Morris v. Metalline Land Co.

• Decision Date: 08 October 1894
• Docket Number: 368,307,326
• Citation: 30 A. 240,164 Pa. 326
• Parties: Evan Morris et al., Trustees of the Metalline Land Co., v. Metalline Land Co., Roope Brooking et al.; Roope Brooking's Appeal; Wm. H. Stevens's Appeal; Appeal of Sarah Miller, Exrx. of Frederick Miller
• Court: Pennsylvania Supreme Court

30 A. 240

Evan Morris et al., Trustees of the Metalline Land Co., v. Metalline Land Co., Roope Brooking et al.; Roope Brooking's Appeal; Wm. H. Stevens's Appeal; Appeal of Sarah Miller, Exrx. of Frederick Miller

164 Pa. 326

Nos. 307, 326, 368

Supreme Court of Pennsylvania

October 8, 1894

Argued April 8, 1894

Appeals, Nos. 307, 326 and 368, from decree of C.P. No. 2 Phila. Co., March T., 1889, No. 86, on bill in equity. Reversed.

Bill in equity by the trustees of the Metalline Land Co. to determine the parties entitled to participate in the proceeds of the sale of certain lands of the company.

The facts appear by the opinion of the Supreme Court.

Errors assigned were in overruling exceptions to the master's findings that the assessments and forfeitures of the stock were legal and that appellants were barred by laches, and in not allowing them to participate in the distribution of the fund.

The decree of the court below is reversed at the cost of the appellees and the record is remitted with instructions to distribute the fund in the hands of the trustees in accordance with this opinion.

Hampton L. Carson, for Brooking, appellant. -- Mr Brooking was entitled to receive notice of a call of an assessment on his stock in strict and exact conformity with the fundamental article of association, and his stock could not be legally forfeited unless he received such notice: Oliver's Est. 136 Pa. 43; Henry v. Dietrich, 84 Pa. 293; Tomlin v. Tonica & Petersburg R.R., 23 Ill. 429; Rutland & B.R.R. v. Thrall, 35 Vt. 536; Hughes v. Antietam Mfg. Co., 34 Md. 316; Macon & Augusta R.R. v. Vason, 57 Ga. 314; Westcott v. Mining Co., 23 Mich. 145; Ry. v. Fitler, 60 Pa. 130; R.R. v. Romley, 8 Fla. 508; Pulford v. Fire Department, 31 Mich. 458; Ins. Co. v. Stewart, 39 N.J.L. 486; Sparks v. Water Works, 13 Ves. 427; Johnson v. Lyttle's Iron Agency, L.R. 5 Ch. Div. 687; Watson v. Eales, 23 Beav. 294; Clarke v. Hart, 6 H.L.C. 633.

The sending of notice by card was not a compliance with the articles of association as to notice: Land Co. v. Field, L.R. 16 Ch. Div. 647; Westcott v. Mining Co., 23 Mich. 145; Sparks v. Water Co., 13 Vesey, Jr., 427; Cockrell v. Van Diemen's Land, 26 L.J., C.P. 203.

The sale of the stock was ultra vires: Butterfield v. Beardsley, 28 Mich. 412; Oliver's Est., 136 Pa. 43.

Mr. Brooking never had that full knowledge of all the circumstances required by the authorities to work an estoppel, and it would be the height of inequity to present his conduct in the light of an abandonment. He did not stand by and acquiesce in what had been done, for, when inquiring as to what had been done, he was deceived: 2 Perry on Trusts, 498; 3 Lewin on Trusts, 923; DeBussche v. Alt, 8 Ch. Div. 286; United States v. Taylor, 104 U.S. 222; 2 Bouvier's L. Dict. 593; 12 A. & E. Ency. L. 587; Cook, Stocks, 731; 2 Lindley on Partnership, p. 467; Barton v. London & N.W. Co., L.R. 24 Q.B. Div. 77; Cababee on Estoppel, 83, 86, 89, 99; Butterfield v. Beardsley, 28 Mich. 412; Clarke v. Hart, 6 H.L.C. 632; Mfg. Co. v. Levy, 54 Pa. 230; Westcott v. Mining Co., 23 Mich. 145; Mining Co. v. McLister, L.R. 1 Ap. Cas. 39; R.R. v. Bowler, 9 Bush, 495; Evans v. Smallcombe, L.R. 3 H.L. 249; Archbold v. Scully, 9 H.L.C. 360.

There is no such conduct in the remaining shareholders as to entitle them to consideration, such as was extended in the English cases cited by the master. They made no large expenditures for the development of the common property.

T. Elliott Patterson, for Stevens, appellant. -- There was no lawful divestiture of the partnership interest: 3 Kent, 24; Lindley on Partnership, Bl. ed., p. 64; Butterfield v. Beardsley, 28 Mich. 412; Oliver's Est., 136 Pa. 58.

The articles were fundamental and binding upon all interested: Livingston v. Lynch, 4 Johns. Ch. 595; Chapple v. Cadell, Jacob's Ch. 537; Lawes's Case, 10 E.L. & Ch. 168; Const v. Harris, Turner & Russel Ch. 496; Clarke v. Hart, 6 H.L.C. 633; Johnson v. Lyttle's Iron Agency, L.R. 5 Ch. Div. 687; Cook on Joint Stock Companies, 150; Boon on Corporations, 161; Ry. v. Rawley, 8 Fla. 508; Sinking Springs Co. v. Hoff, 2 W.N. 41; Ins. Co. v. Stewart, 39 N.J.L. 486.

