Case Name: FRED MACEY CO. v. MACEY
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1906-03-05
Citations: 143 Mich. 138
Docket Number: Docket No. 78
Parties: FRED MACEY CO. v. MACEY.
Judges: Blair, Montgomery, and Hooker, JJ., concurred with Grant, J.
Reporter: Michigan Reports
Volume: 143
Pages: 138–162

Head Matter:
FRED MACEY CO. v. MACEY.
1. Equity — Jurisdiction—Issues op Fact.
Courts of law are not clothed with the sole power to try issues of fact.
2. Same — Jurisdiction—Fraud.
Courts of chancery have concurrent jurisdiction with the law courts to grant relief from the consequences of fraud.
3. Cancellation op Instruments — Equity Jurisdiction.
Courts of chancery are clothed with power to grant relief in the cancellation of instruments, which, until their invalidity is established, may annoy and harass one’s business and impair his credit.
4. Same — Bill—Suppioienoy op Averments.
A bill alleged that the promoters of complainant corporation, nominally subscribing for the entire stock, made a secret and burdensome contract in favor of one of them which they claimed to be binding upon the corporation; that the other officers and stockholders of the corporation knew nothing about the contract, but believed that the corporation was receiving complete title to the patents mentioned in it, and that they took the entire property free from any burdens. The bill prayed that defendant be required to repay royalties he had paid himself from the company’s funds pursuant to-the contract, and that the contract be decreed invalid. Held, that the main relief sought was not a decree for money, but relief from a continuing contract, and that chancery had jurisdiction.
5. Corporations — Promoters—Fiduciary Relation.
The promoters of a corporation are the agents of the corporation and occupy a fiduciary relation to it and its stockholders, and will not be permitted to take a secret advantage of the stockholders.
6. Same — Knowledge op Promoters as Notice to Corporation.
Knowledge by the three promoters and nominal purchasers of the entire capital stock of a corporation, of a secret agreement, burdensome to the corporation, in favor of one of them, does not bind purchasers of the stock who had no notice of the contract, their purchases of stock not being made from the promoters as individuals, but from the corporation, its proceeds being intended to create a working capital.
■ 7. Cancellation of Instruments — Bill — Sufficiency — Surplusage-Removal of Cloud. .
Where a bill by a corporation to cancel a fraudulent contract shows equitable grounds, it is immaterial that it alleges that the contract constitutes a cloud upon complainant’s business, and the court is not called upon to decide whether a bill will lie merely to remove a cloud upon one’s business.
8. Equity — Laches—Delay by Negotiations.
Where a corporation protested promptly upon learning of a fraudulent contract made by its promoters, and entered into negotiations for a peaceable settlement, which failed, a bill for cancellation, filed within a reasonable time after such failure, is not barred by laches.
9. Same — Jurisdiction—Fraudulent Concealment.
Fraudulent concealment is a matter of equitable jurisdiction as well as fraudulent assertion.
Per Grant, Blair, Montgomery, and Hooker, JJ.
10. Equity — Jurisdiction—Fraud — Absence of Legal Remedy.
Chancery has jurisdiction in all cases of fraud, where complainant is entitled to relief specifically equitable, and such jurisdiction does not, in all cases, depend upon an absence of legal remedy.
11. Cancellation of Instruments — Equity Jurisdiction — Fraud —Legal Remedy.
Where one has obtained an executory writing by fraud, equity has jurisdiction to cancel it, irrespective of the legal redress that the injured party may obtain in an action at law, either as plaintiff or defendant.
Per Hooker, MoAlvay, and Montgomery, JJ.
Appeal from Kent; Wolcott, J.
Submitted October 19, 1905.
(Docket No. 78.)
Decided March 5, 1906.
Bill by the Fred Macey Company, Limited, against Frank Macey to obtain the cancellation of an agreement for the payment of royalties. From an order overruling a demurrer, defendant appeals.
Affirmed.
