Williams v. Gold Hill Min. Co.

• Decision Date: 28 August 1899
• Docket Number: 12,531.
• Citation: 96 F. 454
• Parties: WILLIAMS v. GOLD HILL MIN. CO. et al.
• Court: U.S. District Court — Northern District of California

96 F. 454

WILLIAMS v. GOLD HILL MIN. CO. et al.

No. 12,531.

United States Circuit Court, N.D. California.

August 28, 1899

Thomas S. Ford, C. Walter Artz, and E. J. McCutchen, for complainant.

J. M Walling, for respondents.

MORROW Circuit Judge.

This is an action to foreclose a mortgage upon certain mining property situated in Nevada county, in this state. The mortgage was executed by the Gold Hill Mining Company on July 1, 1890, and conveyed the property mortgaged to G. Livingston Morse, of the city of New York, as trustee, to secure the payment of 100 bonds of $500 each, making $50,000 in all payable at five years from date, with interest, payable semiannually, at the rate of 10 per cent. per annum. The respondents George C. Gaylord, Charles E. Maddrell, and Dwight T. Rolfe are judgment creditors of the respondent corporation. It is alleged in the bill that a default has been made by the respondent the Gold Hill Mining Company in the payment of the principal and interest of the bonds, and thereby default has occurred in the performance of the conditions of the mortgage. It is alleged that the persons or parties other than- said mining company named as respondents in the bill of complaint have or claim to have some interest in or lien upon the premises covered by the mortgage, which interest or lien, if any, accrued subsequently to the lien of said mortgage, and is subject and subordinate thereto. The respondent the Gold Hill Mining Company has been served with a subpoena, and has defaulted. The respondents Gaylord Maddrell, and Rolfe have appeared and answered the bill. The respondent Gaylord denies that the Gold Hill Mining Company was authorized to issue the bonds, or to execute the mortgage; alleges that at the date of said mortgage and bonds respondent corporation had its principal place of business in the city of New York, and that said bonds and mortgage are payable in the state of New York; that, according to the by-laws of said corporation, no person was, on July 1, 1890 eligible for election as a director thereof, unless he was a bona fide owner of 100 shares of capital stock in the company at the time of his election; alleges that none of the parties acting as directors at the date of the mortgage and bonds were the owners of such shares; that by the provisions of the laws of West Virginia (Code, c. 53, sec. 49) a director of a corporation must be a stockholder in the corporation; denies that the said corporation had any board of directors at the date of the adoption of the resolution authorizing the execution of the mortgage and bonds mentioned in the bill; that there were any stockholders or any directors of said corporation, or any persons authorized to vote for directors, or persons authorized to represent said corporation at the date of the alleged authorization of the said bonds and mortgage; alleges that the said corporation was not indebted at the date of said mortgage and bonds, but that the mortgage and bonds were attempted to be authorized and executed solely for the benefit of persons who pretended to represent said corporation as stockholders and directors; that no consideration had been received by said corporation from any of the persons in whose interests said mortgage and bonds were issued; that the execution and delivery of said mortgage and bonds were authorized, if at all, only by the votes of pretended stockholders of said corporation, each of whom was directly, personally, and financially interested therein, and received the full benefit thereof, and hence said mortgage and bonds are fraudulent and void; alleges that the respondent corporation is organized for working the mining claims described in the bill; that the mortgage or trust deed set out in the bill, and alleged to have been executed by said corporation, was not ratified by the holders of at least two-thirds of the capital stock of said corporation, as required by an act of the legislature of the state of California approved April 23, 1880, entitled 'An act for the further protection of stockholders in mining companies'; alleges that M. J. Shoecraft and C. Littlefield, whose names appear signed to the mortgage or trust deed, were not respectively president and secretary of the said corporation at the time of the execution of said mortgage; denies that said mortgage was executed by the president and secretary of said corporation, or either of them, and that the premises described in the bill were conveyed to G. Livingston Morse, trustee of the plaintiff, and that by virtue of said mortgage any lien was created upon said mining claim and premises in favor of said G. Livingston Morse; that said mortgage was authorized, made, executed, or delivered in conformity with law; denies that said 100 bonds have been disposed of to bona fide holders for value; that respondent mining company is indebted in the sum of $2,500 semiannual interest on account of said bonds for each or any half year since July 1, 1893, or prior thereto; that on July 1, 1895, the sum of $50,000 principal, or said principal sum and interest thereon, became due and payable; that respondents' claim has arisen subsequently to the lien of said mortgage, and is subject thereto; alleges that respondent Gaylord recorded in the superior court of the county of Nevada, state of California, a judgment for the sum of $12,439.26, together with $8 costs, which judgment has not been appealed from, modified, vacated, or set aside, but still remains in full force; that, subsequent to the entry of the above judgment, said respondent caused an execution to issue, and that said mining claims were sold by the sheriff on October 30, 1897; that at this sale respondent Gaylord, being the highest bidder, became the purchaser thereof for the sum of $13,331.82, whereupon the sheriff issued a certificate of sale to said respondent, which he now holds, no redemption having been made; that on October 29, 1897, in the superior court of the county of Nevada, state of California, respondent recovered a second judgment against said Gold Hill Mining Company for the sum of $4,504.87 and $6.75 costs, which judgment constitutes a lien upon the mining claims described in the bill, but which is wholly unsatisfied since respondent is the owner and holder of said claims; denies that said mortgage was given to secure the purchase price of the property; alleges that the property had been purchased and paid for before the execution of said mortgage or bonds; denies that any considerable portion of the money was used and appropriated as working capital to start said mine. Respondent asks for a decree that complainant have no lien upon the premises described in the bill; that respondent's claims of lien are paramount to those of complainant; that the amount due and to become due on account of said bonds and interest be determined, and that respondent have such further relief as is agreeable to equity. Respondents Maddrell and Rolfe have filed a joint answer, in which the same allegations and denials are made as in the answer of Gaylord, except that said respondents allege that a judgment was recovered in the superior court of the county of Nevada, state of California, by Charles Maddrell, against said Gold Hill Mining Company, for the sum of $603.55 and costs amounting to $5.90; that upon an order of sale the property described in the bill was sold by the sheriff, to satisfy said judgment, and at said sale respondents became the purchasers of the property for the sum of $675.25, whereupon the sheriff issued to them a certificate of sale, and respondents are now the owners and holders of said certificate of sale, no redemption having been made. The prayer of these respondents is identical with that of the respondent Gaylord.

