempt to .bind the corporation by a contract purporting to have been made between the vendor and directors before the shares were offered for subscription, whereas the directors were only the associates of the vendor, who exercised no judgment of their own in behalf of the corporation.
The rule stated by Lord CaieNS is said not to apply when the promoters are subscribers of all of the capital stock (Salo-
From the foregoing we deduce this: If one or more persons acquire property, intending to promote the organization of a corporation to purchase it from them at a profit to themselves and effect such purpose, limiting the membership to interested'parties till the transaction is completed between them and the corporation, intending thereafter to cause the balance of the capital stock to be sold to outsiders, they being kept in ignorance of the true natum.o£.sncL..tr.ansfl.c.tÍQn. and effecting such intent, they are guilty of actionable fraud upon the corporation and responsible to it for the gains made. In such circumstances, in the making of the contract between the corporation and its agents, it is mere fiction as to its prospective members by original subscription. Since it has no one to stand for it as an adverse party in the transaction no meeting of adverse minds, essential to__a_.binding_contract, occurs. The corporation is deceived, in that advantage is
Applying tlie foregoing tcTtEe situation founcTto exist all who were concerned in tbe transaction of buying the land at one price to turn it over to tbe corporation to be formed at a much greater one, and to induce others to come into tbe corporation in ignorance of tbe facts, contributing tbe actual ■capital necessary to enable them to fully accomplish their purpose, became liable to refund their profits to tbe corporation, which liability was enforcihlem this action, unless prior to its commencement it was éxtínguished By the six-year statute ^f limitations.
The action was commenced May 20, 1899, long after the ■expiration of six years from the time the cause of action in favor of the corporation accrued, unless the date thereof was postponed, as regards the remedy for the wrong, by subd. 7, ■see. 4222, Stats. 1898. It is conceded that the life of the cause of action expired before such commencement, unless such subdivision applies. That provides that a cause of action for relief on the ground of fraud in a case which was on or before the 28th day of February, 1859, cognizable in a court of ■chancery shall not be deemed to have accrued until the discovery by the aggrieved parties of the perpetration of the ■fraud. Counsel for respondent argue that this action falls within that because the sole remedy afforded plaintiffs to enforce the right of the corporation was in equity and was so at the time mentioned in such section. That overlooks the fact that the real test is, what remedy was afforded the corporation to enforce its rights in the circumstances set forth in the ■complaint before the adoption of the Code. We need spend no time to demonstrate that it had then, as it has now, a remedy at law in such cases. It follows that before this action was commenced a cause of action of the corporation was extinguished and that with it necessarily the right of the plaintiffs to enforce such cause of action was lost. That is dis
It is suggested by counsel for respondents that the corporation was powerless to assert its rights within the life of its-cause of action because those who were solely in charge of its-affairs were the guilty persons, and by their position prevented any one during such period from obtaining knowledge' of the facts so that they might act in its behalf. While counsel earnestly insist that under such circumstances the statutes-of limitation ought not to apply, no authority is cited to our attention varying the unqualified language of such statutes. So far as we are advised, there is no exception to the rule of' the statute to fit a case of this sort. Views elsewhere are well portrayed in Bank of Hartford Co. v. Waterman, 26 Conn. 324-330, thus:—
“Ignorance of his rights on the part of the person against whom the statute has begun to run, will not suspend its operation. He may discover his injury too late to take advantage of the appropxdate remedy. Such is one of the occasional hardships necessarily incident to a law arbitrarily making legal remedies contingent on mere lapse of time. Strong-equitable considerations in favor of the present plaintiffs seem, however, to grow out of the fact, that they were actually-betrayed into ignorance of their rights by the wrongful acts-of the defendant himself. . . . It is palpably unjust for the defendant to set up the statute as a defense under such circumstances; to do so is in one sense taking advantage of his own wrong. Yet it is difficult to see that he is not, by the clear provisions of the statute itself, protected in so doing.*661 . . . Lord Casipbell properly suggests, relative to a controversy not unlike to tbe present, tbat ‘bard cases must not make bad law.’ ... If tbe dictum of Lord MaNS-pield tbat ‘there may be cases wbicb fraud will take out of tbe statute of limitations,’ were confirmed by direct adjudications, we should be reluctant to withhold tbe application of tbe doctrine in tbe present instance.”
We cannot escape tbe conclusion tbat tbe statute of limitations pleaded bad fully run in favor of tbe defendants before tbe commencement of this action and extinguished their liability.
By the Court. — The judgment is reversed and tbe cause remanded with instructions to enter judgment dismissing tbe complaint with costs in favor of tbe defendants.
