Scadden Flat Gold Mining Co. v. Scadden

HAYNES, C. In 1878 Henry Scadden, Thomas Scadden, and Richard Roberts were the owners of the Scadden Flat Quartz Mine, near Grass Valley, in Nevada county, the interest of each being an undivided one-third. In August of that year a corporation was formed under the name of “Scadden Flat Gold Mining Company,” each of said owners and A. B. Brady and John Tremberth being named in the articles of incorporation as the directors to serve for the first year. It is alleged in the complaint, and found as a fact by the court, that in September, 1878, said Henry Scadden, Thomas Scadden, and Richard Roberts agreed and contracted with said corporation to sell and convey to it the said mining property, and put it in possession thereof, in consideration of the transfer and delivery to them and their order, by the corporation, of forty thousand shares of its capital stock, the whole number of shares being sixty thousand; the remaining twenty thousand shares to be sold for the benefit of the corporation. Of the forty thousand shares, five shares each were to be issued to Brady and Tremberth to qualify them as directors, leaving to each of the Scad-dens and Roberts, respectively, thirteen thousand three hundred and thirty shares; and said shares were issued to said persons respectively, and the corporation went into possession of the property. The remaining twenty thousand shares were sold to sundry purchasers, and the corporation realized therefrom fifteen thousand dollars, which was invested in machinery and other improvements upon the property. Active operations were conducted by the corporation upon the mining property for a year or more, during which time over forty thousand dollars were expended in work in the mine and in the erection of a mill. The board of directors met frequently, and directed the operations of the corporation, which were conducted by the superintendent, Roberts, — 36 — who reported to the board, of, which Henry and Thomas Scadden were members, one of them being president. Prior, to the formation of the corporation, Henry and Thomas. Scadden had each mortgaged his respective interest in the mining property, Henry to secure four thousand four hundred dollars, and Thomas for fifteen hundred dollars, which encumbrances existed at the time the corporation was organized. A deed was prepared for the purpose of conveying said mining property to the corporation, but Boberts refused to execute-it until the property should be released from said mortgages. On September 11, 1878, eight thousand shares of stock were issued to Henry Scadden, and these shares were afterward transferred to Ms mortgagee, and the mortgage was released; and Thomas Scadden also used six thousand six hundred and sixty-six shares of his stock to release the mortgage upon his interest, and' the remainder of the stock to which each was entitled was also issued during the same month. The deed, however, was not executed by either of the Scaddens at any time, nor by Boberts until long afterward. Work was prosecuted by the corporation for a year or more, and was then suspended. The mill was leased to other parties for some months, and not long afterward was destroyed by fire. Meetings of the board were held from time to time after work ceased until March 3, 1881, but none were held thereafter until September 31, 1895, about which time Boberts conveyed Ms one-third interest in the property to the corporation. Henry and Thomas Scadden both died intestate before the commencement of this action, and the defendants are their personal representatives and heirs at law, and the object of the action is to secure a transfer of the legal title to said two-thirds interest in said mining property to the plaintiff. Other facts, so-far as material, will be noticed as we proceed. The findings made by the court are very full, and, it is conceded, support the judgment. The grounds upon which appellants contend for reversal will be noticed in the order in which they are presented. 1. “The judge of the court below was disqualified from trying-the case.” All that appears in the transcript upon tMs point is as follows: — 37 — - “Mr. Ford [counsel for defendants]: -We offer to show by Judge Caldwell that immediately prior to the commencement of the action stock was purchased from him by the Hague syndicate, and that it had no value from 1880 to 1895.” “The Court: I sold the stock; I don’t know whether the sale was to Mr. Hague, for I let Mr. Searls have the stock. I do not know what its value was during those years; I only know what I paid and received for it.” From this it is argued that the judge was interested in the result of the action. Ho objection was made to the court proceeding with the trial, nor was the question raised in any manner in the court below. It may be said, however, that it clearly appears that the judge had no interest in the action. He had disposed of all the interest he ever had in the property. The interest which disqualifies is a direct and immediate interest in the result of the action. (North Bloomfield etc. Co. v. Keyser, 58 Cal. 315; Oakland v. Oakland Water Front Co., 118 Cal. 249.) 