Wilson v. Colorado Mining Co.

• Decision Date: 27 September 1915
• Docket Number: 4431.,4430
• Citation: 227 F. 721
• Parties: WILSON v. COLORADO MINING CO. WILSON et al. v. SAME.
• Court: U.S. Court of Appeals — Eighth Circuit

227 F. 721

WILSON v. COLORADO MINING CO.

WILSON et al. v. SAME.

Nos. 4430, 4431.

United States Court of Appeals, Eighth Circuit.

September 27, 1915

Syllabus by the Court

A corporation which, without lawful authority, assesses and thereby appropriates to itself stock in it, or a valuable interest in such stock, of which it is aware another is owner, thereby becomes liable at the option of the owner to restore to him the stock, or the interest therein and the dividends thereon, or to pay the damages caused by the taking, and the corporation's ignorance of the law or belief in its right to commit the wrong is no defense to the liability.

The test of abandonment of property or of a right of action is the intent to abandon. The presumption is that an owner of property, or of the right to it, did not intend to abandon it, and the burden to prove the contrary is on him who asserts it.

A corporation, with full knowledge that W. was the pledgor of stock, the certificates of which to the pledgees were in the possession of its secretary, made an unauthorized assessment upon and sale of it to itself in the summer of 1900. W. had no knowledge or notice thereof until the fall of 1906, and he brought suit for it in September, 1908.

Held that he did not abandon his interest in the stock or his right to recover of the company for its appropriation.

Where a suit in equity is brought against a wrongdoer for the misappropriation of property within the time limited for the analogous action at law, mere delay and an increase in the value of the property, unaccompanied by the intervention of the rights of innocent parties, the death of important witnesses, the loss of documentary evidence, or other similar circumstances, will not constitute fatal laches.

An unauthorized appropriation to itself by a corporation of collateral securities, with full knowledge of the interest of the pledgor therein, although with the voluntary transfer, or consent, or acquiescence, or negligence, or laches of the pledgee, is both a tort and a breach of trust, and the pledgor may maintain, at his option, a suit in equity for their recovery, or an action at law for the value of his interest therein. The laches of the pledgee is no bar to the right of action of a pledgor who has been guilty of no laches.

It is a general rule that one may not split his cause of action. He who avails himself by action or defense and judgment of a part of an entire indivisible claim or cause of action thereby estops himself from maintaining an action or defense founded upon any other part of it.

But claims that were a part of the indivisible claim or cause of action, but were unknown during the pendency of the first suit to the party who used other parts of the entire claim therein, are excepted from this rule, and an action or defense may be maintained upon them after judgment in the first action.

Where without authority so to do, a corporation has appropriated to itself, or transferred to another, the stock of one of its stockholders, he is entitled in a proper suit to a decree that the company record in his name and issue to him a like amount of stock, and that, if necessary to accomplish this end, the company acquire by purchase and transfer to him the requisite amount of stock, and that, if the corporation fails to issue such amount of stock to him, it pay to him the highest value the stock attained intermediate between the date of the appropriation and the expiration of a reasonable time for him to purchase the stock after he received notice of the appropriation, interest on such amount, and the dividends on the stock that were declared while the misappropriation was in force, with interest.

The appellants were plaintiffs below, where these cases, which related to stock originally owned by Joseph L. Wilson, were heard and decided together. Wilson complains that the court below declined to require the Colorado Mining Company, a corporation, to restore to him and to pay him the dividends on 5,000 shares of its nonassessable stock, which it had without authority, assessed, sold to itself, and appropriated to its own use for a failure to pay that assessment. He sought this relief by a suit in equity, the court below dismissed his suit on the merits, and counsel for the company insist that the dismissal was right: (1) Because the complainant was estopped from maintaining it by his abandonment of his rights and his laches; (2) because his suit was barred by the compromise of and the judgment in his former action at law; and (3) because his suit was barred by the splitting of his cause of action which his former action wrought.

