498
. Jl!EDIUU.L ·UPOBTEB.
,',;
This is a suit on a bond-a joint bond. The plaintiff claims a right to sueal! the obligors on the bond. He has a"perfect right to do this; this is his cause of action. It is not against the bank, nor both. .Even if the bond were several as Wallace, but it well as joint, the plaintiff would have a right to treat it and sue on it as a joint bOJ,ld. And this he has done. The cause in 104 U. S. is much stronger than this'. There, on this question of partnership, the controversy might be fairly said to be a separable one, but the court refused the petition for removal because the plaintiff's complaint in the cause of action was joint. IIere there is no separate obligation to the plaintiff. The parties are .bound jointly, or not at all. What would be a good defense for one would be good forthe.other. What would charge one would equally charge the other. . Under the ruling in the case I have referred to, I feel compelled to remand the cause. Let an order ,be drawn accordingly.
TAYLOR v. HOLMES and others. (Circuit Oourt,
w: D. North
Oarolina. October Term, 1882.)
2.
EQUiTY JURISPRUDENCE-RULES WHICH GOVERN.
The federal court can take. judicial notice of the laws of the several states Of the Union, and in construing the constitution and statutes of a state, and the laws which regulate the rights of proper,ty in a state, it .will be governed by the decisions of the highest court 'of the state; hut upon legal questions of a more general nature, and in the principles of equity jurisprudence, a federal court is influenced but not bound by the decillions of state courts. 3. EQUITY PLEADING-SUIT BY.MARRIED WOMAN.
A feme covert must. sue and be sued jointly with her husband, unless she claims a right in opposition to him, when her prochein ami, with her consent, may sue on her behalf, and her husband be made party defendant. 4. SAME-NECESSARY PAR1;'IES.
AU parties interested in or entitled to ljtigate the sll-me questions in controverRy, are necessary parties, and must be joined.in the suit. j). DEMUIlRER'- WHAT IT
ADMiTS.
A demurrer admits only matters of fact positively alleged, and not conclu" sions of law, or mere pretenses and suggestions, or the correctness of th8 ascription of U lJurpose', when 'not justified by the fadt po'sitively alleged.
TAYLOR, 11. HOLMJl!S.
499
It
BILL-WHEN D1'3MISSED.
A bill· in .eqUlty, where (1) thll[1l IS a want of certatnty in allegation to show that plaintiffs are entitled to the relief (2) the right to relief has been barred by the statute of limitations; (3) long and gross negligence 0f plaintiffs in seeking relief, unexplained by sufficient equitable reasons and circumstances,-will be dismissed. . 7. FOREIGN COUPORATIONS-RIGHTS-COHITY oFSTATEB.
A corporation bas no legal llxistel,1ce without the limits of the state which crcates it, but where it is authorized by,its charter to make contracts and acquire property for thc purpose of carrying on its legitimate business, and is invested with the eapacity of sning and being sued, it may by comity make cnnll'acts and. acquire property in other states, aud as to snch contracts and property may seek the rcmedies afforded, and is IJOund by the obligations imposed by the laws of such states: 8. SAME-FORFEITURE OF FRANCHISE.
Causes of forfeiture do not operate per se, neither can they be taken advantage ofc91laterally, nor in any other manner than by a direct proceeding instituted for the purpose against t1I.e corporation by the sovereign which created it, alJd such sovereign may waive the right of forfeiture 9. '8:.um-StmRENDER OF OHARTER.
A corporation may surrender up Its charter and thull determine its existence, but there must be some definite act of surrender, and an acceptance by the sovereign or its duly-appointed agent. A mere non-user of its powers is not a Burrender, nor will a court of equity be warranted. in presuming a surrender from the abandonment or its franchise in intention .only. There must be a declared purpose and act on the part of the corporation to justify such a.n inference. 10. OIl" CREDITOR!! AND STOCKHOLDERIl.
The rights and interests of the creditors and stockholders of a corporation are not extinguished or seriously impaired by its dissolution, and provisions are usually made, either in the charter or by the laws of the state of iti creation. for winding up the business and securing suoh rights ,and interests. 11. SAME-BuIT BROUGHT BY STOCKHOLDER.
A may bring suit against the corporation of which ,he is share· holder; of himself' attd associates, iba case where the corporation refuses to bring suit, or where the directors, trustees, or other representatives breoo"," of trust, or are proceeding ultra tlirlJ8. and in are guilty of ease the cOrpe>ration and its officers should be parties defendant.
on
12.
SAME':""WHAT MUST BE SHOWN.
,
In a suit by stockholders of a mining corporatIon to enforce a specl1lc per. formance of a contract made by the' defendants with said corporation. the plaintjffs must show when they became stockholde1lll, and whether they entered small price purchased their stock in the into the original enterprise. or market after the failure of the company or the expiration of the charter, and thllt they'requested the directors of the corporation to institute suit against the defendants, llnd that tbedireetors had trUst funds, o!:'were o:lIered proper indempity jor such legal proceedings; and the tiple when any, of the d\rectors ,or wheJi how they resigned office. . . 13. 'l'RUST-Ac.()EPrANCE OIl'. ' ,
A; vciluntarYor express"trust'cannetbe' impOsed oil anyone uidcss be 'agrees, IiQ by clearbpll!ic;ation the. duties aad ;
or
500
FSDERAL REFORTER.
'Yhile acceptance in a case of an implied, resu:ting, or constntctive trust is not necessary, the law holding him liable to the performance of such trust whether he is willing or unwilling: to accept the trust. 14. SAME-CONTRACT l"0R 8ALE OF LAND.