From a decree overruling the demurrer to the bill in equity in this case, the defendant has appealed. It is im portant to state quite fully the allegations of the bill. It states that for about three years prior to April, 1898, Fred Macey had been conducting a business under the style of “The Fred Macey Company,” consisting chiefly of selling home and office furniture and supplies by mail. On April 18, 1898, Fred Macey and one Charles W. Matheson formed a copartnership for the purpose of continuing said business under the same name. May 18th following Fred Macey and Matheson made an agreement with the defendant Frank Macey, a brother of Fred. This agreement recited that Frank had invented and applied, for letters patent on certain devices for use in card indexes, filing cabinets, and other filing devices, and was desirous of marketing the same. That agreement did not include profit on desks containing filing devices. It provided that each of the parties to the agreement should assign to the respective copartners, share and share alike, all patents that they or either of them then owned or might thereafter acquire, pertaining to card indexes, filing cabinets, and filing devices, and supplies for the same, for the sole use of said copartnership. Each copartner owned one-third of the stock of the copartnership, which was fixed at $75,000. This agreement is set forth at length, but it is unnecessary to refer any further to its provisions.
While the business was thus carried on, certain letters patent and copyrights pertaining to articles and devices handled by the Fred Macey Company were acquired, either by purchase or issue, — some being acquired in the name of Fred Macey, some in the name of Frank, and others in the name of the three jointly. The purchase price thereof was paid by the copartnership. The business had grown, prior to 1901, to considerable proportions, requiring additional capital, and it was then agreed to promote and organize a partnership association, limited, to take over and conduct said business. The capital stock was to be $1,000,000 — $600,000 common and $400,000 preferred stock, to bear 6 per cent, interest. It was the intention of the promoters to obtain subscribers for $200,000 of the preferred stock when the company was organized, and to issue more preferred stock as additional capital might be required. The entire amount of common stock was’to be paid for by transferring to the company all of their assets, including machinery,' office equipment, mailing lists, contracts for the manufacture of goods, and the patents and copyrights-under which they had been manufactured and sold, and the good will of the Fred Macey Company. All debts of the partnership were to be paid by that partnership so that the new company would begin business with no debts. The tangible property of the partnership amounted to about $25,000 in value, of which $14,000 was the value of the machinery, tools, and fixtures, and $11,000 the value of the office fixtures and equipment; the balance of the $600,000 was made up by the transfer of the patents, trade-marks, copyrights, good will, mailing lists, catalogues, and advertising investment.
The promotion of said organization was begun in the latter part of 1900, was completed and the articles of association executed April 19, 1901, and filed under date of May 1, 1901. During that period, through the efforts of Fred and Frank Macey and Charles W. Matheson, $200,000 of the preferred stock was sold. It was the understanding that, in obtaining subscriptions of preferred stock, the promoters would offer and give, as an inducement for such subscriptions, a half share of common stock with every share of preferred stock. Such subscribers were shown a prospectus signed by Fred and Frank Macey and Mr. Matheson. The subscribers and purchasers of stock relied upon the representations made in that prospectus in making their purchases and subscriptions. Said subscribers would not have purchased said stock if they had known of the secret agreement between Fred and Frank Macey and Charles W. Matheson, made April 18, 1901. That agreement is as follows:
“Whereas, the Fred Macey Co., copartnership, composed of Fred Macey and Charles W. Matheson,. of the city of Grand Rapids, Mich., are desirous of placing their present business in the form of a limited copartnership association, organized under the laws of the State of Michigan, and wherein interest in such copartnership association shall be represented by preferred and common stock interests, and in accordance with a certain prospectus, which is hereto attached and which is a part of this agreement.
“ And whereas, said Fred Macey Co. are desirous of acquiring the interests of Frank Macey in copartnership agreement known as Macey Bros. & Matheson, and dated May 18, 1898, and also acquiring certain patents and improvements on sectional bookcases, which have not heretofore been covered by any regular agreement.
