Case Name: Godwin v. Whitehead & als.
Court: Supreme Court of Appeals of Virginia
Jurisdiction: Virginia
Decision Date: 1892-01-15
Citations: 88 Va. 600
Docket Number: 
Parties: Godwin v. Whitehead & als.
Judges: 
Reporter: Virginia Reports
Volume: 88
Pages: 600–617

Head Matter:
Richmond.
Godwin v. Whitehead & als.
January 15th, 1892.
Cokpokatiox — Suit to set aside reorganization — Laches.— A trust deed was executed in 1870 by street railway company to secure its bonds. In 1873, becoming insolvent, company suspended. IV., holder of 1,874 of the 2,000 shares and of §49,000 of the §50,000 of bonds, being elected president, expended much money and greatly improved the situation. Trustees having vacated, IV. had others substituted by the court. IV. then became the purchaser. He failing, there was a second sale. In the meantime no objections were made. In 1886, the property having become valuable, G., owning three shares, brought suit for himself and the other stockholders to set aside the reorganization and sale on the ground of some alleged informality in the notice on which the order of substitution was made;
Ilni.n:'
By laches complainant lost, if he had any, right to relief.
Appeal from decree of corporation court of city of Norfolk, rendered December 15th, 1887, in a suit wherein the appellant, Thomas W. Godwin, for, &c., was complainant, and John B. Whitehead and others were defendants.
Opinion states the case.
Burroughs Bro., for appellant.
Tunstall Thom, for appellees.

Opinion:
Lacy, J.,
delivered the opinion of the court.
The bill in this cause was filed ou the-day of-, 1886 or 1887. The exact date is not set forth in the record, nor in any note of argument filed here, but in the deposition of the plaintiffs' counsel, taken in 1887, that he advised the institution of the suit after March 15,1886, after the court in the suit of Roberts v. Whitehead and others had refused to allow a bill to be filed in the name of the Norfolk City Railroad Company against John B. Whitehead and others, and, under his advice, a suit was brought in the name of one stockholder for the benefit of himself and other stockholders. It was filed by Thomas W. .Godwin, suing for. the use and at the costs of William A. Swank, and for all other stockholders of the Norfolk City Railroad Company. The Norfolk City Railroad Company is a street-railroad company, organized under an act of the general assembly passed January 4th, 1866. It was operated for some years, and in 1878 the superintendent, Mr. Joseph R. Garrett, in obedience to the resolution of the legislature of Virginia in relation to the form of animal reports of railroads and other companies, adopted March 15th, 1856, by the general assembly of Virginia, reported that the company was very greatly embarrassed, and without any organization ; that it had neither p-esident, board of directors, treasurer, secretary, nor other officer. On the 20th of April, 1874, the common council of the city of Norfolk called the attention of its street committee to the bad condition of the street railway, and directed them to have the same removed or put in better order. The company had run dowu, and had ceased to operate; was involved in what appeared to be a hopeless indebtedness. Its horses had been sold, and the harness. But little else was left except its track and franchises, and the track was in such condition as to threaten the safety of travelers along the streets of the c-itv. At. its organization under its charter it issued 2,000 shares, of the par value of $50 each. On the 1st of April, 1870, issued $50*000 of 8 per cent, coupon bonds, and conveyed its property to secure them. The appellant, Godwin, in June, 1871, purchased three shares of stock, which he has transferred to W. A. Swank, for whose benefit this suit is brought in the name of Godwin. The object- of the bill was to set aside the reorganization of this company, which had been affected, and to have a receiver appointed, etc. It is set forth that'the appellees have caused the road to be sold for its debts, under a sale which was void, for want of notice in legal form; and that the purchase of the same by Whitehead, the holder of the bonds, and his subsequent formation of a new company, are all void. The appellees, by their answers, admit the sale and ownership of the three shares claimed by Godwin, and by him assigned to Swank, and also the execution of the deed of 1870, and the order of the court of March, 1881, substituting trustees, White and Whitehead, in lieu of those named in the deed; and admit also the sale by the substituted trustees to J. B. Whitehead, the holder of the $50,000 bonds of the company, as is alleged, and $49,000 of which is conceded to belong to Whitehead; and that Whitehead also held, by purchase, 1,874 of the 2,000 shares of the company; and says that about February, 1873, a large bondholder, named Sellers, finding the property and the franchises of the road abandoned, whereby his debt was liable to be a total loss to him, took posession of the property and undertook to manage it; that, the stock being regarded as and being worthless, none of the stockholders or officers objected; that the company was heavily in debt for running expenses and outfit beyond its bonded indebtedness, and in 1874 one of its general creditors filed a bill to subject the property to the payment of the company's debts; that in that year the operations of the company ceased altogether, and that the superintendent reported the company to the board of public works as being without organization, and in the same year the common council of the city of Norfolk took steps looking to its removal out of the streets of the city as a nuisance and obstruction to the legitimate use of the streets. The rails were displaced and bent, and the contiguous pavement full