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was sane, and that she subsequently fully understood what she had done. A deed of one insane, if not previously adjudicated to be such or placed under guardianship, is merely voidable and can subsequently be ratified by the grantor when mentally normal, as in case of a minor upon coming of age. Moran v. Moran, 106 Mich. 8, 58 Am. St. Rep. 462, 63 N. W. 989; Wolcott v. Connecticut General L. Ins. Co. 137 Mich. 309, 100 N. W. 569; De Vries v. Crofoot, 148 Mich. 183, 111 N. W. 775; Allis v. Billings, 6 Met. 415, 39 Am. Dec. 744.
Mrs. Abts, being the owner in fee of this land, conveyed it by a regular warranty deed, prima facie valid, and received from the grantee a consideration therefor which she retained. Conceding this deed to be voidable, it nevertheless carried the fee to the grantee, and remained in force as a valid instrument of defeasance until such time, if ever, as it would be set aside in an appropriate judicial proceeding, at the option and instance of the party entitled to institute such proceeding. In the meantime, the original grantor held no title to the property, and the grantee in whom the fee rested
might convey it to a bona fide purchaser, who would take a title to the estate which could not be attacked.
At the time Mrs. Abts gave a quitclaim deed of the land in question to defendant, she had already parted with all legal title to it. All that remained to her, under any theory, was the personal right to sue in equity to have her conveyance set aside for fraud. Her deed to him
not only conveyed nothing, but contained no warranty which might eventually carry the title to him in case her deed to complainant was later set aside, which would reinstate the fee in her as it was before the voidable deed was given. Her quitclaim does not purport to, and cannot, operate to as
the ground of fraud. Crocker v. Bellangee, 6 Wis. 645, 70 Am. Dec. 489; Graham v. La Crosse & M. R. Co. 102 U. S. 148, 26 L. ed. 106.
It was the theory of the trial court, and is urged here, that equity, having once acquired jurisdiction in the controversy, can and should retain it to give full relief and make final disposition of all matters in- / volved, and that relief should be denied complainant under the maxim that "he who comes into equity must come with clean hands." The application of this maxim is limited to the defendant in the litigation, and there can be no claim that complainant came with hands soiled in a fraudulent transaction with him. The act or transaction concerning which complainant Cloud on titleasks relief is the bill to quiettaking of a deed by defendant from Mrs. Abts, and recording it. Complainant had nothing to do with that transaction, and was not guilty of any wrongful conduct in that connection. In obtaining this deed from Mrs. Abts, who was then sole owner of the property, complainant did not perpetrate any fraud upon defendant or commit any inequity against him. The wrong must have been done to defendant himself, and not to some third party. The power in equity to grant complete Equity-full relief when juris- relief-who diction is once taken given.
cannot be extended to persons not parties to the suit, and whose rights a party to the suit cannot take by assignment.
Defendant's entire defense is necessarily an affirmative attack upon complainant's title, under the allegations in his cross bill, of a fraud practised upon Mrs. Abts, nót himself, which manifestly he could only assert as an assignee, and upon which, not being assignable, he could not be heard. As he was not entitled to file his cross bill on the ground of a fraud practised upon
(190 Mich. 478, 157 N. W. 282.)
her, the court not only had no jurisdiction to grant him affirmative relief on his cross bill, but all defense fell with it, for no other grounds of defense are shown.
It follows that in this case, as between these litigants, complainant is entitled to the relief asked, for the reason that defendant acquired no title to the land by his conveyance, and whatever right Mrs. Abts had to the cancelation of her deed to complainant on the ground of fraud and undue advantage was a personal right, which she could not assign.
The record discloses that in connection with an order made by the trial court granting a "new trial," or further opportunity to take testimony upon a certain matter before final disposition of the case, it was stipulated that the Statute of Limitations would not be pleaded in any suit which might be commenced by Mrs. Abts to recover title to this land. Nothing in this opinion is intended or to be construed as prejudging, abridging, or to the prejudice of her rights in that respect.
The decree of the trial court is reversed, with costs, and a decree will be entered in this court in favor of complainant, as herein indicated. Stone, Ch. J., Kuhn, Ostrander, Bird, Moore, Brooke, and Person, JJ., concur.
