Court Opinion

ID: 5436917
Source: CourtListenerOpinion
Date Created: 2022-01-08 17:55:44.644228+00
Date Added: 2024-06-11T08:31:52.381536
License: Public Domain

By the Court, Sawyer, C. J,
on petition for rehearing :
Defendant, Zellerbach, is the only one interested in the property in dispute. In rendering the decision in this case, we proceeded upon the idea that he did not appear in the record to have any knowledge of the purpose of the Miner’s Ditch Company in its conveyance to the Eureka Lake Water Company, to distribute the stock of the latter company received as the consideration of the conveyance, to the stockholders of the former, which is the fact in the case, if any there is, that renders the transaction between those corporations illegal. Our attention is now called to a fact not before brought to our notice by counsel, and overlooked when the opinion was written, that in the answer of Zellerbach stating the loan of money, through which the title was ultimately acquired by him, it is averred that the Eureka Lake Water Company “borrowed of this defendant and the defendant Powers (then partners in business under the firm of Marks & Co.) the sum,” etc. It also appears in the findings that one George C. Powers signed, as Trustee, the conveyance of the Miners’ Ditch Company to the Eureka Lake Water Company, and it is claimed that, as this is the same name as that of defendant Powers, it must be presumed that the Powers who signed the deed and who advanced the money as the partner of Zellerbach is the same person; that notice to one of the partners is notice to all, and that it therefore appears in the record that Zellerbach did have notice. Conceding this to be so, for the purposes of the decision, it becomes necessary to determine the point whether, upon that hypothesis, the Miner’s Ditch Company stands in a position to avail itself of the illegality of its contract to distribute its capital stock to the stockholders of the corporation, by conveying its property and distributing the stock of another corporation received in payment, in the mode and under the circumstances stated in our former opinion, to its stockholders. And we are of the opinion that it does not. The act of sale and conveyance was not wholly beyond the power
*606of the corporation to perform. It had full power to sell and convey its property. It is provided that it shall not be lawful for the Trustees to divide or withdraw any portion of the capital stock. The corporation having power to sell and convey its property, but it being made unlawful for the Trustees to divide the capital stock, the corporation stood upon the same footing in respect to such conveyance as any natural person with reference to a contract, which he has the power to make, but which is made unlawful upon some principle of public policy adopted by the law making power. In this case the contract was wholly executed. There was nothing of an executory character left on either side. The conveyance was fully made by the Miner’s Ditch Company to the Eureka Lake "Water Company, and the grantee put completely in possession, and remained for years in such possession with the knowledge and acquiescence of both the corporation and its stockholders. While so in possession, it executed its mortgage to Zellerbach and Powers, for the large sums of money advanced bjr them, and put them in possession, and this mortgage was subsequently foreclosed, and under the judgment of the Court the property was sold and purchased in by them, and the defendant, having now acquired the entire title, is in possession. Large portions of the money advanced went in satisfaction of debts due from the Miner’s Ditch Company. At all events, the defendant was in possession under his conveyance, and the contracts were all fully executed on both sides, each having received and enjoyed the consideration. There was nothing of an executory character left. It is not sought by either party in this action to recover on any branch of an executory contract— the usual form in which questions in such cases are presented. The question is which party, in fact, has the title as the case now stands, and, as between those parties, it is clearly in the defendant. Wo know of no instance in which the grantor has been able to recover at law when the contract has been fully executed, as in this case. A fortiori, he would not be entitled to relief in equity. But in the worst view *607that can be taken for the defendant the maxim applied in suits on illegal executory contracts, in pari delicto potior esi conditio p>ossideniis, or defendentis, would apply, and justify an affirmance of the judgment. But the defendant is in a better position than if sued, on an executory contract. (See Schermerborn v. Salmon, 14 N. Y. 141.) The contract is fully executed on both sides, and the transaction closed between them. The case of Inhabitants of Worcester v. Eaton, 11 Mass. 368, is precisely in point. The only difference is, in that case the grantor in the illegal deed is a natural person, and here it is a corporation. But with reference to the inherent power of the two persons to make a conveyance of the property convoyed, the parties stand on the same footing. The vice in both conveyances, if any there be, is that the. contract is illegal for similar reasons. The principle is, therefore, the same. The consideration of the conveyance in the case cited was a composition of a felony. Yet the contract being fully executed, it was held to pass the title, and could not be avoided, so as to authorize a recovery by the grantor, or, which is the same thing, by the subsequent grantee of the grantor, and this, when an entry had been made for the very purpose of avoiding the deed. The case is ill point, and we know of none to the contrary; besides, we believe it to be sound.
The plaintiff, however, claims the benefit of the maxim, because the defendant sets up the facts and prays affirmative relief. But we think the defendant, and not the plaintiff) is the party entitled to the benefit in this case. The defendant is in possession, and has been in possession for many years, with the acquiescence both of plaintiff and the stockholders, who have received and long enjoyed the consideration for the conveyance. The plaintiff brings the action to recover possession of the property conveyed. The defendants, to defeat a recovery, although it is unnecessary, set up the facts in their answer, as a defense, and the Court finds the facts in favor of the defendants, and holds upon the facts, as stated and found, that defendant has a title both in law and equity, *608and so adjudges. And this is undoubtedly so. The facts constitute a legal, as well as an equitable defense, and there is no necessity whatever for any equitable or affirmative relief. It was only necessary, upon the facts alleged and found, to enter a judgment that plaintiff take nothing by his action. This is not the exact form of the judgment, but it is substantially that, and is no more extensive in its operation, as to the matters adjudged, than it would be in that form. Technically, it might just as well be in that form, and as a plea of res adjudicata, in another suit, it would cover the same issues. In effect, the relief is no more as it is than the ordinary judgment against plaintiff in an action for possession. In form, however, it adjudges the title to be in Zellerbach, and that, as between the parties, the plaintiff has no title. That is to say, the judgment simply adjudges what the present state of the title under the executed agreement, as between the parties, really is. It goes no further. It grants no active relief. It gives nothing on any executory promise. It does not change the position of the parties. It only determines what that position is, and leaves them in it. What before existed in fact and in law is simply adjudged to exist. It is now res adjudicata, and not open to further dispute. And this the Court would have determined as the basis of the judgment, although it would not have so expressed it in terms in the judgment, had the judgment been that the plaintiff take nothing by his action. But under the issues upon which such a judgment would have been entered, and the judgment in pursuance thereof, the same matters would have been res adjudicata, as under the present form of the judgment. In substance, then, the parties are left in the same condition in which the suit found them, as to their rights. We will look to the substance of the thing done, and not to the form, especially in a ease like this, where it is clearly manifest that an outrageous injustice would be perpetrated upon the defendant, as between the parties to this action, if, under ordinary circumstances, they could be compelled to surrender this property to the plaintiff without *609a return of tlie vast sums of money they have advanced to obtain it, and in a case, also, where it is quite apparent that none of the parties to the original transaction in fact mediated any wrong. We have no idea that any of the parties at the time of the original conveyance supposed for a moment that they were performing any illegal act.
Rehearing denied.
Mr. Justice Sanderson did not express an opinion on the question of granting a rehearing.