Auten v. St. Louis, Iron Mountain & Southern Railway Company

• Decision Date: 27 October 1913
• Citation: 160 S.W. 873,110 Ark. 24
• Parties: AUTEN v. ST. LOUIS, IRON MOUNTAIN & SOUTHERN RAILWAY COMPANY
• Court: Arkansas Supreme Court

160 S.W. 873

110 Ark. 24

AUTEN v. ST. LOUIS, IRON MOUNTAIN & SOUTHERN RAILWAY COMPANY

Supreme Court of Arkansas

October 27, 1913

Appeal from Pulaski Chancery Court; John E. Martineau, Chancellor affirmed.

STATEMENT BY THE COURT.

This suit was brought by appellant in the Pulaski Chancery Court the object of which appears from the following recitals contained in the complaint:

That on April 30, 1874, and prior thereto, the Cairo & Fulton Railroad Company was a railroad corporation owning and operating a railroad in the State of Arkansas; that its capital stock was divided into shares of twenty-five dollars each; that on the 30th day of April, 1874, there was a consolidation of the Cairo & Fulton Railroad Company with the St. Louis & Iron Mountain Railroad Company, another corporation; and that by the consolidation of the two said roads, there was organized and incorporated under the laws of Arkansas the St. Louis, Iron Mountain & Southern Railway Company, which is the defendant herein, and a railroad corporation owning and operating a line of railroad in the State of Arkansas.

That under the laws of the State of Arkansas and Missouri, the consolidation was authorized and took place as above stated and after providing for the capital stock, etc., section 2 article 4, of the charter of said consolidated company provided:

"Every stockholder in each of the corporations hereto of the first and second part, shall receive in place of the stock held by him in such corporations, stock in the new corporation as follows, towit: For each share of stock held in the St. Louis & Iron Mountain Railroad Company, he shall receive one share of the stock of the St. Louis, Iron Mountain & Southern Railway Company, and for each share of stock in the Cairo & Fulton Railroad Company, he shall receive sixty-one hundredths of one share in the St. Louis, Iron Mountain & Southern Railway Company."

It was further alleged that the stock in the St. Louis Iron Mountain & Southern Railway Company was divided into shares of one hundred dollars each. That plaintiff was owner of twenty shares of the stock of the Cairo & Fulton Railroad, evidenced by certificate No. 529, and that according to the resolutions and articles of the defendant, the consolidated company, the holder thereof would be entitled to twelve shares of the capital stock of the defendant company. That the value of the shares of the Cairo & Fulton Railroad Company stock was twenty-five dollars each, and the plaintiff stated that he was therefore entitled to the value of twelve shares in the St. Louis, Iron Mountain & Southern Railway Company of the value of one hundred dollars each, together with the accumulated interest and dividends from the time of the consolidation to the present time.

It was further alleged that no notice was ever given him, or to the person who transferred the Cairo & Fulton stock to him, either of the consolidation, or the right to exchange the stock. That when plaintiff became the owner of the stock, he immediately took the question up with the defendant company, which now denies that he is entitled to any shares of the St. Louis, Iron Mountain & Southern Railway Company, and refuses to recognize any right in the plaintiff at all, and refuses to make payments of any dividends to him.

Plaintiff alleged that his stock had earned large dividends ever since the consolidation; that the defendant consolidated company has earned large dividends, and has often paid dividends, and that part of the consolidated railroad which was formerly the Cairo & Fulton road, was by far the best property of the consolidated road. That upon the consolidation above referred to, the defendant, St. Louis, Iron Mountain & Southern Railway Company took possession of all property of the Cairo & Fulton Railroad Company of every character, and have converted it to their own use, and now refuse to either issue stock to this plaintiff, or to recognize his rights or to compensate him in any way. Plaintiff alleged the par value of his stock is twelve hundred dollars, and that it has earned since the consolidation up to the present time more than 20 per cent per annum, making his stock, together with the accumulated dividends, now worth $ 6,120.

Plaintiff further alleged that in violation of the law, and in violation of the plaintiff's right, the defendant company has used its funds, and the funds belonging to the plaintiff, to purchase stock in their own and other corporations. That the defendant has not complied with the law of this State with reference to making reports, and the plaintiff is therefore unable to determine what his rights are. He alleged that there was no method by which it can be known what dividends have been earned, nor what has become of the earnings other than to have an accounting, and he prays that a master be appointed and an accounting ordered, and that defendant be required to bring its books and records into the State of Arkansas and keep them here, that they may be open to the inspection of himself and all other stockholders.

In response to a motion to make the complaint more definite and certain, appellant amended his complaint by alleging that he became the owner of the twenty shares of stock on the 11th day of February, 1911, and that they were transferred to him by J. H. Putnam as trustee for St. Andrew's Church at Tioga, Tioga County, Pennsylvania.

Whereupon, the defendant demurred to the complaint upon the grounds that, as amended, it did not state facts sufficient to constitute a cause of action, and because the complaint shows that the alleged claim of plaintiff is stale and barred by laches, and the long delay of plaintiff, and those under whom he claims.

Upon the above pleadings the court rendered a decree sustaining appellee's demurrer, and dismissed the complaint on the ground of staleness of claim and laches in its assertion. This appeal was prosecuted from the order sustaining the demurrer and dismissing the complaint.

Decree affirmed.

Mehaffy, Reid & Mehaffy, for appellant.

1. To charge one with laches he must have knowledge of his rights and of their being invaded; and if he acts as soon as possible after learning of his rights or of their invasion, he can not be charged with laches. 31 A. 833.

Neither can one be charged with laches if he has had no notice of his rights, or that they are being denied, and this notice must be actual, not constructive. 86 Ark. 300.

Laches involves more than mere delay; it involves also some change in the parties or relations which would make it inequitable to enforce the claim. 34 S.W. 209; 75 F. 860; 67 F. 31; 50 N.W. 143; 80 Va. 22; 27 S.E. 504.

2. Appellant had more than a mere right to exchange his Cairo & Fulton stock for stock in the consolidated company--he was a stockholder in the latter company by virtue of its charter, and it makes no difference that a certificate of stock in the consolidated company had never been delivered to him.

His right of action to compel recognition of his rights as a stockholder did not accrue until they were denied. 84 N.W. 862; 64 N.W. 69; 43 N.W. 602.

The relations between the parties is a fiduciary one, and laches could not apply. 144 F. 765; 30 Pa.St. 42.

Stockholders of a corporation may rely on the honesty of their associates and officers, and can not lose their rights by failure to inquire into or interfere with the affairs of the corporation. Occupying a fiduciary relationship, the officers of a corporation are accountable to its stockholders on the principles governing that relationship. 145 F. 103; 45 S.E. 232; 69 N.E. 206; 107 N.W. 629; 77 P. 277.

E. B. Kinsworthy and R. E. Wiley, for appellee.

1. It appears from appellant's complaint that he and his grantor slept on their rights for thirty-eight years, and no excuse is shown for the delay.

Equity will not aid in enforcing stale demands where the parties seeking to enforce them have been guilty of delay and have slept upon their rights. 3 Bro. C. C. 640; 19 Ark. 21; ...