In the reported case (COCHRAN TIMBER Co. v. FISHER, ante, 9) it is held that the holder of a conveyance, taken with notice of a prior conveyance to a third person, cannot defeat the rights of the third person by showing that the latter procured his conveyance by fraud on the common grantor. The maxim of equity, "He who comes into equity must come with clean hands," is available, the court holds, only to a person who has been injured by the inequitable conduct of the complainant. The cases discussing and applying the maxim in question are collated in the note following LANGLEY V. DEVLIN, post, 44.
C. A. CROSS, Appt.,
FARMERS ELEVATOR COMPANY of Dawson, North Dakota, et al.,
North Dakota Supreme Court―June 7, 1915.
(31 N. D. 116, 153 N. W. 279.)
Corporation-violation Corporation violation of subscription contract redress clean hands. 1. He who comes into a court of equity must come with clean hands, and a promoter of a corporation who has prepared and caused to be circulated a stock subscription form or contract by which some, at least, of the subscribers to the capital stock of a corporation, are made to agree not to purchase more than ten shares of such stock, and who in violation of such form or agreement has himself, before the capital stock of said corporation has been subscribed in full, obtained control of said corporation by obtaining an issue of stock to "dummies," and which stock he has afterwards had assigned to him, cannot come into a court of equity and complain because the directors of such corporation have taken such control from him by the sale of the balance of the capital stock of said corHeadnotes by BRUCE, J.
poration, even though such sale was for the principal purpose of depriving him of such control.
[See note on this question beginning on page 44.]
excessive capitalization plaint.
2. The policy of the Incorporation Laws of the state of North Dakota is that the capital stock of a corporation shall be fully subscribed as soon as possible, and when such capital stock is sold at par, a stockholder has no ground for complaint, even though the additional money may not be absolutely necessary to the existence of the corporation.
[See 7 R. C. L. 202–205.]
agreement as to holdings of stock. 3. The subscribers to the stock of a corporation may enter into an agreement under the terms of which neither themselves nor subsequent subscribers to the stock will be entitled to and receive more than the stipulated number of shares, and this agreement will be binding on the parties to it, though not on the corporation.
APPEAL by plaintiff from a judgment of the District Court for Kidder County (Nuessle, J.) in favor of defendants in an action brought to have certain shares of the capital stock of defendant corporation canceled and set aside, and to enjoin the directors from selling any more stock, fixing salaries of officers, and declaring dividends.
Statement by Bruce, J.:
This is an action which is brought by the plaintiff, C. A. Cross, for the purpose of obtaining the control of the defendant elevator company by having canceled and set aside seventy shares of stock which were issued after he had obtained the control of such corporation by the purchase of a majority of its stock before such later issue, and to restrain the board of directors and the board of directors elect from selling any more stock, fixing the salaries of the officers and employees of the corporation, and declaring any dividends. The complaint also asks for an accounting from said. directors.
The trial court dismissed the action on the ground that the plaintiff, C. A. Cross, did not come into court with clean hands, and was not entitled to any relief, but should be left in the position in which the court found him. The plaintiff has appealed, and a trial de novo is demanded.
The findings of fact by the trial court, which, with a few modifications which will appear later in this opinion, we concur in on this trial de novo, were as follows: "That the Farmers Elevator Company of Dawson, North Dakota, is a corporation
organized in August, 1909, and existing under and by virtue of the laws of the state of North Dakota, with its principal place of business at Dawson, Kidder county, North Dakota; that the purpose and object of said corporation was to build an elevator, buy and sell grain and feed, and to build and operate a feed mill, and afford a better market to the farmers residing in the vicinity of Dawson for the grain raised by them; that, pursuant to such purpose, and to enlist the interest and secure the co-operation of a large number of the residents of that community, the subscribers of stock of said company, at the time of their subscription thereto, entered into and subscribed an agreement in writing which is in words and figures following: 'We, the undersigned, do hereby agree to purchase the number of shares of stock in the Farmers Elevator Company, Dawson, North Dakota, which appears opposite our signatures, and hereby contract with the said company to purchase the stock upon demand. Said stock to be paid for at the rate of fifty ($50) dollars a share. It is further agreed that no stockholder be allowed to own or vote more than ten shares of stock in his own name, and that no stock
(31 N. D. 116, 153 N. W. 279.)