Provisions as to forfeiture must be strictly observed: Pierce on Railroads, 86; Redfield on Railways, 214; Morawetz on Private Corporations, 127; Walker v. Ogden, 1 Bissell, 287; Sparks v. Water Works, 13 Vesey, 428; Westcott v. Mining Co., 23 Mich. 145; R.R. v. Graham, 11 Metc. 1; R.R. v. Staples, 5 Gray, 522; R.R. v. Rawley, 8 Fla. 508; Ry. v. Fitler, 60 Pa. 130; Pitcher v. Barrows, 17 Pick. 365; Lincoln v. Wright, 23 Pa. 80; Kellogg v. French, 15 Gray, 357; Beaver v. McGrath, 50 Pa. 482; Hess v. Werts, 4 S. & R. 356.

There were none of the elements of estoppel in Mr. Stevens's case: Pickard v. Sears, 6 A. & E. 469; Freeman v. Cooke, 2 Exch. 654; Keating v. Orne, 77 Pa. 93; Lawrence v. Luhr, 65 Pa. 236; Halleck v. Bresnahen, 3 Wyoming, 73; Carson v. Mining Co., 5 Mich. 288; Mining Co. v. Levy, 54 Pa. 230; Hill v. Epley, 31 Pa. 331; Ashhurst's Ap., 60 Pa. 290; Prendergast v. Turton, 1 Y. & C. 98.

Stevens was not guilty of laches. To constitute an abandonment there must be a voluntary giving up of a thing by one having the intention to abandon it. Intention is the essence of abandonment: Etting v. Marx's Exr., 4 F. 681; Cranmer v. McSwords, 24 W.Va. 601; Partridge v. McKinney, 10 Cal. 183; Crandall v. Woods, 8 Cal. 144; Shaw v. Spencer, 100 Mass. 382; Rush v. Barr, 1 Watts, 120; 2 Perry on Trusts, 482, 498; Lewin on Trusts, 923.

If purchasers of stock in a corporation have notice that their vendors are trustees, they will be held as constructive trustees: 1 Perry on Trustees, § 242; Shaw v. Spencer, 100 Mass. 390; Walsh v. Stille, 2 Pars. Eq. Cas. 17; Bayard v. Bank, 52 Pa. 238.

James E. Hood, Francis I. Gowen with him, for Sarah Miller, executrix of Frederick Miller, deceased. -- The forfeiture of Miller's shares was invalid: Lindley on Partnership, 744; Walter v. Haynes, 1 R. & M. 149; Clarke v. Hart, 6 H.L. 633.

Richard C. Dale and John G. Johnson, Wm. D. Neilson with them, for appellees. -- This association is a company and not an ordinary partnership: Oliver's Est., 136 Pa. 43.

The defendants whose stocks were not forfeited, being those shown by the records of the association to be members, rest on their apparent title and need offer no further proof. The other defendants, having no apparent title, seek to obtain the aid of a chancellor to change the existing status and to secure admission to the privileges of membership. This they seek to accomplish by showing that at one time they were members, and that their loss of membership was accomplished by proceedings in which there was a formal irregularity.

A court of equity will not aid parties to obtain relief who for a period exceeding the statute of limitations have acquiesced in proceedings under which their interests in the Metalline Land Company were forfeited.

Invalid forfeitures may subsequently, by acquiescence, express or tacit, be so far confirmed that they cannot be opened: Green's Brice's Ultra Vires, 188; Agriculturist Ins. Co. Cases in Lindley on Part. 760, 763; Woolaston's Case, 4 De G. & J. 437; Webster's Case, 32 L.J. Ch. 135; Knight's Case, L.R. 2 Ch. 321; King's Case, L.R. 2 Ch. 714; Kelk's Case, L.R. 9 Eq. 107; Austin's Case, 24 L.T. 932; Lyster's Case, L.R. 4 Eq. 233; Mining Co. v. McLister, L.R. 1 Ap. Cas. 39; Lawrence's Case, L.R. 2 Ch. Ap. 412; Hart v. Clarke, 19 Beav. 356; Clegg v. Edmonson, 8 De G.M. & G. 787; McConomy v. Reed, 152 Pa. 42.

Before STERRETT, C.J., GREEN, WILLIAMS, MITCHELL and DEAN, JJ.

OPINION

MR. JUSTICE GREEN:

The proceeding in this case is a bill in equity filed by certain trustees of a fund arising from the sale of lands owned by the defendant land company. "The company is unincorpo rated and is a partnership organized on the joint stock plan by a contract entered into by the members:" Oliver's Estate, 136 Pa. 58. It is composed of numerous members whose interests in the company are represented by certificates of stock of which there were to be twenty thousand of five dollars each. The business of the company was to be the purchasing of lands, developing mines of copper and other valuable minerals, and disposing of the same, situated in the Lake Superior Land District, Upper Peninsula, state of Michigan. The funds and property of the association were vested in three trustees to be held by them as joint tenants, and they were to have the entire control and disposal of the property, real and personal, and to make purchases, conveyances, sales and contracts. In the exercise of their authority they sold forty acres of the lands of the company for $500,000, and the distribution of this money is the object of the present proceeding. Certain of the stockholders had failed to pay calls or assessments made by the trustees, and the shares of a number of stockholders including the appellants, had been forfeited for nonpayment of the calls. If these forfeitures were lawfully made the appellants have no case, and the decree of the court below should be sustained if they or any of them were not lawfully made the appellants are entitled to participate in the distribution, from which they were excluded by the master and court below. Three calls were made prior to the forfeitures involved in the present contention, one in 1872, one in 1874 and another in 1878. As to the call made in 1872 no question arises here, as all the appellants paid the amounts called for at that time. There are three appellants, Roope Brooking, Sarah Miller, executrix, and William H. Stevens. The shares of Brooking and Miller were forfeited under the call of 1878 only. Of the shares of Stevens, five hundred and fifty were forfeited for nonpayment of...