“And whereas, the Fred Macey Company is desirous of forming a blanket contract agreement with Frank Macey that will be equitable and be a fair exchange in consideration for the cancellation of his interests in the copartnership agreement known as Macey Bros. & Matheson, and also for his interests in his patents on sectional bookcases:
“ Now, therefore, it is hereby contracted and agreed by and between said Fred Macey and Charles W. Matheson, known as the Fred Macey Co., parties of the first part, and said Frank Macey, party of the second part, for good and valuable considerations by each to the other in hand paid as follows, to wit: ■
“1. Said first parties, their heirs, administrators or assigns agree to pay said second party, his heirs, administrators, or assigns, a royalty or consideration of 2 per cent, of the actual net selling price of all filing cabinets, filing devices, whether contained in sectional office furniture or not (except desks), and sectional bookcases, and also supplies for the same, whether embraced by patents or not, sold by said first parties, and such royalty or consideration shall not be less than $3,000 per year, and shall continue for a period of 15 years from May 1,1901. And such sums accruing as said royalty or consideration shall be payable semi-annually at the regular preferred stock dividend period of the proposed Fred Macey Co., Ltd., but said royalty or consideration shall not be paid until after the dividends both due and accrued on all outstanding preferred stock have first been paid in full- from the profits, and shall not be paid unless the company has earned sufficient profit to pay dividends both due and .accrued on outstanding preferred stock. Any profits re maining after dividends due and accrued have been paid on preferred stock, shall be applied first to the payment of said royalty or consideration both due and accrued, and shall be paid before any profits are distributed on outstanding common stock.
“2. The said first parties agree to use all reasonable diligence in marketing the goods covered by this agreement,' and to pay all patent expenses relative thereto or relative to any invention of the said second party involved or embraced in this agreement, and said first party shall have the exclusive right to use all improvements made by said second party, whether patented or not.
“ 3. The said second party agrees to transfer and assign unto said first parties, their heirs, administrators or assigns, all his rights, titles, and interest in the following patents, and subject to the conditions of this contract: [Here follow a list of 20 patents, 19 of which were issued, and one applied for.]
“4. Said second party agrees to assign said first parties or to any party named by them any patents he may secure upon any improvements or that may be secured under his name on any improvements that have been or may be developed by him during the term of his employment with the said first parties, subject to the conditions of this contract, the same to be without pecuniary expense to said second party.
“5. The said second party hereby agrees to do any acts •necessary to procure patents, both United States and foreign, on behalf of said first parties, for the benefit of said first parties, the same to be without pecuniary expense to said second party, and to assign to first parties or to their heirs, administrators, or assigns, all such patents while in the employ of first parties, their heirs, administrators, or assigns.
“6. The said first parties agree to keep accurate and complete books of account of all business transacted by them, which shall be open to inspection by said second party at any time, and will make semi-annual reports of all sales, under-oath if requested.
“ It is agreed that this agreement shall take effect May 1, 1901, and that the interest of Frank Macey in the sales of articles covered by this agreement prior to May 1,1901, shall be adjusted on a basis of payment to him of 2 per cent, on all sales of sectional bookcases up to and including April 30, 19Q1, and that the remainder of the articles sold shall be settled as per special copartnership agreement known as Macey Bros. & Matheson, dated May 18, 1898.
“ This contract supersedes all prior agreements between the parties hereto, both verbal and written, and is in lieu thereof, except in event of failure of the Fred Macey Co., Limited, to be duly organized as per the attached prospectus, in which case this contract shall be void and of no effect, and all patents and all rights of interest of Frank Macey contained in agreement of Macey Bros. & Matheson .shall be returned to him the same as if this agreement had never been written.”
The prospectus stated the business of the company for five years, showing a very large increase. It stated the proposition to form a limited copartnership association in order to take care of the excess of business, stating the stock, etc., as hereinbefore stated. It set forth in glowing terms the prospective business, the prospective profit, and the promise to give a half share of common stock for every share of preferred stock. It contained the following:
“Preferred stock shares are for $100 each, and are entitled to 6 per cent, cumulative annual dividends, dividends payable semi-annually, February 1st, and August 1st.