Rehearing
Tbe respondents moved for a bearing, and tbe following opinion was filed January 31, 1905:
Tbe motion for rehearing, in this case, as all such motions wbicb are made in tbe proper professional spirit are, was welcomed here and has received consideration. There was no need whatever for tbe learned counsel’s apology for making it. It were better if they bad omitted from tbe argument tbe words “Well, as I understand tbe aversion of this court to rebearings.” It involves an assumption tbat has no foundation whatever. This court has no “aversion” to tbe assertion by any attorney of any right wbicb tbe statute, court rules or tbe practice affords him. It has no feeling but tbat of respect for all considerate efforts of members of the profession to safeguard tbe rights of their clients and to aid tbe court in tbe proper administration of justice. Occasions have been improved to admonish practitioners to exercise care not to subject their clients to the burdens of additional eost by inconsiderate motions for rebearings, and if it be necessary in order tbat such admonition shall be efficient in tbat regard it might well be repeated. It is well appreciated here tbat
Counsel now present for consideration propositions which only incidentally, if at all, were mentioned on the former argument. They frankly confess that the importance of such propositions was not appreciated by them, if thought of seriously at all, until aroused in that regard by some questions propounded from the bench on the argument. We will say,, however, at the outset, that the subjects iAvolved did not pqss here without the most careful study, as the result will now more fully indicate.
Counsel’s second proposition, it would seem, ought to have ñrst place. “The right of action at law upon the subscrip
Counsel’s next proposition is that “the defendants are es-topped from setting up and receiving the benefit of the six-years statute of limitations.” That presents the question of whether such statute, as to an action in favor of a corporation against its officers, runs while they themselves are the ones clothed with the sole authority to protect its interests and fraudulently neglect to do SO'. True-, as said by counsel before and as said now, the corporation was powerless to enforce its right to recover the unlawful profits through the instrumentality of its officers, since they were the guilty parties and con-
• “There is (said the chief justice), for example, very much and very high authority for saying that the bar of the statute of limitations may be avoided at law for fraud in the party seeking to take advantage of it.”
True, there is such authority that way, but also true when ■analyzed the same is found to have no application whatever to •a situation wholly otherwise regulated by statute, as in this •state. It is significant- that the remark quoted, though made over thirty years ago, has not since been referred to in any opinion in this court, and that the doctrine there said to. be supported by “very much and very high authority” has never been incorporated into our system. A brief history of such doctrine will fully clear up all uncertainty, if any exists, as to whether it should be adopted here.
The whole system of extinguishing rights, or rights of ac
“In Massachusetts, before tbe present statutory exception ■existed, tbe fraudulent concealment of a cause of action was held to be a good replication to a plea of tbe statute. In Maine, also, tbis'rule was adopted. Tbe doctrine of these cases was predicated upon a dictum of Lord Mansfield, in an English case; but tbis dictum seems never to bave been followed in tbe English cases in actions at law, nor do tbe American cases before cited seem to bave been generally followed in tbis country.”
There are three general classes of authorities found in the books on tbe subject under discussion and unless tbe statutory differences giving rise thereto are appreciated one is ■quite liable to fall into confusion as to bow tbe law ought to be declared under a statute like ours. Tbe first includes tbe ■states where there is no statute on tbe subject, bolding tbat fraud concealed by tbe person invoking tbe statute of frauds postpones its operation. They are, in tbe main, tbe following: Massachusetts and Maine,’ prior to tbe adoption of tbeir statutes on tbe subject, Vermont, Rhode Island, New Hampshire,
As to concealed fraud postponing the running of the statute' of limitations respecting a cause of action at law, it has been expressly repudiated in the following states having statutes-similar to ours: New York, Troup v. Smith's Ex’rs, 20 Johns. 33; Kentucky, Ellis v. Kelso, 18 B. Mon. 296, where a clerk made a fraudulent entry upon his employer’s books, and it was held that the statute ran from the date of the entry; North Carolina, Hamilton v. Shepperd, 3 Murph. 115; South Carolina, Miles v. Berry, 1 Hill, 296, where the maker of a note fraudulently obtained possession of it, and ' kept it until the statute had run upon it, and it was held that such fraud did not prevent the running of the .statute.. The same rule has been declared in the following cases belonging to the first class, or having a statutory provision like-that which ruled Arnold v. Scott, 2 Mo. 14: Mississippi, Wilson v. Ivy, 32 Miss. 233; Virginia, Rice v. White, 4 Leigh, 474. The same rule prevails in states belonging to the second class: Tennessee, York v. Bright, 4 Humph. 312; Smith v. Bishop, 9 Vt. 110; Fee’s Adm’r v. Fee, 10 Ohio, 469.
_ Thus it will be seen that of all of the authorities cited by counsel there is no support whatever for the proposition advanced that under a statute such as ours the running of the-■statute of limitations, except in the particular class of cases referred to in such states, is affected by fraud, while a careful classification of them with reference to the statutory differences under which they were made and judicial declarations, all, directly or by implication, sustain the conclusion to which
Counsel suggest that the language quoted in our former opinion from Bank of Hartford Co. v. Waterman, 26 Conn. 324, is not authoritative because it was entirely unnecessary to the case, and, further, because many cases could have been found at that tiipe where it had been held that fraud, concealed, prevented the running of the statute of limitations. True, there were such cases and we have briefly, but fully, explained them in harmony with the views formerly expressed. The quotation voices the law under the Connecticut statute.
