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a doctrine contrary to that laid down in Hawes v. Oakland, supra; and, second, in Hawes v. Oakland the Supreme Court first decided the case and enunciated the equitable doctrine and rules applicable to such a case, and then immediately adopted and promulgated the rule in equity quoted to emphasize that decision. See Corbus v. Gold Mining Co., 187 U. S. 462, 23 Sup. Ct. 157, 47 L. Ed. 256. I think the rules laid down in that case are not local in their application, but general; that they constitute a general rule of equitable jurisprudence and equitable jurisdiction throughout the entire United States, and govern all like cases tried in the Circuit Court of the United States, whether instituted there or removed thereto from a state court.
In giving equitable relief in such cases, the holdings of the Circuit Courts of the United States should be uniform, and all shareholders in corporations should stand on an equality therein. Many state courts, as those of New York, hold that a plaintiff in a negligence action must allege and prove absence of contributory negligence. In the United States Circuit Court contributory negligence is an affirmative defense, and must be alleged and proved. This is the rule where the case is removed from the state court to the circuit court. R. R. Co. v. Gladmon, 15 Wall. 401, 21 L. Ed. 114; I. & St. L. R. Co. v. Horst, 93 U. S. 291, 23 L. Ed. 898; N. Pac. R. Co. v. Mares, 123 U. S. 710, 8 Sup. Ct. 321, 31 L Ed. 296.
The demurrer must be sustained; but defendant may answer within 30 days after being served with a copy of the order to be entered pursuant hereto.
McCULLOUGH et al. v. SUTHERLAND et al.
(Circuit Court, N. D. West Virginia. April 16, 1907.)
1. SPECIFIC PERFORMANCE-PARTIES–CORPORATIONS.
Where the owners of all the stock in a corporation agreed to convey the same to defendants and to execute a deed to the corporation's property, the corporation as such was not a necessary party plaintiff to a suit to
enforce specific performance. 2. CORPORATIONS-TRANSFER OF STOCK-EFFECT.
Where the owners of all the stock of a coal corporation agreed to transfer the same to defendants and to execute a deed of the corporation's real estate, the transfer of the stock, franchises, and rights of the company unincumbered operated as a transfer of the real estate as effectively as
the execution and delivery of a deed. 3. FRAUDS, STATUTE OF-MEMORANDUM-SIGNATURE BY AGENT.
Where a contract for the purchase of land is signed by the purchaser's duly authorized agent in his own name as agent, such contract consti. tutes a sufficient memorandum in writing to satisfy the statute of frauds.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 23, Frauds, Statute
of, 88 251-260.] 4. SAJE--Part PERFORMANCE.
Where defendants agreed, as part of the same transaction, to purchase a railroad and coal mining corporation, and they did in fact purchase and take over the railroad, such act constituted a sufficient part performance to satisfy the statute of frauds.
[Ed. Note.--For cases in point, see Cent. Dig. vol. 23, Frauds, Statute of, SS 287–292.]
5. SPECIFIC PERFORMANCE-SALE OF LAND-PAROL CONTRACT.
A court of equity, in order to defeat fraud, will compel specific performance of a parol contract for the sale of land, if established by clear and convincing proof.
[Ed. Note.-For cases in point, see Cent. Dig. vol. 44, Specific Performance, $ 113–119.] 6. SAME-PARTIES–LIENORS.
Where, at the time of a contract for the sale of all of the stock, assets, etc., of a corporation, there existed to the knowledge of all the parties a mortgage on the corporation's property to a trustee to secure certain outstanding bonds, which the vendors agreed either to pay prior to conveyance or to suffer an abatement of the price equal to the amount due on the bonds on the day the conveyance was made, the trustee was not
a necessary party to a suit to enforce specific performance. 2. SAME-ELECTION.
Where a contract for the sale of all a corporation's stock, franchises, and property provided that the vendors should satisfy certain outstanding bonds or suffer an abatement of the price equal to the amount due thereon at the time of the transfer, and the vendees thereafter repu ated their obligation to complete the contract, the vendors in a suit to enforce specific performance were entitled to elect whether they would pay the bonds or
suffer an abatement of the price. & SAYE-MUTUALITY OF REMEDY,
Where complainants, who owned all the stock in a coal-mining corporation, the property of which was subject to a mortgage to secure certain outstanding bonds, contracted to sell the same in connection with the railroad company to defendants for a specified price, there was no want of mutuality of remedy, precluding complainants from maintaining a suit for specific performance.
