Walker v. Ogden

DRUMMOND, District Judge. My opinion is that the assessment was legal and proper, and that a sufficient notice was given to Walker. If there was an illegality or irregularity in the assessment, the burden of proof was on the complainant to establish it, and he has failed to do so. But irrespective of the presumption of law of its regularity, I think upon the evidence before me that its legality is sufficiently established in every substantial particular. I am also of the opinion that the objection taken by the defendants to the action of Fleet-wood in receiving the acceptances, is well taken. I think the trustees had no authority, under the articles, to take anything but money. The complainant being a party to the articles, was bound to take notice of the nature and extent of the authority thereby given. I assume, therefore, that the giving of the acceptances was illegal, and that the complainant did not pay his assessment as required by the [43] articles, and the question in the case is simply one of forfeiture. NOTE. Corporations may be authorized to forfeit stock. Herkimer Manufacturing & Hydraulic Co. v. Small, 21 Wend. 273: Troy Turnpike & Railroad Co. v. M’Chesney, Id. 29G. Unless the power to forfeit stock is given by the charter, a by-law subjecting it to forfeiture is merely nugatory. In re Long Island R. Co.. 19 Wend. 37: Bordentown & S. A. Turnpike Co. v. Imlay, 1 South. [4 hi. J. Law) 285; In re National Patent Steam Fuel Co.. 5 Jur. (N. S.) 420, 2S Law J. Ch. 637. Directors cannot forfeit stock in any other way than the mode provide! in the charter. Downing v. Potts. 3 Zab. [23 N. J. Law] 66. Forfeiture can only be enforced upon full compliance with the provisions of the act. Eastern "Plank Road Co. v. Vaughan, 20 Barb. 155. ■I am of opinion that the complainant at law incurred a forfeiture of his stock, and the only question is, has the court of equity the right to relieve for such forfeiture and is a case for such relief made out by the complainant? It is to he observed that no rights of property have become vested by reason of the forfeiture in this case. The forfeited stock has never been distributed among the shareholders, or sold as is provided for by the articles. Had such action been taken a different ease would have been presented. The articles provide no express mode by which the forfeiture is to be established. If they did, and such mode had been pursued, and especially if any right had vested in consequence thereof in third parties, the defendants’ argument would have had more force. But here is a mere naked declaration that the stock is forfeited, which is all that stands in the way of the relief sought by the bill. Courts of equity do not favor forfeitures, and it cannot be denied that the effect of a forfeiture in this ease would be to inflict a heavy loss and injury upon the complainant. He would thereby lose all his interest in the in- ! creased value of a large amount of property, in a portion of which he was concerned as one of the original purchasers. The question is: Can the mere declaration of the trustees have the effect to foreclose all of "Walker's interest in this property? I think not. I am inclined to the opinion (although I do not put my decision of this case on that ground), that a judicial decree of foreclosure upon a bill filed by the trustee, was necessary in order to bar the rights of Walker to redeem his stock. Having come to the conclusion then that a court of equity has the right to grant relief if a proper case is made, the remaining question is: has the complainant made out such a case? In this view of the case, the transaction with Fleetwood is important. There is no question that this was in perfect good faith on the part of all the parties. They acted under an honest mistake in regard to their powers. The paper furnished by Walker was deemed unquestionable at the time. He left the stock as collateral. He was, as is shown, amply able to have raised the money in other ways if this agreement had not been made with Fleetwood. The trustees certainly knew of and acquiesced in the act of Fleetwood in taking the acceptances. They gave no notice to Walker of any dissatisfaction on their part with the arrangement until long after the maturity of the acceptances. tinder such circumstances, the complainant having come in and tendered in money the whole amount due and ten per cent, interest, it would be hard and oppressive to deny him the right to redeem his stock, and I should not feel inclined to do so unless compelled by the authorities, and from such examination of the. law as I have been enabled to make in the brief time I have had, I think relief may be granted. The case of Sparks v. Liverpool Water Works, 13 Ves. 428, decided by Sir Wm. Grant, has been pressed with much- force by the defendants’ counsel. But I think that that case rests upon the public corporate objects of the concern. The ease before me is different. It is that of a mere private land company in which the public have no interest. This case has been likened by the counsel on the part of the complainant to that of a bill to redeem from a mortgage after forfeiture, and on the other side to a bill for a specific performance of a defaulted contract to convey, and in my opinion neither of these views are to be regarded as exactly correct. It is a case which rests upon principles peculiar to itself, and the right to relief is based upon the considerations which I have stated. Upon payment of the whole amount due, principal and interest, the complainant should be allowed to redeem his stock, and certificates thereof should be executed and delivered to him by defendants, and decree will be entered accordingly.