Several federal cases are cited to our attention, which, when rightly understood, are unimportant. Bailey v. Glover, 21 Wall. 342, is the most significant of them. That is to the effect that under the federal system the rule is, as to cases not gpverned by state statutes and decisions, the court being left free to declare the law according to its own views, and there being no federal statute interfering therewith, the running of the statute of limitations is postponed in case of fraud, concealed by the party invoking such statute, till the adverse party discovers the same. If there had been a United States statute expressly providing when fraud shall so operate, the decision would doubtless have been that all cases not covered ■thereby were excluded. In Troup v. Smith’s Ex’rs, 20 Johns. 33, the court was urged to engraft on the statute of limitations •of New York an exception saving actions at law from the operation of such statute in case of concealed fraud, preventing
“The dictum of Lord MaNseield, in Bree v. Holbech, 2 Doug. 654, is the only instance in which such a position was ever advanced in Westminster Hall; and when it is further considered, that his lordship had an inclination to entrench on courts of equity, that mere dictum cannot be regarded as authority. . . . Courts of law are expressly bound by the statute. ... I know of no dispensing power which courts of law possess, arising from any cause whatever.” The-court said further, substantially: The statute having made-provision for the postponement of the running of the statute of limitations in certain cases it would be an assumption of legislative authority to introduce any other. “The plaintiff’s case may be a hard one; but that affords no reason for construing away a statute of great public benefit, and which, in many cases, is a shield against antiquated and stale demands.”'
That decision made over seventy years ago has stood the test of time without a word of criticism in New York, or elsewhere under a like statutory system to that which the court-had under consideration.
In Miles v. Berry, 1 Hill, 296, speaking on the same subject, the court said:
“Many of the difficulties, in cases upon the statutes of limitations, have arisen from losing sight of the words of the statute, and looking to what appeared to be just and right between the parties. The judges here and elsewhere have, howrever, set about the work of reform -in this respect, and are now endeavoring to conform to the statute.” To allow the time-of the discovery of the fraud to be regarded as that of the maturity of the injured party’s cause of action “would be to make and allow, by judicial construction, an exception to the-statute of limitation, which the legislature did not think proper to make.”
In line therewith Chancellor KENT said in Demarest v. Wynkoop, 3 Johns. Ch. 129-142: “The doctrine of any inherent equity creating an exception as to any disability, where-
In the light of the foregoing, it would seem that the right of the matter under discussion is unmistakable. The statute, sec. 4222, Stats. 1898, provides that “the cause of action in such case is not deemed to have accrued until the discovery, l^/By the aggrieved party, of the facts constituting the fraud.” Ey one of the most familiar canons of construction all other cases are thereby excluded. “Kxpressio unius esirexclusio al-teriusP The mere fact that the enforcement of the statute according to the foregoing leads occasionally, as it does seem-y ingly in this case, to great hardship does not furnish the ■slightest reason why the courts should ingraft an exception upon it. The enactment of the lawmaking power within its legitimate field must not be obstructed by the judicial administration. Such power is ample, if it sees fit, to extinguish any right enforcible by an action, if judicial remedies for . such enforcement are not invoked within such reasonable time as it sees fit to name. The possessor of the right may be under disability to personally enforce the same within the pre- ■ scribed period by reason of infancy, insanity, imprisonment ■ or other cause, and yet the statute in general terms, not containing any exception to save the right, will extinguish it. Vance v. Vance, 108 U. S. 514, 521, 2 Sup. Ct. 854; Carden v. L. & N. R. Co. supra. The legislature is the judge, and the sole judge in such matters, subject to no judicial review whatever, so long as it acts within the boundaries of reason. It is far better that occasionally one should suffer severely from the enforcement of the law, as the court finds it, than ■that they should endeavor to bend the law out of its manifest
We should not close this opinion without referring, at least briefly, to the doctrine urged upon our attention that equity will always furnish a remedy for any wrong, other than a mere moral transgression, if legal remedies are inadequate or do not exist at all. It is not infrequently that we see that valuable doctrine invoked where it has no proper place. It is never applicable to give a remedy for a wrong, so called, which is not a wrong at all, because the written law makes it otherwise. Such wrongs, if the injuries may be.so designated at all, are not within the maxim “there is no wrong without a remedy.” Rowell v. Smith, ante, p. 510, 102 N. W. 1.
The last suggestion of counsel is that respondents having proceeded in good faith should not be made to pay costs in this court or in the court below. Such a practice, if once adopted, would compel the defendant in most any case to wholly, bear the burden necessary to his defense, since, generally, the plaintiff thoroughly believes in his side of the case. There is no good reason for making this case an exception.to the general practice of awarding costs to the defendant where in an equity action he prevails as to the entire cause of action •set forth in the complaint. According to the conclusion to which we have arrived the defendants have so prevailed.
By the Gowrt. — The motion is denied.