The Colorado Mining Company was incorporated in December, 1898 with a capital stock of $125,000, divided into 250,000 shares, of the par value of 50 cents a share. Prior to its organization Wilson was the owner of mining claims which he conveyed to the company for 73,334 shares of its stock, for which the company executed its certificates to him, but held them in its stock book under an agreement between it and the other stockholders, who purchased their stock with mining claims, that all this stock should be held by it for them, and that none of it should be sold until the treasury stock of the company should be first disposed of. Wilson was not only the owner of this large amount of stock, but he was the manager of the company until, in February, 1899, he was taken seriously ill and went to St. Mark's Hospital in Salt Lake City, where he remained about two months, and then continued disabled for many months thereafter. He was unable to pay the hospital in full for its services, and on May 9, 1899, to secure a balance of $80 which he owed it, he made a written order, directed to the president of the Colorado Company to 'issue in the name of St. Mark's Hospital five thousand (5,000) shares Colorado stock, and deliver the same to Dr. Croxall. This is for security of a bill I owe the hospital. ' Thereupon the company took 5,000 shares out of a certificate to Wilson of a much larger number of shares, and issued a certificate for 5,000 shares in the usual form to St. Mark's Hospital, but retained it in the possession of its secretary. At the same time Brown, as secretary of the corporation, issued and delivered to the hospital a certificate that he held the certificate for 5,000 shares in favor of the hospital in his possession until such a time as Wilson should pay to the hospital $80, or a satisfactory equivalent for its services. On May 15, 1899, Wilson pledged 10,000 shares of his stock to the plaintiff Croxall to secure $150, and like writings were made, delivered, and held by the respective parties to that pledge. On March 27, 1907, while Wilson held his interest as pledgor in these 15,000 shares of stock, and while he also owned other stock in the company which was not pledged, he demanded his certificates of stock of the company, and it refused to deliver any of the stock, or any certificate of any of it, to him on the ground that it held them in trust under the agreement heretofore stated until the treasury stock was sold. The Colorado Company had ceased mining operations and business in the fall of 1899, and about March 27, 1900, Wilson left the state of Utah and remained absent from that time until some time in the year 1907. Meanwhile, between May 1, 1900, and August 1, 1900, the Colorado company went through the form of levying an assessment upon, making a sale of, and transferring to itself the 5,000 shares then owned by Wilson as pledgor and the hospital as pledgee, and the 10,000 shares then owned by Wilson as pledgor and Croxall as pledgee, the certificates for all of which were held in the possession of the secretary of the company. About the time the assessment was made the hospital was informed thereof, but declined to pay it. There is a conflict of evidence on the question whether or not Croxall received any notice of the assessment or of the sale at any time prior to the fall or winter of the year 1907. But the evidence is conclusive that Wilson never received any notice, and never had any knowledge of the assessment, sale, or misappropriation until he returned to Salt Lake City some time in the fall of the year 1907, and then he obtained this information with difficulty, for the officers of the company denied his request to permit him to inspect its books.

Wilson knew that he had assigned the 15,000 shares of his stock to the hospital and Croxall, but he had forgotten that he had assigned it as security for his two debts only, and supposed that his assignments were indefeasible, and the only papers which evidenced the transaction were in the possession of the Colorado Company, the hospital, and Croxall. On November 27 1907, he commenced an action at law against the company for that part of his stock, or the value thereof and the dividends thereon, which he had not assigned to the hospital or Croxall. He expressly alleged in his complaint that he had subscribed for and was originally entitled to 73,334 shares of the stock of the corporation, and that he was entitled to have issued to him all these shares, except 15,000 shares which he alleged that he had theretofore sold and delivered. In its answer the defendant not only admitted, but expressly alleged, that 'on or about the 9th day of May, 1899, the plaintiff, for and in consideration of certain hospital fees, sold and delivered to the St. Mark's Hospital of Salt Lake City, Utah, 5,000 shares of the capital stock of defendant corporation,' and that 'on or about the 15th day of May, 1899, in consideration of medical services rendered by one Dr. W. Y. Croxall, plaintiff sold and delivered to the said Croxall 10,000 shares of the capital stock of defendant corporation then owned...