A binding contract for sale of land enforceable in equity, though in fact un· executed, is considered as performed, and the land is in equity the property of the vendee. When the vendee has paid all the purchase money he has a complete equftable eslate, and the vendor is a mere trustee of the legal title, and if the vendee has paid only a part of the purchase money, the vendor is a trustee to the extent of the amount paid. 15. SAME-hu'LIED TRUST-VENDOR.
Where a person, for a valuable consideration, contracts in writing to sell lands to the use and benefit of another, an implied trust arises in favor of the vendee against the vendor and -his representatives, and those claiming under him. ' OF LtM:rTATIONS,
Where a trust arises by implication out of the agreement of 'parties, and there is noconfiict of claim or adverse possession between the vendee and cestui qU6 trust, statutes of limitation do not apply; but where there is a conflict of claim, and the party having the legal estate holds adveJ;sely, the of limitations will protect theane having legal title, and who is sought to be ,converted into a by a decree founded upon fraud, breach of trust, or sOme inequitable advantage obtained by him. 17. SAME-'-RuLEOF PROPERTY.
Federal courts, in passing upon questions relating to property in the several 'statc9,r/lcognize statutes, of limitations, at1d give them the cQnstruction and eiIect that are given by local tribunals; and they will consider equitable'1'ights as barred by the lIame limitations, Where nothing has been done or said directly or indirectly to recognize such equitable elaimsby the adverse possessor.
InEquity. A. B. Conger and D.M. Furches, for plaintiffs. J . .11. Mc.Corkle, for defendants.
'. DICK, D. J. Thegel1eral demurrer' of the defendants 'is a denial, in form and substance, of ,the right of the plaintiffs to ,have their eRse1lonsidered and acted upon. by the court, and is an admissien of the truth of the allegations of the matters of fact set 'fo'rth in the bill properly , ' '' . .i It is neoessary,therefore, for the court to consideJ: what are the allegations of material'facts which are set forth in the bill; whether in direcr'terms an,d wit!}. ,precision to that, there is a definite equity inbeha:if. of them to ,the relief .demandedjwhetherthe plaintiffs have lost their Hghttcf"felief 'by' the bar ofastatute'o.f limitations, or·'by lapse of time, unexplained by proper eq'uitable 'and whetber all .neeessary,parties have been made, so: that the Qourtcll-n P1;lt end to,ithe, litigation by adjusting and settling in this suit the rights of
TAYLOR V. HOLMEB'.
501
all persons who are interested in or affected by the subject-matter in controversy. As there was considerable discussion by counsel as to the force awl effect of a uemurrer, and as to the extent that it can be made available in defense, I will state briefly some of the well-settled principles on this subject. A demurrer is applicable to any defense which may be made out from the allegations in a bill; but the most ordinary grounds of demurrer are want of jurisdiction, want of equity, multifariousness, and want oLparties<. By demurrer a defendant may properly insist upon staleness of claim, the statute of limitatiolls, and long acquiescence in his adverse possession and claim. The protestation usually inserted in a demurrer is a, practice ' rived from the Common law, and has no effect in limiting admissions as to faets properly alleged in the pending suit. The formal statement of causes of demurrer, though usual, is not The assertion of a 'general demurrer is that absolutely the plaintiff has not, on his own showing, made out, a 'case. If the causes ofdemiwrer 'are not formally set forth, the plaintiff may object, and require them to be thus stated; If the defendant assigns .causes of demnrrerore tenu,s he will not generally be entitled to , costs; for if the objections had been formally stated, the'plaintiff might have submitted to the demurrer and asked leave til amend his bill. . ; ,Where a demurrer for want of parties is filed, the should point out ,the proper parties, and thus give the' nity to amend; but this rule does not apply where it 'appears from the face of the bill that;;the plaintiff has !sufficient infonna.tionlllS to the names, interests, andresidenc,es of the proper paTties., . If; the objection as to parties be made ore tenus at the hearing,'theplairitiff will be allowed to amend without costs. Ini'order to present clear:ly the .questions of. law dispuslled: and de. cided in this'case, 1 will giv:e a brief outline of the materi1l.1J:allegations'inthe·bill., .. ":' ." li. The plaintiffs allege that they are the owners and of ,nearly threecfoutths 'of the stock issued by the Gold Hill Mining ;CoihpanYt a organized undedhe lawsofiNewYprk on the thirtieth of August, 1853 t for 'of the business of mining of Rowan state. of North Caro" lina.. l'hercapitalstock was fixed at' $1,000,000, in 200,000 'shar-osj at $5a share; andthe.corporation wasto.contiuuefor.2'5.years;anq.