[Ed. Note.--For cases in point, see Cent. Dig. vol. 44, Specific Perform
ance, 9-11.] 3. SAYE-EVIDENCE.
Complainants, who were the owners of two corporations, one operating a railroad and the other certain coal fields, refused to sell the railroad to defendants without the coal fields, whereupon separate contracts were executed for the sale of both as a part of the same transaction; complainants being assured that both properties would go together. Defendants took over the railroad, but refused to complete the contract as to the coal fields for various technical reasons, which were subsequently obviated, when they refused absolutely to comply with such part of the contract. Held, that the contract was single and indivisible, and that complainants were entitled to enforce specific performance of the part relating to the coal fields.
[Ed. Note.--Persons entitled to enforce specific performance, see note
to Lawyer v. Post, 47 C. C. A. 493.] 10. SAME-CONDITIONS--PERFORMANCE-TENDER.
In a suit to compel specific performance of a contract to purchase the stock, franchises, and property of a coal corporation, it was not a condition precedent to complainants' right to such relief that they should have tendered a deed to the property or other papers necessary to transfer the rights intended to be conveyed, defendants having expressed a purpose
to repudiate the contract. 11. SAME-QUANTITY OF LAND-DEFICIENCY-EVIDENCE.
In a suit to enforce specific performance of a contract for the sale of a coal mining corporation's property represented to cover 4,073 acres of coal, evidence held insufficient to warrant a finding that there was a ma
terial deficiency in the coal land the corporation was empowered to convey. In Equity.
Robert McCullough, William E. Gheen, Samuel Humes, J. W. Christman, H. A. Miller, and Thomas A. Davies, citizens of Pennsylvania, have filed their original bill in this court against Howard Sutherland and Stephen B. Elkins, citizens of West Virginia, and the Pennsylvania Steam Coal & Coke Company, a West Virginia corporation, in which they allege themselves to have been, prior to the 28th day of March, 1903, the officers, directors, and sole owners of all the capital stock of two West Virginia corporations, the said Pennsylvania Steam Coal & Coke Company and the Cheat Valley Railroad Company; that the property of the coal company consisted principally of about 4,000 acres of coal lands situate in Preston county, W. Va., and the property of the railroad company consisted of a railroad with its franchises, rolling stock, rights of way, etc., designed to extend from Rowlesburg in said Preston county, along and adjacent to said coal field, to the Pennsylvania state line beyond Brandonsville, about seven miles of which, starting at Rowlesburg, was built; that the railroad was necessary to the operation of the coal field, and had been bought by the plaintiffs to make such operation and transportation of the coal to market possible; that on several occasions prior to March 28, 1903, the defendant Howard Sutherland had called on plaintiffs, seeking to purchase this railroad, but plaintiffs had refused to sell the road without selling at the same time the coal field, and finally these negotiations resulted in two contracts, both dated March 28, 1903, whereby, aided by a supplement added June 5, 1903, the plaintiffs agreed to sell to Sutherland all the capital stock, rights, franchises, and property of the coal company, and also all of the capital stock, rights, franchises, and property of the railroad company, for a consideration of $200,000 in cash upon delivery of the properties; that said Sutherland made payments of $5,000 on such purchase price; that on June 5, 1903, Sutherland pressed for immediate delivery of the railroad, as it was a going concern, and gave as a reason for not taking over the coal field at the same time that certain farmers (from whom the coal had been purchased) had bonds or claims against the property which constituted clouds upon its title which it was the duty of plaintiffs to remove. and that immediately after such claims were satisfied and such clouds removed the coal field would be taken over and paid for; that upon this representation the railroad was on that day transferred to and possession thereof given to said Sutherland and a further payment of $102,500 was made by him, leaving $95,000 still due plaintiffs upon the contracts; that, immediately after, plaintiffs paid off and discharged the claims of the farmers; that Sutherland then refused to comply and take over the coal property and pay the balance of the purchase price of the properties, setting up that Lakin and others had a suit pending for a money demand against the coal company; that plaintiffs offered to indemnify against this suit, but Sutherland refused to accept such indemnity, and they then proposed that he retain purchase money to the amount of the demand made in this suit until its determination, which he likewise refused to do; that in September, 1903, the Lakin suit was in court determined against the plaintiffs therein and in favor of the coal company, and thereupon Sutherland and Elkins (it having been alleged that Elkins was a silent partner with Sutherland in the contracts) both still refused to comply.
