A bill in equity filed in the circuit court of the United States
in 1882 by a stockholder in a New York corporation, whose corporate
term expired in 1878, to correct a deed of land in North Carolina
made to the corporation in 1853, is barred by the statute of
limitations in North Carolina and by the general principles of
courts of equity with regard to laches, unless a better reason for
not instituting the suit earlier is given than the one given in
this suit.
A stockholder in a corporation which has passed the term of its
corporate existence and has long ceased to exercise its corporate
franchises, who desires to obtain equitable relief for it, must, in
order to maintain an action therefor in his own name, show that he
has endeavored in vain to
Page 127 U. S. 490
secure action on the part of the directors, if there are any, or
to have the stockholders elect a new board of directors, and must
disclose when he acquired his interest in the corporation.
Bill in equity. The case is stated in the opinion.
MR. JUSTICE MILLER delivered the opinion of the Court.
This is an appeal from the Circuit Court of the United States
for the Western District of North Carolina. A bill in chancery was
brought in that court by Isaac Taylor, a citizen of the State of
Massachusetts, and Sallie A. Howes, a citizen of the State of New
Jersey, as they declare,
"for themselves individually, each as a holder and owner of
shares of the capital stock of the Gold Hill Mining Company as well
as for and in behalf of all other stockholders of the said company
who may desire hereafter to unite with them,"
against Moses L. Holmes, Reuben J. Holmes, Ephraim Manney, and
Valentine Manney, all citizens of the State of North Carolina. To
this there was a demurrer, which was sustained, and a decree
rendered dismissing the bill.
The Gold Hill Mining Company, according to the bill, was duly
incorporated under the laws of the State of New York, August 30,
1853; its capital stock fixed at $1,000,000 and its shares at the
par value of five dollars each. Its term of existence was to be
twenty-five years. It also appears from the bill that shortly after
its organization, to-wit, September 1, 1853, this corporation
bought of Moses L. Holmes, one of the defendants, the Gold Hill
mines and mining property, consisting of twelve lots and tracts of
land lying in the Counties of Rowan and Cabarrus in the State of
North Carolina; that the company expended large sums of money in
the pursuit of mining and in making improvements upon the lands of
which it had possession, and that $20,000 or thereabouts was raised
by assessments upon its stock. It would appear that this was
Page 127 U. S. 491
the condition of affairs before the outbreak of the war in 1860,
when the enterprise seemed to be a failure and practical mining was
abandoned. The bill also set up a foreclosure sale under a mortgage
at which the property was purchased in by Moses L. Holmes and
Reuben J. Holmes, who have had undisturbed possession thereof ever
since.
It is also alleged in the bill that about July, 1861, the
officers of the corporation, which had been in possession of the
property, were driven off by the defendants, and that thereafter,
by the death and resignation of its officers and directors of the
greater part thereof, it became utterly disorganized and never held
any meetings of its directors or stockholders since the year 1862,
so that at the time of the filing of the bill, there was but one
director of the corporation living and surviving, within the
knowledge of complainants, and it is alleged that he, by his act
and doings and connections with the defendants in and touching
pretended claim or claims adversely to the interest of said
corporation and its stockholders and creditors, has rendered
himself incompetent to assert and protect the rights of said
corporation and of complainants, and has refused and neglected, and
still refuses and neglects, so to assert and protect the same.
One of the objects of the bill is to correct an alleged mistake
in the original conveyance made by Moses L. Holmes of the lands on
which the mining operations were conducted to this corporation, the
allegation being that it was intended to convey to it a perfect
title in fee simple, whereas, wanting the words of limitation to
heirs or assigns, and other defects, it did not convey such a
title. These matters are set forth with much particularity and at
great extent in the bill of the complainant, but as the decision of
the Court does not turn upon them, nor upon another question which
has been raised connected therewith, as to whether or not one of
the deeds was delivered as an escrow or absolutely, we need not
here consider them further.