The Gold Hill Mining Company is a corporation organized under the laws of West Virginia on June 23, 1890, and consequently a corporation foreign to the state of California. The recognition of its existence, therefore, and the enforcement of its contracts in this state, depend upon the comity and consent of the state. Corporations chartered by one sovereignty have no authority to exercise their franchises in another, except as the latter shall permit; but by comity they are suffered to do so where it will not contravene any principle of local policy, or any general statute. As was said in Runyan v. Coster's Lessee, 14 Pet. 122:

'Every power which a corporation exercises in another state depends for its validity upon the laws of the sovereignty in which it is exercised, and a corporation can make no valid contract without the sanction, express or implied, of such sovereignty.'

In the case of Paul v. Virginia, 8 Wall. 168, Justice Field, delivering the opinion of the court, said:

'The corporation, being the mere creation of local law, can have no legal existence beyond the limits of the sovereignty where created. As said by this court in Bank v. Earle, 13 Pet. 588, 'it must dwell in the place of its creation, and cannot migrate to another sovereignty.' The recognition of its existence even by other states, and the enforcement of its contracts made therein, depend purely upon the comity of those states,-- a comity which is never extended where the existence of the corporation or the exercise of its powers are prejudicial to their interests, or repugnant to their policy. Having no absolute right of recognition in other states, but depending for such recognition and the enforcement of its contracts upon their assent, it follows, as a matter of course, that such assent may be granted upon such terms and conditions as those states may think proper to impose. They may exclude the foreign corporation entirely. They may restrict its business to particular localities, or they may exact such

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