502
FEDERAL _REPORTER.
its prinoipal place of business was in the city of New York. That on the first day of September, 1858, the defendant Moses L. Holmes offered and agreed to sell the property in controversy to certain persons for the benefit of said corporation, and convey the same by unquestionable titles. The amount which he was personally to receive for such sale and conveyance was $151,000, and 30,000 shares of the stock of the corporation. The company also agreed to payoff incumbrances to be placed on the property to the amount of $125,000. The other defendants, being interested in the said property, agreed upon the .receipt of their share of the purchase money to join in a conveyance with said Moses L. Holmes, and they all did on the fourth day of October, 1853, execute a deed to the president and directors of said company, for the consideration then stipulated and fixed at $299,500, conveying six tracts of land, containing in all 517 acres, etc. This deed was, in some respects, imperfect, and did not convey a fee-simple title for the want of -proper words of limitation to convey a fee. On .the ninth da,y of July, 1855, the defendants executed another deed for said property to Isaac H. Smith, president, his successors and assjgns, in trust tha,t he should stand seized a,nd possessed thereof for .the benefit of the company, etc. This deed was defective in -not containing appropriate wordso!' limitation to convey a fee as cQntemplated by the parties to the contracts of, sale. The said Isaac H. Smith died in 1858, and never made or abtempted to make a conveyance of said property. The 'bilHurther a,lleges that the defenda,nts were a,cting trust,ees and superintendents of the compa,ny from the commencement of its operations until December, 1860, when the last incumbra,nce was removed, the company then being left in debt over $40,000, as the result of. its opera,tions, besides $20,000 assessed on its stock. The bill then alleges. that the defenda,nts, knowing tha,t there werenot proper words of limitation in the said deed to Isaac H. Smith toconvey the fee, and that on bis death they held the legal title as reversioners, and that they were bound to execute the trusts arising from their contracts with the company, neglected and refused to executeproper;deeds to ca,rry out sllch trusts, but on the tenth day of July, 1861, by threats and armed violence, did drive off the servants and agents of .the company, and take possession of all the property theD-owned ,by the company at Gold Hill, convert the rents and profits to their own use,and caused the said property to be sold under attachments; and thereafter pretended that ,they had acquired a perfect title, and. have also fraudulently autlered said lands to be sold"
v.
HOLMES.:
508.
and incumbered with mortgages which are clouds upon the title of the company, etc. The bill, further alleges that the 'company, besides the money mentioned in said deeds, spent large sums in ,pur.chasing other real estate at Gold Hill, and in. improvements thereon, of aU which' it ha.d possession until July 10, 1861, thereafter becoming " utterly disorganized;" its directors holding no meetings after 1862, and only one of the directors now survives, and he incompetent al1d neglecting to protect its rights, and those of its stockholders and creditors. The bill further alleges that theJeme plaintiff was married in 1864, and still remains under the disability of coverture. The prayer for relief is that the defendants be required to execute proper deeds and conveyances according to their oontracts with the Gold Mill Mining Company, to a. trustee appointed by the court to hold to the use of the creditors and stockhOlders of said company; and that said defendants be compelled to account forpertjonal property used.anddestroyed, and for rents and profits since JuJy 10, 1861, etc. When we consider the:terms of the origfual contract of August 30, 1853, and of other subsequent contracts, and the language of the deeds of October 4, 1853, and July 9,1855, and all thecircumstanc6s attending the whole transaction, we conclude that themanifestin-, tent and object of all parties were thattlle said deeds should convey a'fee-simple title to the lands mentioned, and that this intent and object were not accomplished on account of the mutual mi$take of the parties, and the inadvertence or uDskillfulness of the in not using appropriate wordEl of limitation in the deeds. Although it is a general rule that tt mistake of law furnishes no ground for the interference of a court of equity, yet this rule is 80metimas dep&rted from when there is a plain, admitted, or undisputed mistake of law arising from ignorance or inadvertence. Snetl v. [nil. Co; 98 U. S. 85. There could scarcely be a clearer case for a court of equity, if plied to by proper parties, in proper time, and in a proper manner, to adequate' relief by exercising its of corinterfere and rection of written instruments, and specifically enforcing contracts for the sale of land. The contracts were in writing, within the }?rovisions of. the statute of frauds; they were certain and fair:in all they were founded upon. valuable and adequate consid¢rMiQnB. paid and received by the respective parties. Theoffio61i'8 of. the tioD. were put in pramis6s,and sums (if money in buildinp;s,' repairs, and and could easily perform the agreementsQf I
504
FEDERAL REPORTER.
the errors in the deeds were caused by the mutual mistake of the parties. Nearly all the elements which constitute the equity for correction and specific 'performance are to be found in this transactio!!. It is a well-settled principle in equity jurisprudence that where a person for valuable consideration contracts in writing to sell lands to the use and benefit of another, an implied trust arises in favor of the vendee against the vendor and his representatives, and those claiming undet him as volunteers or with notice of the contract. When things are thus contracted to be done, equity treats them, for many purposes, as if they were done, and will specifically enforce such contracts "by decreeing a proper conveyance, (lr correcting a conveyance which fails to accomplish the purposes of the parties. The right of specific performance accrued to the corporation in this case at the time it compliedwiththecoritracts of sale,and the equitable right of correction accrued at the time of the execution of the defective deeds, onthe fourth of October, 1853, and the ninth of July,. 1855. The cOTporation never instituted any suit for the enfOrcement of these clear and definite equities, and we will now consider the plaintiffs;" by the statements in their bill, have shown themselves entitled, after so long a lapse of time and after such material changes in circumstances, to the relief which they demand. In considering the questions involved in this suit I will notice SOme" of the many causes of demurrer assigned, and follow, as near as possible, the line of argument adopted by tho counsel of the parties. The counsel of the defendants presents these legal propositions: "The bill shows that the Gold Hill Mining Company was created under the laws of New York, and all remedies affecting the rights of stockholders and creditors must be governed by the laws of that state, and this court, differing from the rules prevailing in state courts, takes judicial notice of the laws of New York." I assent only to a part of these legal propositions. This court can take judicial notice of the laws of the several states of the Union, and in c?nstruing the constitution and statute laws of a state, and the laws which regulate the rights of property in such state, will be governed by the decisions of its highest courts; but upon other legal questions of a more general nature, and in the principles of equity jurisprudence, a federal court is influenced by but not bound to follow decisions of state courts. When a corporation is created by a state statute, its powers, duties, and privileges, and the mode of exercising them, must depend upon the laws of the state which created it, and it can make no contracts
TAYLOR V. HOLlIES.