2. It is insisted that the complaint alleges an express contract for the sale of the property by the Scadden brothers and Boberts to the corporation, and that this allegation .is not sustained by the evidence. The allegation is that said owners “entered into and made an agreement and contract,” by which they “agreed and contracted that they would sell and convey and deliver to the plaintiff all the real property aforesaid and the -possession thereof in consideration of the delivery to them and their order, by plaintiff, of forty thousand shares of its capital stock; and plaintiff agreed” to deliver said stock in consideration of the sale, conveyance, and delivery of the property to it; and the court found that this allegation was true. Mr. Brady, the secretary of the corporation, testified that Thomas Scadden, Henry Scadden, and Bichard Boberts made an agreement, prior to the formation of the corporation, to convey the property to the corporation when formed, and to receive stock therefor as hereinbefore stated; that they received the stock; that' a deed was prepared but was not executed;-that Boberts refused to sign it until the mortgages upon the other interests should be removed, and that the corporation worked the mine. The minute'-book of the corporation, attested by Henry Scadden — 38 — as president, and Mr. Brady as secretary, show an instruction to the secretary to reserve twenty thousand shares to be sold at seventy-five cents per share; that JEL Scadden asked consent to have eight thousand shares issued to him, to be placed as security with L. B., Webster on the mortgage held by Webster, and this was done. “Thomas Scadden, having sold one-half of his interest in the above company, asked permission to have said stock issued to J. T. Morgan.” The corporation also sold the twenty thousand shares of treasury stock, built a mill, made assessments upon the stock, and managed and operated the property as owner. These facts show that in some manner the corporation was informed of the previous agreement and purpose of the owners of the property, and by its acts, if not otherwise, accepted the proposition of the owners, and such acceptance completed the conr tract between the former owners and the corporation; and the-corporation, having issued and delivered all the stock, and taken possession of the property and operated it, complied with the-conditions of the contract upon its part and became the owner of the property, and Henry and Thomas Scadden and Boberts were thereafter simply trustees of the legal title for the corporation. : “The promoters are not the corporation, and their contracts cannot be its contracts. This is so, though the promoters become at the creation of the corporation its only stockholders, directors, and officers. After it comes into existence and operation it may, by adopting arrangements thus made for it in advance, make them its contract precisely as it might make similar contracts had no previous engagements been entered into.. There can be no difference between its making a contract by adopting an agreement originally made for it in advance by its promoters and its making an entirely new contract.”' (Battelle v. Northwestern etc. Co., 37 Minn. 89.) The supreme court of Massachusetts said: “A corporation maybe bound to fulfill a contract made in its name and behalf, in anticipation of its existence, by afterward accepting the.benefits, of the contract, as it may acquire a right to enforce such a contract against the other party by his acceptance of performance by the corporation.” (Penn Match Co. v. Hapgood, 141 Mass. 145: See, also, Chater v. San Francisco Sugar etc. Co., 19 Cal. — 39 — 219, 247.) The contract alleged in the complaint is fully sttstaincd by the evidence. 3. It is also contended that this action is barred by the statute of limitations, or by unreasonable delay in bringing this suit. Appellants contend that the evidence shows nothing more than a constructive trust; that such a trust is born of fraud, and presupposes an adverse claim from its beginning, and that section 343 of the Code of Civil Procedure, which prescribes a four years’ limitation, applies; and that, for the purpose of avoiding that section of the code, an express trust is set forth in the complaint. In this appellants are mistaken. The complaint alleges an agreement to sell and convey the property to the corporation for a certain quantity of stock, that the stock was delivered, but the conveyance was not executed. This constitutes a resulting trust, and differs from a constructive trust in that the latter is forced upon the conscience of the trastee against his will, and generally to prevent the consummation of a fraud; while an express trust differs from a resulting trust only in the manner in which it is proven; but, when proven, a resulting trust is enforced in the same manner as an express trust. (Love v. Watkins, 40 Cal. 547, 568; 6 Am. Rep. 624.) That a purchaser who has paid the purchase price may be