Raht v. Sevier Min. & Mill. Co.

• Decision Date: 26 October 1898
• Court: Utah Supreme Court
• Parties: W. L. RAHT, APPELLANT v. THE SEVIER MINING AND MILLING COMPANY AND CHARLES LAMMERSDORF, RESPONDENTS

54 P. 889

18 Utah 290

W. L. RAHT, APPELLANT v. THE SEVIER MINING AND MILLING COMPANY AND CHARLES LAMMERSDORF, RESPONDENTS

Supreme Court of Utah

October 26, 1898

Appeal from the District Court Salt Lake County, Hon. Ogden Hiles Judge.

Action by plaintiff to set aside and annul a sale under an assessment on certain shares of stock of defendant company and to annul and cancel the issuance and transfer of said stock to defendant Lammersdorf. From a decree in favor of defendants plaintiff appeals.

Affirmed.

Frank Pierce, Esq., for appellants.

The alleged assessment of May 27, 1893, is absolutely void and consequently the attempted forfeiture and sale of the stock is void. The assessment was not in accordance with Compiled Laws of 1888, Sec. 2377, in that, First: It does not specify "to whom and where payable." Second: It does not "fix a day on which the unpaid assessment shall be delinquent." Third: It does not fix "a day for the sale of delinquent stock."

It is a settled rule that the validity of the forfeiture and sale of shares depends upon a strict and formal compliance with the requirements of the statute. 1 Cook on Stock & Stockholders Sec. 129; Garden Gully Co. v. McLister, L. R. 1 Appeal Cases, 39; Germantown Ry. Co. v. Fitler, 60 Pa. 124.

The power given to forfeit stock must be strictly pursued and if any restrictions or limitations imposed by the charter have been disregarded, the forfeiture is invalid. Morris v. Metalline Land Co., 44 A. S. R. 614; Same case, 164 Pa. St. 326.

A corporation has no inherent power to forfeit or sell shares of stock owned by delinquent stockholders. That is not a common law remedy and can only be exercised when it is expressly conferred by the statute, and then only in the manner prescribed by law. Budd v. Multnomah Street Ry., 15 Ore. 413; Westcott v. M. M. Co., 23 Mich. 145; Cook on Stock & Stockholders, Sec. 123; Thompson on Corporations, Sec. 1766.

If the condition precedent prescribed by law be not strictly complied with, the proceedings to declare the forfeiture are absolutely void. Westcott v. M. M. Co., 23 Mich. 145, and cases there cited.

The court found that our action was barred by the provisions of subdivision 4, section 3144, laws of 1888. We think the court erred in this. We think it is controlled by Sec. 3150 Compiled Laws 1888, to wit: Sec. 3150. S. 201. "An action for relief not herein provided for must be commenced within four years after the cause of action shall have accrued."

Our action is to clear a cloud from our title, to cancel spurious and over-issued stock and to compel the company to recognize the plaintiff as the owner of the stock.

California for many years has had a statute identical with our Sec. 3150. 3 Deering's Code, 343.

In 1867 the Supreme Court of that State decided that an action to remove a cloud from a title was not controlled by the limitations contained in the clause covering fraud and mistake but by the section identical with our Sec. 3150. Such has been the settled law in California ever since. Stewart v. Thompson, 32 Cal. 264.

At the common law in action to clear a cloud from the title actions which are purely equitable, mere lapse of time is never a bar. 13 A. & E. Enc. of Law, 680, note 2. Schoener v. Lissauer, 107 N.Y. 111.

We are not barred by Sec. 2391 of the Compiled Laws of Utah. 1888.

Respondent's plea is, First: We did not bring our action in six months. Second: We have not tendered the (alleged) assessment of 1/2 a cent.

This section applied only in those cases where there is

(a) An irregularity or defect in the notice of sale.

(b) A defect or irregularity in the sale.

This section is not applicable to the case at bar. The attempted levy is void. The board never exercised the power given it by Sec. 2377 to make a levy. The assessment is void ab initio. Any amount of notices by the secretary could not put life into a void levy.

Section 2391 is similar to the California law. It has been construed there in a case where the levy was valid but the sale was irregular. Burham v. San Francisco Fuse Mfg. Co., 76 Cal. 28.

The plaintiff is not estopped to deny the validity of the assessment because he voted for it or acquiesced in it.

Any amount of acquiescence in an absolutely void act cannot give it validity. Scoville v. Thayer, 105 U.S. 143.

The plaintiff was not guilty of laches.

We believe the rule of laches to be this: So long as the relative positions of the parties is not altered, to the prejudice of the defendant, delay short of the period of limitations is of very little consequence. 12 A. & E. Enc. p. 544, Note 4 and cases cited.

Messrs. Marshall, Royle & Hempstead for respondent.