505
'and do no acts within or without such state except such as are authorized by its charter. It has no legal existence without the limits of such state. But where it is authorized by.its charter to make contracts and acquire property, in general terms, for the purpose of carrying on its legitimate business, and is invested with the capacity of suing and being sued, it may, by the comity which is recognized to the fullest extent in this country, make contracts and acquire property in other states, and as to such contracts and property may seek the remedies afforded, and is bound by the obligations imposed by the laws of such states. Bank of Augu8ta v. Earle, 13 Pet. As the Gold Hill Mining Company was authorized by its charter to make contracts and acquire property for the purpose of carrying on its business, and made contracts within the scope of its authority as to real and personal property in this state, by which it acquired legal and equitable interests, its rights and remedies as to such -property must be governed by the laws of this state. It is further insisted by the counsel of the defendants that ,as the Gold Hill Mining Company failed or neglected to pay its debts, and suspended its lawful and ordinary business for more than a. year subsequent to its disorganization in 1861, it WaS dissolved by virtue of the provisions of a statute of New York. 9 Rev. St. N. Y. p. 706, § 46. I have not here referred to any decision of the highest court of that state furnishing a construction as to the force and effect of said statute, and I cannot assent to the construction inSisted upon by the counsel of defendants. Causes of forfeiture do not operate per se, neither .can they be taken advantage of collaterally, nor in any other manner than by a direct proceeding instituted for the purpose against the corporation, so that it may have an opportunity to answer. Such proceedings can be instituted by no one but the sovereign which created the corporation, and such sovereign may waive the right of forfeiture. Proceedings to enforce forfeitures belong to the common-law jurisdiction of courts, and courts of chancery do not deal with such questions unless empowered to do so by express statute. They can deal with officers of corporations as trustees for any abuse of their trusts or failure in the performance of duty. Neither the insolvency of the Gold Hill Mining Company, nor the failure of the corporation to elect officers at the appointed time, operated as a. dissolution or was a virtual surrender of its franchises. A private corporation in this country is not com- , posed of integral parts which are essential to its existence. The
506
EEDERAL
stoQkholdera compose the company.. The directors and officers are agents necessary for the active management of the affairs of the company, but they are not;integral parts essential to its existence. A corporation possesses s,trcmgand tenacious principles of vitality, derived from its charter bestowed by sovereign authority, and does not cease to exist until its dissolution is accomplished in a manner provided by law. A corporation may surrender its charter to the sovereign power that created it, 'and thus determine its existence, but there must be sonie &efiniteact of sur,render, and an acceptance by the sovereign or its duly-authorized agent. Mere non-llser of its powers is not It sur:-render,' and'a court wonld not be' warranted in presuming a sur'render from the' abandonm.ent' of its franchises in intention only; there must!; ;bea declared purpose and act on the part of the corporati'ort, to justify;,such an iriference. In the charter of the Gold Hill Mining Company, and in the laws of New York, ample provisions were made to enable the company to effect a reorganization' and put :inoperationitsauspended powers. 'As the directors who controlled the affairs of the company in 1862,were trustees of an express trust which they hd V'olu,ntatily accepted, they could not divest themselves of that trust by a resignation of office without the assent of the corporation, and before successors were appointed, and a court of equity, upon proper application, would have 'compelled them to have taken such steps as were necessary to secure the rights and interests of the creditors and stockholders of the company. As the Gold Hill Mining Company was not dissolved in any manner provided' or recognized by law, it remained a corporation until 'September 1, 1878, when its corporate existence expired by the ex;presslimitation of its charter. The rights and interests of the creditors and stockholders of a corporation are not extinguished or seriously impaired by its dissolution. ,Provisions are usually made, either in the charter or by the laws of the state, for winding up the business and securing the rights and interests of the stockholders and creditors in all trading, business, and moneyed corporations. regards the capital, property, anddehts of such corporations astrllst funds pledged for the payment of the dues of creditors and stockhOlders, and has ample power to reach sllch trust funds, and collect and apply them to the pur':' pOBesof the trust. Baconv. Robertson, 18 How. 480. There was much learned discussion in the argument as to the power of stockholders to institute a suit to enforce the rights of a cor-
TA.YLOR V. IlOLMES.:
507
poration. The gen,eral doctrine on this subject t and 'itslimitatibns t is well stated in Dodge v. Wool.seYt 18 How. 331, and, Hawes v. Oak· land, 104: U. S. 450. It is well settled that a stockholder may sue the corporation to prevent or be relieved against fraud or breach of trust on the part of. directors or trustees, and to restrain them from -exercising powers outside of their chartered authority. As to matters' which affect the rights and interest of a corporation, the general rule iS t the corporation must sue to redress or prevent a wrong and secure a benefit; but a stockholder may bring a suit in behalf of himself .and associates in a case where the corporation refuses to bring suitt or when the directors t trustees, or other representatives are guilty of ;& fraud, a breach of trust t or are proceeding ultra vires. 