“ The preferred stock has a prior lien over the common stock on the entire net assets of the company, and also on the profits.
“ Common stock is entitled to all dividends remaining after 6 per cent, cumulative annual dividends has been paid the preferred stock, and takes second place to the preferred stock in both dividends, and participation in the net assets of the company.
“ Subscriptions for the $200,000 of preferred stock offered will be received on or before April 15, 1901, and 10 per cent, of the amount subscribed shall be payable May 1, 1901, and shall be subject to a 10 per cent, payment monthly thereafter until fully paid.
“ All subscribers to stock shall be entitled to vote so long as their assessments on subscriptions are fully paid, and shall also be entitled to receive full dividends on their entire stock from the date of their first payment, provided, however, that all assessments made from .time to time by the board of directors shall be paid; but in no case shall the directors ask to exceed 10 per cent, per month on such subscriptions.
“ All subscriptions shall be made payable to the Fred Macey Company, Limited; but no subscription shall be binding unless $200,000 of preferred stock shall be subscribed.”
After the requisite subscriptions had been obtained for the $200,000 preferred stock, and on April 19, 1901, Fred Macey and Frank, and Mr. Matheson executed the articles of association stating the amount of capital stock held by each — Fred Macey, $200,000 preferred, $450,000 common; Charles W. Matheson, $100,000 preferred, $150,000 common; Frank Macey, $100,000 preferred, no common. It annexed a schedule of property mentioned in the articles. The schedule among its assets mentioned “Entire interest in all copyrights, trade-marks, and applications for copyrights and trade-marks covering the line of merchandise dealt in by the association.” The officers selected were three managers — Fred Macey, Charles W. Matheson, and Frank Macey. Chairman, Fred Macey; secretary, Charles W. Matheson; treasurer, Frank Macey.
At the first general meeting of the shareholders, July 25, 1901, a board of five managers was selected, giving their names; that at that meeting a report was made by the chairman, Fred Macey, in the presence of the defendant, Frank, stating the resources and liabilities of the company, among which were the following:
“Patents, trade-marks, copyrights, good will, contracts, organization, and established trade of mail order business of the Fred Macey Company, $465,632.72.
Since the organization $100,000 of the reserved preferred stock has been subscribed, paid for, and issued, and is now held by a large number of stockholders who were ignorant of the contract which is the subject of this litigation. Nearly all of the $600,000 of the common stock has been sold by Fred Macey and Matheson, and such purchasers bought without any knowledge or notice of that contract. Said Frank had general knowledge that Fred Macey and Mr. Matheson were selling to persons purchasing in good faith with no knowledge or notice of the existence of this contract. About one year after its organization complainant first became aware of the existence of this contract, except in so far as it might be chargeable with notice because the contract was within the knowledge of the individuals originally forming the company, but charges that because of the relations of said three parties to it, notice to these individuals was not notice to the complainant. Said contract was unknown to nearly if not all of its subscribers except the three named. After said contract became known to complainant the defendant claimed, and has continued to claim, that it is obliged to pay said royalty of 2 per cent, specified therein. The articles upon which this royalty is to be paid have constituted more than one-half of its business. The royalties amounted to several thousand dollars each year. In consequence of the knowledge on the part of defendant of the sale and purchase of this stock, under the circumstances, he is estopped in equity from asserting said contract as a liability or debt against complainant. Defendant has been, from the formation of the complainant, and still is, its treasurer, having general charge and custody of its funds. Defendant was formerly in the employ of the complainant on a salary, but is not now actively connected with the business. During the first two years of its existence he drew from its funds the sum of $10,700, claiming that it was due him under this contract, and has refused and still does refuse to account for said moneys, and to return or replace it. Soon after the existence of this contract became known to the other members of the board of managers, and defendant claimed payments under it,— they objected, and various discussions and negotiations were had between the managers and the defendant to prevent litigation and to get complainant relieved from liability under said contract. Such