Princeton Mining Co. v. First National Bank , 7 Mont. 530 ( 1888 )

Bach, J.

This is an action that was brought to quiet title to certain real estate situate in Silver Bow County, Montana Territory.

The appeal is from the judgment alone. The transcript on appeal contains the judgment roll, consisting of the complaint, answer, replication, the findings of the court, and exceptions to those findings; request of certain findings which were refused by the court, and exceptions to such refusal; the decree, notiee of appeal, and undertaking on appeal.

The record in this case is incomplete. For instance, the first finding of fact reads as follows: “That, on or about the 29th of May, 1883, an agreement in writing in reference to the property described in the complaint was made and entered into between Francis W. H. Medhurst and Emile Erlanger, a copy of which agreement is attached to the deposition of said Medhurst and said Erlanger in this case.”

Those depositions are not in the judgment roll. The agreement referred to in the findings can only be ascertained by a comparison of all of the pleadings and the findings. There was no motion for a new trial made; therefore we are to conclude that all of the findings are supported by the evidence; that there was no evidence to sustain the findings requested and refused; and that where there is no finding on any issue, the court found in favor of the plaintiff upon that issue. Such is the rule laid down by the statutes, and from the authorities.

The facts, as shown by the record, are about as follows: On the twenty-ninth day of May, 1883, one Emile Erlanger entered into an agreement with Francis W. H. Medhurst, whereby it was agreed that Erlanger was to furnish moneys for the purpose of locating and purchasing mining properties, and that Medhurst, on his part, was to use his skill as a miner in locating, purchasing, and developing mining property; that the patent for such properties as were not already patented was to be taken in the name of Medhurst, and to be held in trust as follows:—

That said Medhurst was to convey fifty-five per cent of the property to some person designated by the said Erlanger, or to some corporation so designated. It is admitted that Erlanger was and .is an alien.

Thereafter, on the-day of December, 1883, this agreement was modified so that, instead of Medhurst applying for the patent, all of the mining property so located and purchased by the said Medhurst was to be conveyed to a corporation thereafter to be named, and that said corporation was to apply for the patents itself where no patents had already been obtained. In said corporation, Erlanger was to control and have the disposition of fifty-five per cent of the stock; fifteen per cent of the stock was to go to the said Medhurst, fifteen per cent of the stock to one Pardee, and the remaining fifteen per cent to one Wartenweiler. The said Erlanger advanced the sum of about fifty thousand dollars, in accordance with the terms of said agreement. There is an issue upon the following points, viz.:—

Whether or not there was a consideration, whether or not the agreement was in writing, and as to whether or not there was fraud in fact. But, as has already been stated, it must be concluded that the court found in •favor of the plaintiff upon these issues. The corporation, as to all of its material parts and the interests of its stockholders, had been completely provided for, and all that lacked of making it a legal corporation was the filing provided by the statute. Upon the ninth day of February, the First National Bank of Butte commenced an action against the said Medhurst, and levied an attachment upon the properties described and mentioned in the complaint. The agreement and modification thereof heretofore mentioned were not on record, but it is alleged in the complaint in this action that the said First National Bank of Butte, when the action against Medhurst was commenced, had actual knowledge of said agreement. That being an issue in the case, if .it is material, it must be held to have been found in favor of the plaintiff. The action of the First National Bank of Butte against Medhurst resulted in favor of the plaintiff therein. Execution was issued, and some time thereafter the property described in the complaint was sold at sheriff’s sale. Between the date of the attachment and the date of the sheriff’s sale, the Princeton Mining Company, which is admittedly the corporation referred to in the agreement and modification thereof between Medhurst and Erlanger, was duly incorporated under the laws of the territory of Montana, and at the sheriff’s sale gave actual notice of their claim to the property which the sheriff was then selling. At said sale the judgment creditor in the execution, the First National Bank of Butte, the defendant herein, bought the said property. The sheriff was about to. deliver the sheriff’s deed to the defendant herein when the plaintiff brought this action to quiet his title and restrain the sheriff from delivering said deed. The first point made by the appellants is, that Erlanger, being an alien, cannot hold title to real estate, or an interest in it as cestui que trust. It may be well admitted that an alien cannot locate mining lands of the United States, and it is a question decided in the negative by many courts as to whether or not an alien may be a cestui que trust to any real estate, even when the legal title stands in the name of a citizen: but in this last case it would seem to be beyond doubt settled that the cestui que trust may maintain his interest as against everybody until office found; but that is not the question involved in this case. The agreement, as modified before the attachment, provided, not that Erlanger should have fifty-five per cent of the land, but merely an interest in the stock. Counsel for the appellants holds that this places Erlanger’s share in the same position as though he were directly the cestui que trust to the land.