111 such a {lase the corporation and its officers or other representatives should be partiest so that they may have an opportunity of explanation and J.efepse, and be bound by the decree, and thus prevented from bringinganother suit involving precisely the same subject-matter. DavenpO'rt v. Dows, 18 Wall. In the case before us the oharter of the corporation had expired, by effluxion of time, four yea.rsbefore the bringing of this suit by the plaintiff stockholders. In the case of the dissolution of a corporation, provision is made in section 9, p. 557 t of the Revised Statutes of New York to authorize the existing directors or managers of such corporation, as trustees, to wind up the business of the company. From the bill in this case it appears that there were directors of the corporation at the time it suspended business in 1861, and they acted until 1862t and were in no way relieved from their duties and responsibilities by any act·of the corporation, and one of suoh direotors still survives. In a subsequent part of this opinion I will consider the question whether this surviving director is a neoessary or indispensable party to this suit. It is insisted by the counsel of the defendants that the plaintiffs, by their statements in their bill t have not shown themselves entitled to the interposition of a court of equity to grant them thetelief prayed; that they have not stated positively and with sufficient certainty faots essential to their rights and within their own knowledge.. They have not shown themselves to have been stockholders at the time the corporation acquired. the equity whioh they seek to enforce t or the time when they beoame stockholders; whether they paid par value for their stock, or purchased it when it was grea.tly depreciated by the indebtedness t embarrassment, and disorganization of the company, or became owners of' 'such stock after the expiration of the
508
charter. They have not shown that they made any effort to reorganize the company, which they could easily have done under the laws of New York, and by the chartered powers of the corporation, as they were the owners of a large majority of shares of stock. They have not shown· th,at they requested the directors or trustees of the cprporation to institute suit for the enforcement of tbeir rights. They have shown that th(;l corporation was largely indebted in 1860, and have not shown that the directors had sufficient corporation funds to carry on properlitigation, or that means and suitable indemnity were offered to such directors. They have not shown that they at any time made earnE-Jt or even. reasonable efforts fort\le redress of grievances complained of during the existence of the corporation, or with tb(;l trustees upon whom the rights of the corporation devolved upon its suspension of business or its dissolution. These suggestions, made by. the .counsel of defendants, have received my careful consideration, aI,ld I regard them as having a material bearing upon the case, and I will state my conclusions upon the subject in a subsequent part of this opinion. The chief causes of demurrer relied upon by the defendants to defeat the suit of the plaintiffs .are the statute of limitlittions, lapse of time, and staleness of Glaim. In pa..ssing upon thes(;l questions it becomes necessary for me to consider the natur.e of the trust which existed between the defendants and the 'cnrporation arising out of the contracts and transactions between the parties in relation to the property in controversy. A binding contract for the sale of land enforceable in equity, though in fact unexecuted, is considered lits performed, and the land is in equity the property of the vendee, and wilLdevolve in a comse of descent upon the heir of the vendee. When theyendee has paid all the purchase money he has a complete equitable estate, and the vendor is a mere trustee of the legal title. If the vendee has paid only a part of the purchase money, .then the vendor is a trustee to the extent of the money paid, and the vendee cannot demand the legal title until he has complied with the terms of the contract; but still there is an implied trust arising out of the presumed intention and consent of the parties that the vendor will make a transfer of the legal title when the balance of the purchase money is paid. In the case of a trust arising by implication out of the agreement of parties, as there is no conflict of claim or adverse possession between the trustee and cestui que trust, statutils limitation do not apply until these consistent relations of the parties are changed into conflicting and adverse claims.
TAYLOR V. HOLMES.
509.
In the case of a constructive trust there is always some conflict of claim, and the party having the legal estate holds adversely, and does not become a trustee until he is converted into one by a decree founded upon fraud, breach of trust, or some inequitable benefit or advantage obtained by a person occupying a fiduciary relation to another. In such of constructive trusts the statute of limitations will protect one who has the legal title and is sought to be converted into a trustee against his assent, and it begins to run from the time when the equitable rights of the other party accrued; Taylor v. Dawson, 3 Jones, Eq. 86. The written contracts in this case did notcl!eate an express trust. There were no direct and express terms of trust imposed by the makers. Voluntary or express trusts cannot be iinposed upon any person un· less he agrees to accept or by clear implication ll,ssumes the duties and liabilities. . Acceptance of a trust in the case of an implied, trust is not necessary, as the law holds a resulting, or person liable to the performance of such trust, whether he is· willing or unwilling to accept the situation. It is insisted' by the plaintiffs that in this there is a construct. ive trust arising out of the .fraudulent conduct of the defendants, and that length of time will not operate as a bar to a suit in equity where such fraud is admitted by the demurrer of the defendants. To sus. taintbis position there must not only be shown an established trust, butosom.e' actual and intentional fraud practiced upon a cestui .que trust by a' trustee, which bas been concealed from the cestui que; ttUBt. Clarke v. Boorman, 18 Walll 493; Godden v. Kimmell, 99 U. S.. 20l. A. demurrer only admits matters of fact positively alleged, and not conclusions of law or mere pretenses and suggestions, nor the correct. of tbe ascription of a purpose to parties when not justified by the language used and facts positively alleged. Dillon v. Barnard, 21 Wall. 430., The mere allegation in the bill that the defendants knew of the existence of the legal defects in the said deed, and neglected and re. fused to rectify the same, is not sufficient to imply constructive fraud, as the agents of the corporation had full knowledge of the defect or the means of such knowledge in their hands. There is no dir{lctaverment that the defendants were ever requested to rectify euch deeds.. The error in the deed was a plain .mistake of a clear and well-settled principle of law, and it is upon the ground that there waB,a mu,tual mistake of law, caused by ignorance or inadvertence, that the plaintiffs can claim the interference of a court of equity to
510
FEDERAL,REPORTER.