discussions and negotiations continued for nearly two years, but did not result in a final settlement. Defendant claims that payments under such contract are constantly acciimulat ing as a liability against the complainant. Complainant is in default on its preferred stock. The length of time during which it may be so in default is uncertain, depending upon the success of the business. In consequence, no action for such payments can now be maintained, but defendant threatens to bring suit therefor. The relations between complainant’s stockholders and defendant are fiduciary, and it would be unjust and inequitable, therefore, to permit him to enforce the said contract, and as between complainant and defendant there is no consideration for any liability under said contract; said claims and pretentions of the defendant—
“ Constitute a serious and continuing cloud upon and injury to your orator’s property and business; that the same, if it in fact exists, will continue to accumulate from year to year, without any power on the part of the defendant, Frank Macey, to bring an action at law therefor, unless dividends on the preferred stock are earned and paid; that it may thus, accumulate to a very large amount, and to an amount sufficient to seriously injure or to destroy the financial standing and credit of your orator, without any opportunity to determine at law the validity and existence of the same; that the alleged existence of such claim and possible accumulation thereof constitute a cloud against that portion of the assets of your orator represented by the preferred stock, both because its existence and satisfaction may exhaust profits and assets required in future years for the payment of cumulative dividends on the preferred stock, and because it may be claimed to have priority over the preferred stock as to the assets in casé of liquidation, and because, as aforesaid, such claim and the accumulation thereof injure and may seriously impair your orator’s ability to do business; and that the same constitutes a cloud upon and injury to that portion of your orator’s assets represented by the common stock because it is alleged to be prior thereto in all respects for the full term of such contract.”
The prayer of the bill is that the defendant may answer ■under oath that said contract may be adjudged to constitute a cloud upon the complainant’s business and assets, that it be canceled and vacated as to complainant; that it be decreed that said contract created no liability against complainant; that the defendant be enjoined from asserting that said contract creates any claim against complainant; that defendant account for moneys withdrawn under it, and be decreed to return, refund, and pay them over to complainant. To this bill a demurrer was interposed, denying that complainant is entitled to relief for the following reasons:
“ 1. That the complainant has not shown that it is a corporation, and entitled to bring the suit in the name of the association.
“2. That the said bill doth not contain any matter of equity whereon this court can ground any decree or give to the complainant any relief against this defendant.
“3. That the complainant had a plain, adequate, and complete remedy at law.
“ 4. That the claims of the defendant against the complainant, under the contract of date April 18, 1901, do not constitute a cloud upon the complainant’s property and business.
“ 5. That equitable relief upon an allegation of a cloud upon title is limited to the title to real estate, and does not extend to personal property and business.
“ 6. That the complainant has not rescinded, nor offered to rescind the contract of date April 18, 1901.
“7. That the complainant has retained all the benefits of the contract of date April 18, 1901, and thereby has affirmed its validity.
“8. That the complainant, by its bill, has not made any title to the relief thereby prayed in respect to the contract of date April 18, 1901.
“ 9. That the complainant has shown by its bill that it has been guilty of laches in that it has delayed for the space of two years and over, after full knowledge of the contract of date April 18, 1901.”
Complainant was afterwards permitted to amend its bill by inserting four new paragraphs, alleging in substance:
That the full and complete equitable title to the patents, rights to improvements, and inventions specified in paragraph 3 of the contract, was vested in the complainant by a transfer from Fred Macey and Charles W. Mátheson, and that the assignment of the same by the defend ant was for the purpose of conveying the naked legal title thereto.
That the patents, inventions, and rights .were substantially of no value. That their use was long ago abandoned with some technical but no substantial exceptions. That they are of no use to complainant at the present time, and that the money withdrawn by defendant for payments under the contract was many times in actual value of said patents.