It is true that, for many purposes, the trustees of a corporation hold the title to real estate, as they do the title of all its property, in trust ultimately for its stockholders, so that, if there should be a dissolution of the corporation, and property remain, the stockholders would share pro rata in all of its property; but while the corporation is still in legal existence, the stock of the corporation is personal property, and may be transferred as personal property, and the owners of that stock have no interest in the land which can be taken by any process known to the law, and the mere fact that a foreigner, an alien, owns stock in a corporation which has acquired the title to- real- estate, does not, under any authority which we have been able to find, disturb the title of that corporation to the real estate. That becomes quite apparent when we remember the law passed by a recent session of Congress, providing that no corporation in which an alien owns over twenty per cent of the stock should be entitled to acquire mining property. If the law had been such as contended for by the appellants here, it would have been unnecessary legislation on the part of Congress to pass such law as is referred to.

What right did the First- National Bank of Butte acquire in and to the real estate by filing its attachment upon that property ?

The facts in this case show that the judgment creditor, the First National Bank of the city of Butte, is not a purchaser in good faith, for when it commenced the action against Medhurst it had actual notice of the agreement and modification referred to, and of the actual interest of its judgment debtor. Such is the allegation of the complaint, and it being an issue in this case, as has already been said, must be deemed to have been found in favor of the plaintiff. Therefore the law in regard to the rights of purchasers in good faith, as against unrecorded conveyances, does not apply, for where there is actual notice the purchaser would not be a purchaser in good faith.

And it is also a rule of law that where a judgment creditor attaches real estate of his judgment debtor, and that property is held by the said judgment debtor in trust, the judgment creditor (at least when purchasing with actual notice) obtains no right as against the cestui que trust of that property, even though the trust is no part of the records. See Osterman v. Baldwin, 6 Wall. 110; Brown v. Pierce, 7 Wall. 205; Chumasero v. Vial, 3 Mont. 376; Story v. Black, 5 Mont. 26.

Consequently, at the sheriff’s sale, the judgment creditor, the First National Bank of Butte, obtained no right except such as Medhurst himself had, and that right was merely the right of a trustee to convey the lands to the plaintiff in this case; and inasmuch as Medhurst, before the sale, had conveyed the property to the Princeton Mining Company, there was no trust left to be executed.

It is claimed, however, that the defendant is entitled at least to Medhurst’s share of the real estate; that is to say, fifteen per cent. Medhurst has no title or share that can be set apart by him in the real estate as long as the corporation is legally discharging the purposes for which it was formed; his sole interest is in the stock.

If a judgment creditor of a stockholder, by attaching his debtor’s stock, could insist that he was entitled to a pro rata share of all of the assets of that corporation upon demand, the existence of corporations would be placed in a very questionable position. Every such judgment creditor would become a tenant in common of the corporation. The corporation is entitled to the free and undisturbed use of its property within the law, free from any claim of the creditor of the stockholder. It is entitled, when so authorized to do, to use all of its property as security for moneys borrowed for the purposes of that corporation.

We have looked in vain for an authority sustaining the position of the appellants in this case. We admit the point claimed by them that the stockholders are ultimately to share pro rata in all of the properties of the corporation; but that division is not to take effect until the dissolution of the corporation by act of law, or by some order of the court where the law authorizes a dissolution by süch an order. Up to that time the right of a stockholder is mere personal property.

It may be that the plaintiff in this case should have protected the interests of the First National Bank of Butte by refusing to issue the stock to Medhurst, and' that in neglecting to do that, if it has neglected so to do, it does not properly come into court offering to do equity; but that point has nowhere been raised by the appellants, either in the court below or in this court, and we do not feel compelled to say what might have been the result if that point had been properly before us.

The judgment of the court below is affirmed, with costs.

Judgment affirmed.

McConnell, C. J., and Liddell, J., concur.