grant relief. Ignorance of law by. one party to a contract is not generally a ground for relief in equity, as a party to a contract is presumed to know the law which affects his rights and obligations. In the matters of fact positively alleged in this case there are none of the elements of actual and intentional fraud. The defendants did not misrepresent any material matter to produoe a false impression, or in any way mislead the agents of the corporation to obtain undue advantages. There was no evil act with an evil intent. They did not conceal any material facts or remain silent as to any. The want of. proper words of limitation in the deeds to convey a fee-simple title to the lands was as welt known to the agents of the oorporation as to the defendants, or such agents might easily haveaoquired information as to such defects, as the deeds were duly accepted and registered by them, and constituted a link in the chain of title to lands in which they had undisturbed possession for more than six years. No statute of limitations began to run against the oorporationwhile its agents were in possession, and the defendants, as implied trustees, had not disputed the equitable rights of the corporation, or set up any adverse claim. When the defendants took forcible adverse possession of the lands and other property in 1861, the statute of limitations had been suspended in this state by legislative enactments, and remained suspended until January I, 1870. From that date the statute of limitations began to run in favor of the defendants, as they held the possession of the lands adversely to the Gold Hill Mining Company. As possession was thus held adversely for more than seven years under the legal title, and with known and visible boundaries, the legal and equitable claims of said corporation were barred. Bat. Rev. 147. As such corporation was agent and representative of the stockholders, who were entitled to rights and interests by and through the corporation, I am inclined to think that the stockholders were also barred, and the coverture of the feme plaintiff did not prevent the bar as to her rights. Wellborne v. Finley, 7 Jones, 228; 2 Perry, Trust. § 458; Herndon v. Pratt, 6 Jones, Eq. 327; Kcn'ison v. Stewart, 93 U. S. 155. The fact that the plaintiffs were non-residents of the state did not prevent the operation of the statute of limitations, (Harris v. Harris, 71 N. C. 174,) and this construction of the statute was adopted by the supreme court of the United States in Davie v. Briggs, 97 U. S.628.
TAYLOR- V. 1I0LMES.
511
The and effectot the statute of limitations was not only to bar the remedy of the corporation, but to extinguish its rights, and holders. vest a perfect title in the 'Federal courts, in passing upon questions relating to property situated in the several states, recognize statutes of limitations, and, give them the same construction and effeot that are given by the local tribunals. . . When a statute of limitations applies, to llo' legal proceeding or a legal right, courts of equity will in analogous cases consider equitable 'rights as barred by'the Same limitations, where nothing has been dorie or said directly or indirectly torecogni1;e snch equitable claims by the adverse possessor. E1ITnetulOrj v'.' fJ'ayior, 10 Wheat. 152. A statute of limitations, where it applies, is an absolute ba.r, and or any kind of hardship allegations of justnes's of claim, cannotavoidfts oPeration. If such circuti1stances were allowed to eontrol,therewouldibe no end to litigation and no certain rules of property. 2 Perry, Trust. 484. Statutes of limitation are fOllnded in fa: wise and salutary public policy, and'promote the peace and well-being of society by quieting titles to property, and puttirtg' an eon to stale demands. It was insisted by the defendants thai; without reference to any statute of limitations, courts of equity have adopted the principle that unreasonable delay in the assertion of a right by Buitwill defeat reoo\1ery or relief, and questions as to laches and lapse' of time are to be determined by the particular circumstances of each case. We will briefl.y consider this matter, as it was elaborately discussed by counsel on both sides of the ease. 'In 1855, upon the execution of the defective deed to Isaac H. Smith by the defendants, the corporation had a clear and defulite equity for the correction of said deed, as it was fOuilded upon a large, valuable, and adequate consideration, and the defects in the conveyance resulted from a mutual mistake of the parties. The corporation,through its officers and agent!!, took possession of the premises, made large expenditures for improvemerits;and continued to exercise control over the property until 1861. At this period it was so much embarrassed by debts that it was unable to carryon its business and became "completely disorganized." These embarrassments could 'not then be relieved by any efforts of tITe 'stockholders, as of them were citizens of the northern states. and were excluded from the limits of this staie by'the disturbed condition of public affairs produced by a civil war. It is alleged that
;112
FEDERAL REfORTER.
the defendants, who were stockholders, and had been directors and managers of the business of the corporation, with armed violence took possession of the property and drove off the agents of the corporation, and have continued to this time to hold possession, receive rents and profits, and have mortgaged and otherwise dealt with the property as absolute owners. Upon this statement of racts, if the plaintiffs, in their bill, had shown any plausible reason for their long delay in asserting their xights, and if lapse of time was the only defense interposed by the defendants, I would overrule the demurrer and require them to -answer such grave charges of injustice, wrong, and oppression against the absent stockholders with w};J.Om they had been associated in fiduciary and friendly relations. It appears from the bill that about 500 acres of land were purchased from the defendant for mining purposes; that the capital stock of the company was fixed by the charter at $1,000,000, in shares of $5 each; that the business was regqlarly carried on for more than six years; that the company in December, 1860, owed $40,000 of indebtedness, and had not sufficient available assets todischa!ge the same; and that the company became" utterly disorganized" and cel:l,sed to exercise its corporate functions. We may well infer from these facts and circumstances disclosed in the bill, and from the history of such hazardous enterprises, that the mining venture of the company became a .failure, that the land be,came greatly depreciated in value, and the large amount of shares of stock which were issued became. almost worthless, and could be purchased at a nominal value. We may also well infer that the credo itors of the company made. some efforts to collect or secure their debts out of the wreck of the hazardous and unfortunate enterprise. After such long delay in asserting their rights, the plaintiffs ought to show some equitable reason for such delay, and substantial merits to repel such unfavorable inferences. The plaintiffs have not shown when they became stockholders; whether they entered into the original enterprise, or for a small price purchased the stock in the market after the failure of the company or after the expiration of its charter. If they were stockholders in 1861, at the time of the of the company, they have not shown that they made any effort to reorganize the company, which they could easily have done under the provisions of its charter and the laws of New York.