shall be negotiable or sold to any
no more could be sold until the spring of 1913, at which time seventy (70) shares of the unissued capital stock of said corporation were sold at par and regularly issued to qualified purchasers, to wit:
"That forty (40) of such shares were sold before June 7, 1913, annual meeting of the stockholders, at which directors were elected, and thirty of such shares were sold after such meeting; that each of the purchasers of said stock paid to the corporation par value therefor, and they are now, and at all times since the purchase of said stock have been, bona fide stockholders of said corporation, and owners of such stock, and entitled to all the rights and benefits of stockholders in corporations of the state of North Dakota; that said stock was issued and sold according to the statutes of the state of North Dakota. (4) That at all times since its organization said corporation, in order to carry on its business, has had to borrow greater or less sums of money, and to pay interest thereon; that at times it has been necessary to have at its command large sums of money, and that the additional capital so secured by said sale of stock could be used to great advantage by the corporation, though not absolutely necessary in order to carry out the purposes of its organization and conduct the business as specified in its articles of incorporation. (5) That after its incorporation in the year 1909, the corporation built a grain elevator on the Northern Pacific right of way at Dawson, North Dakota, at an expense of fifty seven hundred twenty-five ($5,725) dollars; that at the time said elevator
was completed the company did not have enough money to pay for same, and was in debt, and was dependent upon borrowed capital to conduct its business; that thereafter plans and specifications were prepared for building a feed mill, and estimates therefor received, but on account of lack of money such feed mill has not been built; that the money arising from the sale of stock sold and issued in 1913 is the property of the corporation, and is for the joint benefit of all of the stockholders of such corporation. (6) That said elevator building was erected in the fall of 1909, and opened for business on or about October 1st of that year, and has ever since been and now is used and employed by said corporation in its business of buying and selling grain. That said company has, ever since the opening of said elevator, conducted an ordinary elevator business for profit, by purchasing and selling grain in the open market, and has transacted a large volume of business, and such business has been profitable to said corporation and the stockholders thereof, it having been shown to the court that for the first year's business, embracing the period from the opening of said elevator in the fall of 1909 to June 30, 1910, adopted by said company as the end of its first fiscal year, a dividend of 22 per cent was earned, and such dividend was the net profit from the conduct of said business for such period, after paying all expenses, charges, and obligations in and about the conduct of said business. And it further appearing to the court that during the next fiscal year, ending on June 30th, 1911, which was a period of poor crops and small business in that locality, the said defendant corporation paid all its obligations, charges, and expenses in full, and, after surnming up its business for said period, had a small deficit, to wit, about $27; and it having been further shown that for the next fiscal year, ending June 30th, 1912, the said corporation earned and paid to its stockholders a net dividend on the
total capital stock invested, of 10 per cent, after paying all its debts, charges, and expenses of conducting said business; and it further appearing to the court that for the next fiscal year, ending June 30, 1913, a large net profit was earned by said corporation after deducting all expenses, charges, debts, and obligations of said business, together with a sum equal to 15 per cent of the cost of the elevator, as deterioration of the said elevator building; and that there is now a large surplus available for dividends to be paid stockholders, amounting to approximately $2,900. (7) That the plaintiff, C. A. Cross, knew that unissued stock was for sale at par at all times, and has not at any time expressed his intention or desire to purchase any of the unissued stock of such corporation, or demanded or offered to pay for any part thereof; that the said Cross had due opportunity to purchase such unissued stock, but refused so to do. (8) That at the stockholders' meeting of said corporation, held in July, 1912, a resolution was introduced, passed, and adopted to the effect that four of the seven directors elected at that meeting should hold office and serve for a term of two years, and three for a term of one year, and that the board of directors should designate which members should serve for two years and which members for one year; that the board of directors thereafter at their meeting held on January 30, 1913, designated George Magee, William Hoeft, Frank Eberl, and Sam Swanson as directors to hold office for a term of two years, and John C. Taylor, Henry Albreacht, and R. A. Haase as directors to hold office for a term of one year; but through the neglect and oversight of the secretary of such meeting no record was made of such resolution. That a meeting of the stockholders was held June 7, 1913, which was the regular annual meeting of the stockholders of such corporation, lawfully and properly called; that C. A. Cross participated in such meeting, and was afforded