The findings of fact by a trial court will not be set aside without finding that they were made against the clear preponderance of the evidence. Connor v. Raddon, 16 Utah 418; McKay v. Farr, 15 Utah 261; Henderson v. Adams, 15 Utah 30; Darke v. Smith, 14 Utah 35; Silva v. Pickard, 14 Utah 245; Whiteside v. Green, 13 Utah 341; Short v. Pierce, 11 Utah 29; Stahn v. Hall, 10 Utah 400; Dooly Block v. Rapid Transit Co., 9 Utah, 31; Hannaman v. Karrick, 9 Utah, 237; Slater v. Cragan, 7 Utah, 412; Mining Co. v. Haws, 7 Utah, 315; McDonough v. Smith, 5 Utah 276.

The assessment under which plaintiff's stock was sold was a valid assessment.

The provisions of Sec. 2377 Compiled Laws, 1888, defining what the order levying an assessment should state, are directory merely. Fisk v. Patton, 7 Utah, 399 at page 409.

Even if there was a defect or irregularity in the sale of plaintiff's stock he cannot maintain this action for the reason that he did not first pay or tender to the corporation or to the defendant Lammersdorf the sum for which the same was sold, together with all the subsequent assessments paid thereon and interest on such sums from the time they were paid.

The foregoing states in substance the requirements of Sec. 2391 C. L. of Utah, 1888, none of which the plaintiff in this case has complied with.

On the point that this statute must be strictly complied with and that it is not sufficient for a plaintiff seeking to recover stock sold for delinquent assessment to make a tender for the first time at the trial, see 2 Thompson on Corporations, Sec. 1808; Burham v. San Francisco Fuse Mfg. Co., 76 Cal. 26.

The plaintiff's cause of action, assuming that the assessment for which the stock was sold was invalid, is barred by the Statute of Limitations, Subd. 4 of Sec. 3144, and Sec. 2391 C. L. of Utah, 1888.

The plaintiff's cause of action, assuming that the assessment under which his stock was sold was invalid, is barred by his own laches. The time in which a claim is barred by the laches of its owner may be much shorter than the period prescribed by the statute of limitations; and the doctrine of laches is stringently enforced in cases involving mining properties of uncertain or prospective value. Pomeroy's Eq. Jur. 2d ed. Sec. 418-419; same Secs. 816-820-917-965; Watt's App. 78 Pa. St. 370; Hoyt v. Latham, 143 U.S. 553 at p. 567-570; Johnson v. Standard Mining Co., 148 U.S. 360; Mining Co. v. Mining Co., 14 Colo. 90; 2 Thomp Corp. Sec. 1807; Sayre v. Citizen's Gas Light & Heat Co., 69 Cal. 207; 2 Cook on Stock and Stockholders, 3d ed. Sec. 732 and notes; Clay Co. v. Harvey, 9 Utah, 497; 2 Herman on Estoppel, Secs. 733, 735, 1003.

The plaintiff himself as a director voted for the assessment he now claims is void. If the complaining stockholder takes part in this act complained of, he is barred of his remedy. It does not lie in the mouth of a member of a corporation who has participated in the irregular proceedings to question their legality. Cook on Stock and Stockholders, 3d ed. 730, and cases cited in note 7. U.S. v. U. P. Ry. Co., 98 U.S. 569, at p. 612. N. H. Central Ry. v. Johnson, 64 Am. Dec., 300 at pages 307-8. Wood v. Corry etc. Waterworks Co., 44 F. 146. 1 Beach on Private corporations, Sec. 296 and note 2. Easterly v. Barber, 65 N.Y. 252.

MINER, J. ZANE, C. J. and BARTCH, J., concur.

OPINION

MINER, J.

This action was brought on the 25th day of September, 1897, to set aside and annul a sale under an assessment on 15421 shares of the capital stock of the Sevier Mining and Milling Company, and to annul and cancel the issuance and transfer of said shares of stock to defendant Lammersdorf, on the ground that the assessment under which the stock was sold was fraudulent and void. The answer after denying the allegations of the complaint, alleges that the plaintiff's cause of action is barred by his own laches and by the provisions of subdivision 4 of Sec. 3144, and by Sec. 2391, C. L. U. 1888.

The plaintiff was one of the directors of the defendant company, and owner of the stock in question. On the 27th day of May, 1893, plaintiff met with the directors of the defendant company in a board meeting, and with the balance of the directors voted for the following resolution, which was unanimously adopted: "Director Rice moved that an assessment of one-half cent per share be levied, payable immediately; carried by full vote."

The resolution was entered on the minute book of the company. In pursuance of this levy of assessment the stock in question was sold for delinquent assessment on the 20th day of July, 1893, to defendant Lammersdorf, and thereafter on the 30th day of September, 1893, the plaintiff's stock was marked cancelled on the books of the company, and the stock certificate covering the shares cancelled, together with other shares, not here in question, were issued to defendant Lammersdorf. Notice of this assessment was duly given to plaintiff and other stockholders, and duly published according to law, as was also the notice of the sale of the stock for delinquent assessment.

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