That as Fred Macey and Charles W. Matheson transferred these patents and rights to the association, which has paid them for the same by the issue of its common stock, the complainant is under no legal or equitable obligations to return the patents to the defendant, but is willing, and hereby offers, if the court shall think it equitable, to return to the defendant “all and every right, title, or interest in any patent or in any invention conveyed by him directly or individually to the complainant.”
That it did not know of the “withdrawals or payments” until the discovery of the contract,— and then protested and refused to permit it further to be carried out. But the allegations of lack of knowledge are intended to allege lack of knowledge by any officer or manager of this complainant except the three individuals who were personally interested therein. But the three individuals were three of the five managers of the company.
The original demurrer was ordered to stand as a demurrer to the amended bill.
Taggart, Denison & Wilson, for complainant.
Grane & Norris, for defendant.

Opinion:
Grant, J.
(after stating the facts). The ground of demurrer most strenuously urged is that complainant has an adequate remedy at law which bars the jurisdiction of the chancery court. It is claimed that to maintain this suit in equity deprives the defendant of his constitutional right to a trial by a jury. The learned counsel for the defendant say that (l) complainant, if sued at law by the defendant, can plead the fraud and invalidity of the contract as a defense, and (2) that he may now bring a suit at law to recover the amount appropriated by the de fendant from the complainant. They have filed an able and exhaustive brief citing many authorities to sustain their contention.
Courts of law are not clothed with the sole power to try issues of fact. The jurisdiction of the court of chancery in this State to try cases and grant relief from the consequences of fraud is as old as the jurisprudence of the State. In the early case of Wheeler v. Clinton Canal Bank, Har. Ch. (Mich.) 449, the court, after holding that the complainant's remedy at law was difficult and doubtful, said: " Courts of chancery have also concurrent jurisdiction in cases of fraud." See, also, Wales v. Newbould, 9 Mich. 45. The same principle runs through, many cases from that time to the late case of Edwards v. Investment Co., 132 Mich. 1, in which many authorities are cited.
Counsel recognize that this case is ruled by John Hancock Mut. Life-Ins. Co. v. Dick, 114 Mich. 337 (43 L. R. A. 566), and Mactavish v. Kent Circuit Judge, 122 Mich. 242, and therefore argue strenuously for the overruling of those cases. They insist that they are overruled by the later case of Northwestern Mut. Life-Ins. Co. v. Amos, 136 Mich. 210, and that the writer of that opinion failed to distinguish it from those cases. We may have failed in distinguishing them, but we were evidently of the opinion that we did distinguish them. At all events it is manifest that there was no intention to overrule the former cases, but, on the other hand, to approve them. Our attention is called to no case in which we have cast any doubt upon the correctness of those decisions.
The concurrent jurisdiction of courts of equity and of law where relief from fraud is asked, is too firmly established in the jurisprudence of this State to be now overruled. We deem it unnecessary to again travel over the ground and cite the many authorities upon the subject. We may, however, state that Barrows v. Doty, Har. Ch. (Mich.) 1, and Teft v. Stewart, 31 Mich. 367, and sim ilar cases cited by defendant, have no application to this case.
In Barrows v. Doty complainant sought relief in chancery from a judgment in a suit at law on two promissory notes, where he might have set up the same facts as a defense upon which he claimed relief in his equity suit.
In Teft v. Stewart a decree for money alone was asked. Complainant asked no relief as to the instruments upon which the transaction was based.
Courts of chancery, not only in this jurisdiction but in others, are clothed with power to grant relief in the cancellation of instruments which, until their invalidity is determined, may annoy and harass one's business and impair his credit. The language of New York, etc., R. Co. v. Schuyler, 17 N. Y. 592, is so applicable here that we quote it:
"There is no head of equity jurisdiction more firmly established than that which embraces the cancellation of instruments which are capable of a vexatious use after the means of defense at law may become impaired or lost, or when they are calculated to throw a cloud upon the title or' interest of the party - seeking relief. Whatever their character, if they are capable of being used as a means of vexation and annoyance, if they throw a cloud upon the title or disturb the tranquil enjoyment of property, then it is against conscience and equity that they should be kept outstanding, and they ought to be canceled. These principles of general jurisprudence are believed to be decisive in favor of the right of this corporation to demand the cancellation of the false stock and to maintain a suit in equity for that purpose."