513
The disturbed condition of public and private business which pre· vlliled in this state during the civil war did not prevail in New York, where the corporation had its chartered existence and where most of the holders of stock resided. After the termination of the civil war in 1865 the state and federal courts were open for the administration of justice, and the rights of property, of which the were temporarily deprived by the armed violence of the defendants, could easily have been restored by the courts, or the military power that pre· vailed in this state for three years. The rights of property of citizens of the northern states were not affected by the statutes of limitations, or legal proceedings in the courts of the insurrectionary states during the civil war.. As the plaintiffs have not set forth their claims with sufficient certainty, and have not assigned any reasons why.they have so long slept upon their rights, they cannot properly complain at the operation of .well·settled principles of equity jurisprudence lipon the subject which have been adopted and are enforced for the peace and well· being of society. Badger v. Badger, 2 Wall. 87; Hawes v. Oakland, U. S. 450. There can be no fixed and definite rule established by a court of equity as to what delay in asserting a right will amount to an equitable bar from lapse of time, all there are different circumstances and elements involved in each case. I think, however, that the principle insisted upon by the counsel of defendants in his brief is well sustained by reason and authority; that" in mining property, which is hazardous, uncertain, and speculative, greater diligence is required in asking for the specific performance of contracts relating to mining lands than to other lands." Leading Cases on Mines, 'etc., 397; Twin Lick Oil Co. v. Marbury, 91 U. S. 587. As my decision in this case may be reviewed in the supreme court, I feel it to be just to the defendants to consider other causes of demurrer which have been assigned. The defendants insist that this bill cannot be sustained in behalf of the feme plaintiff, as it appears that she is a feme covert suing in her own name, and her husband is not made a party. The rules of equity pleading upon this subject are too familiar and well settled to need discussion or much citation of ,authority. A feme covert must sue and be sued jointly with her husband, unless she claims a right in opposition to him, in which case her prochien ami, with her con· sent, may exhibit a bill in her behalf, and her husband be made a v.14,no.9-33
514
FEDERAL REPOR'!'1l:n.
party defendant. Courts of equity will in some cases recognize So feme covert as capable ot disposing of her separate property and other acts as a feme sole. She may in some instances act as a trustee, or :execute a power, without the concurrence ·of her husband, if such act does not defeat B right of the husband, or impose a legal responsibility upon him. But in. all suits in equity in which a feme covert sues or is sned; the husband must be a party plaintiff or defendant whenever he is within the jurisdiction 'of the court and can be made a party. Story, Eq. PI. §,63; 2 Story, Eq. JUl'. § 1368. The rulMof equity pleading upon this subj are not affected in ct any manner iIi this court by the right which a feme covert may have to institute suits in her own name, under state laws, as the practice -act of 1872 (Hev. St. § 914) does not apply to the pleadings and modes of procedure in federal courts of equity·. Bleas6 v. Garlington, 92 U. S. 1. The bill does not show whether the interests of the feme plaintiff are adverse to, or in conformity with, those of her husband. If it appeared that she is suing for her, separate estate and the husband refused to join with her in the suit, I would allow a proper amendment, so as to introduce a'prochien ami and make her husband a defendant; and this amendment would not oust the jurisdiction of the court on account of the same citizenship of the parties, as the husband defendant would be only So formal party. Wormly v. Wormly 8 Wheat. 451. If, however, the husband has a substantial adverse interest to the feme plaintiff, then such amendmfmt could not be allowed. The husband is an indispensable party to a suit in equity where the wife 8ues or is sued, and his non-joinder is sufficient cause for the dismission of a bill, if an amendment making him a party cannot properly be allowed. It is a general rule in equity that all parties interested in or entitled to litigate the same questions in controversy are necessary parties. They must be expressly made parties, or the bill must be so framed as to give them an opportunity to come in and be made parties. This principle is only departed from ,when it is extremely difficult or inconvenient to enforce this rule. This general principle has in some degree beenmod,ified by section 733, Rev. St., and the twenty-second and forty-seventh rules adopted by the supreme court for the regulation of the practice of United States courts of equity. By virtue of this statute and these rules courts of equity may dispense with merely formal parties; and in cases where the real merits
l'AYWR V. HOLMES.
