Williams v. Gaylord - 186 U.S. 157 (1902)
U.S. Supreme Court
Williams v. Gaylord, 186 U.S. 157 (1902)
Williams v. Gaylord
Argued April 8-9, 1902
Decided May 19, 1902
186 U.S. 157
This suit was brought by petitioner as trustee of a mortgage. Held that when a corporation sells or encumbers its property, incurs debts, or gives securities, it does business, and a statute regulating such transactions
does not regulate the internal affairs of the corporation.
This suit was brought by the petitioner as trustee of a mortgage made by the Gold Hill Mining Company, a corporation of West Virginia, upon certain mining ground in the State of California. Subsequently to the execution of the mortgage,
the corporation, in the conduct of its mining operations in the State of California, became indebted to the respondents for materials, labor, and supplies. Mechanics' and materialmen's liens were filed by respondents, and judgments obtained by them upon which executions were issued and the property mortgaged was sold. The respondents became its purchasers.
The corporation made default in the foreclosure suit, and a decree pro confesso was taken against it. The respondents pleaded their judgments and the titles which were claimed thereunder, and pleaded further that the mortgage was void because it had not been ratified by the stockholders of the corporation, as required by a statute of California, passed April 30, 1880, and entitled "An Act for the Further Protection of Stockholders in Mining Companies," section 1 of which act is as follows:
"SEC. 1. It should not be lawful for the directors of any mining corporation to sell, lease, or otherwise dispose of the whole or any part of the mining ground owned or held by such corporation, nor to purchase or obtain in any way additional mining ground, unless such act be ratified by the holders of at least two thirds of the capital stock of such corporation. Such ratification may be either in writing signed and acknowledged by such stockholders or by resolution duly passed at a stockholders' meeting called for that purpose."
The circuit court sustained the defenses, 96 F. 454, and its ruling was affirmed by the circuit court of appeals. 102 F. 372.
The mortgage was given to secure one hundred coupon bonds of $500 each. They were dated July 1, 1890. The mortgage bore the same date, and the manner and authority for its execution the record exhibits as follows, being the minutes of a meeting held June 5, 1890:
"The meeting was called to order by C. Littlefield, who nominated G. Livingston Morse temporary chairman; nomination was seconded by W. W. Tucker and unanimously carried."
"C. Littlefield then proposed W. W. Tucker for temporary
secretary; motion was seconded by R. H. Pettigrew, Jr., and was unanimously carried."
"Waiver of notice of corporators was then agreed to by all present as per roll call."
"Roll call of incorporators being made, all were found present as follows: M. J. Shoecraft, Calvin Littlefield, G. Livingston Morse, R. H. Pettigrew, Jr., and W. W. Tucker."
"The chairman said we were now ready for business, whereupon Mr. M. J. Shoecraft presented a duplicate copy of papers of incorporation, and a telegram from Secretary of State of West Virginia stating that the charter of this company was duly filed June 23, 1890, which was adopted."
"On motion of W. W. Tucker, seconded by R. H. Pettigrew, Jr., it was --"
"Resolved, That the said Gold Hill Mining Company issue one hundred first mortgage bonds, of the denomination of five hundred dollars each, each bond bearing date of July 1, 1890, and bearing interest at the rate of ten percent per annum, payable semiannually, on the first day of January and July in each year, and to run five years from July 1, 1890, with the privilege of the said company paying off and redeeming the same sooner by giving to the holders of said bonds six months' notice of the company's intention thus to do, to pay off said bonds and redeem the same on any day interest is payable, or on payment of six months' interest in advance, and the president and the secretary of said company are hereby authorized and directed to execute said bonds and mortgage for said company, and the said board hereby authorize and direct the seal of said company to be affixed to the same."
"On motion of C. Littlefield, seconded by M. J. Shoecraft, the chairman, G. L. Morse, was elected trustee for the bondholders. Motion carried."
"On motion of W. W. Tucker, seconded by R. H. Pettigrew, Jr., Mr. G. L. Morse was appointed to draw up a proper bond, have same executed and lithographed; also a stock certificate book of two hundred certificates, total cost not to exceed ninety-five dollars."
"On motion of M.J. Shoecraft, seconded by G.L. Morse, it
was voted that the incorporators of the Gold Hill Mining Company be named as directors of said company. Motion carried."
"On motion of C. Littlefield, seconded by M. J. Shoecraft, the company's seal was ordered to be made, and Mr. Shoecraft be a committee to have the same made. Motion carried."
"Mr. Shoecraft reported that the bylaws were not quite ready, and the chairman suggested that he report a full set at a future meeting."
"On motion, the meeting was declared adjourned to the second Tuesday in July, 8th inst."
"W. W. Tucker"
It was testified that the gentlemen present at the meeting held all of the stock of the company.
The record also contains the minutes of a meeting held July 10, 1890, at which meeting a president, vice-president, secretary, and treasurer and general manager were elected. The following resolution was passed:
"On motion of Mr. Morse, seconded by Mr. Pettigrew, resolved, That the directors of this company be authorized and directed to purchase of M. J. Shoecraft the mines formerly known as the Nevada City Gold Quartz Mining Company, and pay therefor one hundred and sixty thousand shares of the capital stock of this company, being its total issue, and twenty-five thousand ($25,000) dollars in first-mortgage bonds. Motion carried."
"On motion adjourned, to meet at the call of the president."
It was also testified that a paper was "executed by the Gold Hill Mining Company for the purpose of correcting the form of the mortgage as originally executed."
The paper was introduced in evidence. It was dated August 28, 1890, and recited that --
"Whereas, by a resolution of the board of directors of the Gold Hill Mining Company, duly passed and adopted on the twenty-fifth day of June, 1890, and in accordance with and in pursuance of said resolution, a mortgage was executed and delivered
to G. Livingston Morse, as trustee for the use and purposes therein mentioned, on the first day of July, 1890, by the president and secretary of said company, they being authorized and directed in and by said resolution thus to do, and duly acknowledged by them, and the corporate seal of said company duly affixed to said mortgage by the like authority of said board of directors."
Certain mistakes were then stated to have been made in the mortgage, and the secretary, Calvin Littlefield, was given authority to correct them, and he and the president were directed and authorized to execute a paper on behalf of the company and to affix the corporate seal of the company thereto. The paper was duly executed and recorded in Nevada County, California. Other facts are stated in the opinion.