The court below sustained the demurrer to the bill upon two
principal grounds: first, that the suit was barred by the statute
of limitations and by the general doctrine of laches as
Page 127 U. S. 492
applicable in courts of chancery; second, that no sufficient
reason is shown why the suit should be brought by two stockholders
instead of by the corporation itself in its own name. We think both
of these grounds, or either of them, sufficient to sustain the
position taken by the court below.
It is, however, alleged that the corporation itself is extinct
by reason of the limitation placed upon its existence, under the
articles of incorporation, by which it expired on the 30th day of
August, 1878. But under the laws of New York, the existence of such
a corporation was continued after the period for which it was
limited for the purpose of winding up its business and for the
purpose of collecting and distributing its assets and paying its
debts. Although the allegation of the bill is that many of the
directors of the company are dead, still it is shown that one of
them survives, and no assertion is made that there was any
application to this surviving director on the part of the
defendants for the purpose of instituting any proceedings looking
to the rectification of this deed, or for the recovery of the real
estate in North Carolina; nor does it appear that there was any
request made to him to bring any suit either at law or in chancery
for that purpose. No effort was made to call together the
stockholders to take any action on the part of the company, or to
elect other directors, or to obtain any united action in the
assertion of the claims now set up.
Although there is in the bill a declaration that the two
complainants are owners of a majority of the stock of the Gold Hill
Mining Company, there is no statement as to when or how they became
such or whether they were such stockholders during the times that
injuries were inflicted of which they now complain in regard to the
taking possession of the property by the defendants, or whether
they became stockholders afterwards. In short, there is no such
averment of their relation to the corporation or of their interest
in the matter about which they now seek relief as brings this
action within the principle of the decision of this Court upon the
subject.
Hawes v. Oakland, 104 U.
S. 450.
Under the statute of limitations of the State of North
Page 127 U. S. 493
Carolina or upon the general principles of courts of equity with
regard to laches, the complainants are barred of relief in the
present case.
The mistake sought to be corrected, which is made the foundation
of the present suit, occurred in 1853. This suit was brought in
1882, after the lapse of nearly thirty years, during all of which
time the action might have been brought so far as relates to the
correction of the alleged mistake in the deed. During seven or
eight years of this time, the corporation was in full existence and
operation; it had the means to prosecute this suit and had an
opportunity of knowing, or at least its principal members must have
known, all the facts which are now brought to the consideration of
the court, and even up to the time when this suit was commenced
there was a director surviving who had never been discharged or
resigned. There was no reason, if stockholders were proper persons
to bring this action, why proceeding should not have been begun by
them upon the practical dissolution of the company is 1862, after
which time, as the complainants allege, no corporate organization
was kept up, no work or business done, and no attempt made by any
of the directors to act upon any of the rights of the corporation
or to exercise their authority in the conduct of its affairs. If we
allow some deduction for the period of the war, which closed in
1865, there still remains the long delay between that time and the
bringing of this suit in 1882, a period of about seventeen years.
This lapse of time requires some better account in regard to the
reasons why this suit was not earlier instituted than is given in
the present bill. It is obvious that during all this time, and
indeed from the year 1861, when, as the bill declares, the
defendants took possession of the property, it has been held by
them adversely to the claim of the Gold Hill Mining Company and to
the claim of the complainants. No sufficient reason is given why
relief was not sought earlier. During all this period, the shares
of the corporation seem to have been of no value, so that the
defendants may have bought them in the market for a very
inconsiderable sum and may now be prosecuting a suit for relief
which, if sustainable at all, ought to inure to the benefit of
other parties.
Clarke v.
Boorman, 18 Wall. 493.
Page 127 U. S. 494
These questions have been too frequently discussed in this Court
to need further comment. We concur with the circuit court that the
bill is without merit, and believe that it was rightfully
dismissed. The decree is therefore
Affirmed.