515
of the cause may be detea.'mined without essentiaJly affecting the interests of absent parties, whose interests are separable from the other litigants, it- may be the duty of such courts to make a decree as to the parties before them. But neither the act of congress nor the rules of the supreme court enables the circuit court to make a deoree in equity in the absence of an indispensable party whose rights must neoessarily be affected by such decree. This principle is founded upon the broad ground of natural equity and justice that prevails in all systems ot enlightened jurisprudence, that no court ought to adjudicate directly upon a person's rights without the party being either actually or constructively before the court, with opportunity for explanation and defense. Although it is a general· rule in chancery that a bill will not be dismissed for the want of proper parties, yet if, upon the hearing of a bill, the court sees that an indispensable party is not on the record, and cannot be made a party without ousting its jurisdiction, it will refuse to proceed, and dismiss the bill. Shield8 v. Barrow, 17 How. 13u ; Bank v. Railroad, 11 Wall. 624. There are other questions which were presented in the pleadings, the and they were insisted on in the argument, as to what rights and interests of the creditors of the corporation for whom relief is asked in the prayer of the bill; and what were the rights, duties, and responsibilities of the of the Gold Hill Mining Company. All the rights, interests, and property of an insolvent or dissolved corporation constitute a trust fund, and are held,-First, for the payment of creditors; and, 8econd, for the benefit of the stockholders. It appears on the face of the bill that at the time the corporation suspended the exercise of its functions and franchises in 1861 there were creditors to the amount of $40,000, and there were no available assets for immediate payment. There was an assessment on the stock to the amount of $20,000, but it does not appear that the same was collected and applied in payment of debts. It in no way appears that the prior and exclusive equities of creditors have ever been adjusted and discharged by the corporation assets. Under such circumstances it seems to me that this court cannot proceed to make a decree as to the secondary and subordinate equities of the stockholders to the property of a once insolvent'and now dissolved corporation, unless the existing creditors (if there be any) are in some way represented in this suit. This is· a stockholder's bill, and they cannot properly represent the rights and inter-
._--------- -
516
ests of creditors, which are not identical with those of the plaintiff, but different, superior, and conflicting. But for the prayer in the bill for relief in behalf of creditors, I would Euppose that all the claims of the creditors had been satisfied and discharged undet proper legal and equitable remedies afforded by the courts, or had been barred by the statute of limitations. The creditors could have reached the property of the corporation by legal and equitable process and I caunot imagine any reason why they should have slept upon their rights for 20 years. If the property was sold under proper legalproc6ss the purchasers acquired good titles. If the defendants, who were trustees, purchased the property (as is intimated in the bill) at a fair and open sale under legal process, and at the highest pticethat it would bring .at auction, this tl"ansaction was neither fraudulent nor. void. It may be that on account of their fiduoiary relation to the corporation and the stockholders they might in a reasonable time have been declared trustees for the cestuis que trust. In such cases the .cestuis qtLitrust must seek their relief in. reasonable time, and we have already considered sufficiently the facts and circumstances of this case as to the reasonable diligence of the plaintiffs in seeking relief.· Twin Lick Oil Go.. v. Marbury, supra, It appears 1D the bill that there were directors in 1861 when the corpotation suspended business,and that they continued to act until 1862, and they were not discharged from their duties and responsibilities in any manner provided in the charter or the laws of the state of. New York. As directors they were strict trustees of the creditors and stockholders, and it was their duty to have taken care otthe corporate property under their control, and to have maintained the rights and consulted the advantages of their cestuis que t1'ust by instituting proper legal proceedings to enable them to perform the duties of the trust with which they were invested. The bill does not, allege that the directors were requested to institute suit against the defendants, or that they had the trust funds, or were offered proper indemnity for such legal proceedings. It was the duty of the directors or trustees to have rendered proper accounts of their transactions, showing what disposition they had made of the property under their contl'bl. When a direct tl'ust is unclosed the statute of limitations does not protect trustees or their legal representatives from liability. As" the directors were strict trustees, and voluntarily accepted the trust, they could not divest themselves of the trust by a resignation
WALKER V. OOLBY WRINGER 00.
517
unaccepted by the cestuis que trust, unless somo other method was provided in the charter or by the laws of the land. The bill does not show when any of the directors died, or when or how any of them resigned office. If the trust of the directors was coutinued by a failure of the COrporation to elect other directors as successors in office, then it may be that the directors who were living in 1878, when the corporation was dissolved by the expiration of its charter, became trustees of the rights and property of such corporation 557. by virtue of the statute of New York. 1 Rev. St. § 9, The allegations in the bill are admitted by the defendants, so far as they are affected by snch allegations; but such admissions do not dispose of the rights and responsibilities of the directors and their representatives, who are not parties. It seems to me that the directorsoOr their legal representatives. ought to be made parties, 80 that they may have an opportunity of being heard, and have the whole subject.matterin controversy sO ad. jnsted and settled by a decree of this court as to free them from duties and liabilities of future litig-4ttion. I will not further consider or determine this question, as there lj,re other sufficient causes for the dismission of the bill. I will dismiss the bill on the following grounds:
p,
(1) Want of certainty in allegation to show that the plaintiffs are entitled
to the relief demanded. (2) The right to relief has been barred by the statute of limitations. (3) The long and gross negligence of the plaintiffs in seeking relief.unex. plained by sufficient equitable reasons and circumstancel'l,
It is ordered that the bill be dismissed, with costs.
WALKER
and others v.
COLBY WRINGER
Co. and another. \
(Oircuit Oourt E. D. Wisconsin.
Dc.tober Term, 1882.)
L
EFFFCT OF DEED.
WoRDa
"HEIRS,"
Fac.,
INSTEAD OF" SUCCESSORS,"
ETc., or
A
Execution levy was made upon certain lands to satisfy a judgment recovered in an action on a bond, with surety. taken upon the representations that one of the defendants was possessed of valuable land in her own right. The principal on the bond was a lllin:Jr, and the judgment was against the surety alone. A suit was brought by the complainants herein asking for an inJunction restraining the sale Of the lands of which they claim to be the owners. In the deed to the land in dispute the defendant in the former suit appears as the grantee,naiIied