barred of an action against the seller to enforce the trust resulting from such transaction is not doubted; but the statute ■ will not begin to run so long as the purchaser is in possession; for if it would (as was stated in Love v. Watkins, supra), “these curious results must follow: that the equitable owner of land is barred of his right while holding possession according to his right, and without an adverse claim or possession; and a person out of possession acquires title to real estate by the statute of limitations against a person in possession holding adversely. .... And I have never yet met with a case, whatever the character of the trust, where the statute has been held to bar the rights of the beneficiary in favor of the trustee, when the beneficiary has continued in possession according to his fight, and no adverse claim made by the trustee. Such a case would be at va-. rianee with the fundamental idea of statutes of limitation that possession draws to it, or rather extinguishes, all adverse claims and titles.” ■ • ! , — 40 — The court found that the plaintiff, in September, 1878, entered into full possession of the property and has held and retained possession of it from that time, and has never been dispossessed, and has- every year- since 1878 paid the taxes assessed thereon. ■ It is contended that the finding that plaintiff has been in possession ever since 1878 is not justified by the evidence. There is' some- conflict in the evidence upon this point, but I think there is sufficient to sustain the finding. ' Tn'the finding that plaintiff has had possession ever since 1878 there is an exception of a small portion of the surface, a lot of about one hundred and thirty by two hundred and twenty feet,which was conveyed by the corporation to Thomas Scadden on May'6, 1889, the deed conveying only the right to the surface, and reserving all rights for mining purposes. This- deed was recorded at the request of Thomas Scadden a few days thereafter. • The occupation of this lot, which was fully described, was under the-title created by it, and could not be adverse, but, on the contrary, was an acknowledgment of the ownership and right of-the -corporation. After the mill was burned brit little work was doné in the mine. Mr. Morgan testified that in recent years the mine was worked by some parties whose names he did not remember; that a Mian named Pierce worked as a tributer and paid a percentage to’-the corporation; that the witness had the shaft repaired five or six years ago. There was also evidence that some of the Scadden hoys' worked there occasionally for short spaces of time when not employed elsewhere, and accounted to their father; but the court found that plaintiff had no actual notice thereof, and that the work done was so limited that plaintiff could not be presumed to-have had knowledge of it. But there is no evidence of,' any repudiation of the rights of the corporation by word or act brought home to it. In Luco v. De Toro, 91 Cal. 416, 417, it was said: “Time begins to run against a trust only from the time it is openly disi avowed' by the trustee, and the adverse claim is clearly and unequivocally made known to 'the-cestui que trust.....Full performance by Hartman created an indefeasible estate in equity; which could not be defeated or divested by Olivera without pos — 41 — itive and unequivocal repudiation of the trust relation, and notice of such repudiation to the beneficiary.” Here neglect of the trustee to convey, or of the cestui que trust to demand or compel the conveyance, as in this case, is not sufficient to bar the right of the purchaser to compel a conveyance. The court, owing to the difficulty of compelling the defendants, who were numerous, and many of whom were minors, to execute a conveyance to the plaintiff, appointed a receiver, in whom the legal title was vested by the decree, to make the con - veyance; and this, it is argued, was erroneous. Section 564 of the Code of Civil Procedure authorizes the court to appoint a receiver: “3. After judgment, to carry the judgment into effect,” and appellants suppose the appointment of a receiver was made thereunder. This provision is very comprehensive, and we see no reason why the mode here adopted is not proper. Where the means to carry into effect the jurisdiction of the court is not specifically pointed out by the code or statute, “any suitable process or mode of proceeding may he adopted which may he conformable to the spirit of this code.” (Code Civ. Proc., sec. 187.) A person to execute conveyances ordered by a court of equity is frequently appointed, and is usually designated a “commissioner”; hut we think it immaterial whether he he called a commissioner or a receiver—since his powers and duties are fixed by the decree, and need not he inferred from the name or title of the officer. The judgment appealed from should he affirmed. Belcher, C., and Chipman, C., concurred. For the reasons given in the foregoing opinion the judgment appealed from is affirmed. Garoutte, J., Harrison, J., Van Fleet, J. Hearing in Bank denied.