of holes, and generally out of order. Under these circumstances, John B. Whitehead, who was largely interested in the bonds and stock of the company, came forward to see what could be done to save all from an impending total loss, and was elected president of the company September 17, 1874; and because he had taken, to save a bad debt, 1,874 shares of stock, and $2,400 par value of the bonds of the company, he was forced to undertake the task of resuscitating the company, and bought teams and made extensive repairs; that- Godwin knew his stock was worthless, and neither he nor any other stockholder except Whitehead would do anything; and the road being pressed -with debt and threatened by its creditors, he Avas obliged to and did purchase $49,-000 of the bonded debts, and believed he had the \AThole $50,000, "and bought up the stock at nominal prices — $1 a share — a good deal being given to him, as theoAvners knew that the company AAras insolvent and the stock Avorthless, and that it Avas due to his exertions and achievements that the company did not cease to exist in 1874 or in 1875; and that he, holding these bonds and stock in 1881, employed counsel to liaA'e trustees substituted by the court in lieu of those named in the deed of 1870, made to secure these bonds, and one having remoATed beyond the limits of the state and become a non-resident, and the other being dead, that notice AAras given of the motion to substitute these trustees by publication in a Xorfolk paper, in AA'hich city of [Norfolk, Godwin resided. There Avas no objection from any source, and on the 9th day of March, 1881, the order Avas made, and "White and oné H. C. Whitehead Avere substituted by the court. In December following these trustees, being so required by the beneficiaries under the deed, made the sale, and the appellee, J. B. Whitehead, became the purchaser, at the price of $20,000, at public auction, in the presence of a large concourse of the people draAvn together by the notice of the sale. The purchaser then formed a mwv company, expended more money, and finally raised the road to a high state of efficiency.
During all this time Godwin took no notice of the company, and claimed no interest in it; and subsequently Swank, who had been counsel for Roberts in the suit lately decided here, but not reported, of Roberts v. Whitehead, which was decided adversely to the pretensions of Roberts, both in the corporation court and in this court, believing that he had discovered an informality in the notice for the substitution of the trustees, in that the notice, as he claiined, showed that it was proved by the certificate of the business manager of the newspaper instead of by the certificate of the editor or the affidavit of any other person, bought without price the three shares of Godwin stock, took an assignment to himself, and brought 'this suit upon a speculative idea; and Roberts attempted to come in again, by petition, and try his fortune once more on the demands decided against him, but the court below dismissed the plaintiff's bill, and refused to allow the petition of Roberts to be filed, or the petition of some others, claiming small amounts of the old stock. From this action of the court the appeal is here.
The sale under the deed of 1870 is claimed to be void because made without notice, and therefore without jurisdiction. But the court below decided expressly that the notice was sufficient. What the proof was we need not inquire. There was no appeal from this decision, and there can be none now. There is no proof in the record that the alleged defective notice was the evidence relied upon by the court. It is not made a part of the record in any way, and other proof may have been before the court. The court, while a court of general jurisdiction, was proceeding under the authority of a special statute, and in that respect may be conceded to be a court of special and limited jurisdiction; and yet the record expressly shows that the order was made upon a sufficient and legal notice, and there was no objection and no appeal, and there is no proof to the contrary. The appellant has been guilty of the grossest laches in the assertion of his claim, if any lie had. He has waited until he has seen a change of circumstances, and what was worthless has been made valuable. If he could, by some defect in the proceedings, have had them annulled, and the old company rehabilitated, he has delayed too long, and John B. Whitehead has, in his turn, failed, and these properties, rights and franchises have passed by assignment to his creditors, and are held by subsequent purchasers, without notice of his supposed rights; and, if he had discovered and availed of any sufficient defect in the proceedings in the matter, he would yet come in questionable guise, seeking to set aside all the transactions herein for -the benefit of Swank, who owned nothing, or of Godwin, who claimed nothing, during all this time, and throughout all these proceedings. But yet, again, the action had herein was, by the direction of a large majority of the stockholders of the eonrpany of which he claims to be a member, approved and ratified. Did-they not represent him ? This action was put in motion by creditors whose debts exceeded the value of the property two-fold and more. If he had come forward, then he could have accomplished nothing; and suppose his wishes were gratified, and the new company rehabilitated, he would still be in a small, insignificant minority of .the stockholders, and could not prevent his antagonist, the owner of more than 1,800 shares out of the 2,000, from outvoting his three shares. He could still accomplish nothing. Ilis claim is, in every view, without merit; and the corporation court of Horfolk did not err in dismissing his bill, and we are of opinion to affirm the same.