The bill alleges the existence of an instrument, intended by the parties who made it to bind the corporation. Silence for a long time on the part of the corporation might endanger its rights.
It is undoubtedly true that complainant might bring a suit to recover the money which it alleges the defendant unlawfully took from its treasury. If in that suit the binding force of this contract upon the complainant were decided, the judgment would undoubtedly determine the rights of the parties for all time; but it is apparent, under the facts alleged in the bill, that that case might be disposed of without deciding the main question here sought to be litigated. The defendant might concede that the conditions had not, in fact, arisen which entitled him to the royalties, and therefore might repay the amount taken before trial. Or the court might dispose of the case on other grounds than the validity of the contract. However this may be, the concurrent remedy in equity lies. The bill alleges in substance that the three promoters of the complainant corporation, nominally subscribing for the entire stock, made a secret and burdensome contract which is claimed to be binding upon the corporation; that other officers and stockholders of the corporation knew nothing about it, but believed that the corporation was buying complete title to these patents, and that they took the entire property free from any burdens. The main relief sought is not a decree for money, but relief from a continuing contract, claimed by defendant to be binding upon the complainant though it was not a party signatory to it. Under the allegations of the bill it will, unless declared inoperative as to the complainant, injure its business and impair its credit.
These promoters occupied a fiduciary relation to the complainant and the other stockholders. 2 Cook on Corporations (5th Ed.), § 651; Warren v. Holbrook, 95 Mich. 185. They were agents of the corporation, and will not be permitted to take a secret advantage of the other stockholders. Dickerman v. Trust Co., 176 U. S. 181.
The knowledge of this contract by the three promoters and subscribers to the capital stock did not bind the purchasers of the stock who had no knowledge thereof. The stock evidently was not sold as their individual property, but as the stock of the corporation, the proceeds of which were to be paid into the treasury as a working capital. The case is one with which a court of equity can most effectually and may most appropriately deal, and in one suit settle and determine all the questions affecting the rights of the parties.
We think it immaterial that the complainant has alleged this contract to be a cloud upon its business. We need not therefore discuss the question whether a bill will lie merely to remove a cloud upon one's business. The bill does allege that the transaction was a fraud upon complainant and its stockholders who purchased without any knowledge of the transaction — and the facts upon which this fraud is based are stated. These allegations are sufficient to call for an answer and proofs; and the allegation that it is a cloud upon its business may be treated as surplusage.
Complainant's cause of action is not under the bill barred by laches. It protested promptly after discovering the fraud, and entered into negotiations for a peaceable settlement, which failed. Under the bill there has been no such failure to assert rights or such lapse of time as will justify the court upon demurrer in holding the complainant guilty of laches. A similar question was raised in Compo v. Jackson Iron Co., 49 Mich. 39, where more than 35 years had elapsed since the making of the agreement which was the basis of the suit. The court held that " lapse'of time alone will not necessarily operate as a disseisin in law or in equity, and the bill does not indicate any considerable delay since the company gave up negotiating, and denied her rights."
Fraud may be consummated by suppression of facts and of the truth, as well as by open false assertions. Fraudulent concealment is a matter of equitable jurisdiction as well as fraudulent assertion. The point, therefore, that no fraudulent representations were made by the defendant to the complainant or its stockholders, is not well taken.
We deem it unnecessary to discuss the other questions presented by the demurrer. The decision of most of the questions may be controlled or affected by the proofs.
The decree is affirmed, with costs, and the case remanded for leave to answer in accordance with the rules, and practice of the court.
Blair, Montgomery, and Hooker, JJ., concurred with Grant, J.