The allegations of said bill are further "that plaintiffs have tendered, and have at all times been ready, willing, anxious, and able, to tender to defendants a good and sufficient deed of general warranty, clear of all debts and incumbrances, as in, and by, their said written articles of agreement they had agreed to do, in and to all of the capital stock, rights, property, and franchises of the Pennsylvania Steam Coal & Coke Company and of the Cheat Valley Railroad Company, and now renew such tender and willingness, and now bring into court such deed of conveyance and every necessary muniment of title to the property of the Pennsylvania Coal & Coke Company and proffer delivery of the same to defendants."
The prayer of the bill is for specific performance and a decree for the $95,000 purchase money unpaid. To this bill the defendants filed a written motion to dismiss, and each a separate demurrer, Sutherland alleging some 10 grounds and Elkins 14 therefor, which motion to dismiss and said demurrer were overruled, and thereupon the defendants have filed their joint answer, to which plaintiffs have filed replication, in which answer they admit the execution of the contracts, that Sutherland in the transactious was acting for Elkins, who furnished the money, and was beneficially interested in both contracts. They allege the properties to have been separate and distinct ones, held by separate and distinct corporations, and they deny that the two contracts were one and the same transaction, that the railroad was necessary to the coal field, but, on the contrary, allege that another railroad from Morgantown was being built nearer to these lands. Sutherland admits, substantially, in this answer, the negotiations had prior to March 28, 1903, the date of these contracts which he terms "options," and also admits, "that those with whom Le discussed the question of said option sought to induce him to purchase the IWO properties in a single contract; but, realizing from the location of said lands that the coal claimed by the parties with whom he was negotiating would be of doubtful value, and being desirous of securing the railroad in the event the coal property should prove of slight value, he declined to unite the optious for the two properties in the same contract”; but he declines either to sdmit or to deny "what may have been in the minds of complainants with whom he was negotiating for these properties as to whether they regarded the two contracts as one transaction, and dependent for their enforcement one upon the other," and denies that they communicated such idea, but that, on the other hand, they concealed it from him, if they did have it in mind. He les not, on the other hand, allege that he informed them as to what motives be had for requiring the contracts to be two, instead of one. He alleges he was to pay $100,000 for each of said properties and paid $2,500 down on each when contracts were signed. The defendants jointly deny the ability of plainfiffs to comply; deny that any tender has ever been made of a deed for the cal field of the capital stock, etc., of the coal company, or of the contracts, maps, surveys, notes of borings, cores, etc., or of the abstracts of title, books, and papers relating to the coal company. They deny that they have been nilled upon to elect whether they will take the land subject to the mortgage existing upon the lands or free from it, which right of election the contract Are them. They deny that the coal field embraces anything like 4,073 acres which the contract required it to contain, and on this account deny the plaintiffs' right to specific performance. Sutherland denies that on June 5, 1903, the plaintiffs were induced to transfer the railroad to him because "a delay in the transfer of the same would prejudice his interest,” but avers that “he notified the said parties that, if they failed to settle as to the railroad property at that time, he would enforce his rights under the terms of said contract rither in law or equity as might be deemed expedient.” He admits that he refused at that time to take the coal property, but alleges it was because "the provisions of the contract as to its title, number of acres underlaid with coal, of merchantable quality, was not demonstrated or shown, and none of the monditions precedent provided for by said contract were then and there offered to be performed by complainants or any of them.” On the other hand, be says all these conditions precedent were performed touching the railroad, and for this reason he then and there took it over, and both respondents admit that Elkins went into full possession of it. They also admit the payment of $200 at that time on the coal contract, and that they did not tender the residue. They then deny the jurisdiction of this court, for the reason that the coal company's interest is with complainants, and the diversity of citizenship is therefore destroyed. Samuel Humes having died pending suit, a bill of re viror has been filed and matured.
P. J. Crogan, for plaintiffs.
DAYTON, District Judge (after stating the facts as above). have carefully gone over again the technical defenses raised by the demurrer and the motion to dismiss for want of jurisdiction, and have discovered nothing to cause me to reach any other or different conclusion than the one arrived at upon former hearing thereof. In my judgment, under the facts alleged and now fully proved, these six nonresident plaintiffs owned all the stock of the Pennsylvania Steam Coal & Coke Company, composed its board of directors and officers, and had full power, without the aid of this court of equity, to fully comply with all the essential and vital requirements of their contracts, to wit, to turn over to the defendants all the stock, rights, franchises, interests, and property of this company. They had but to control their own action to do While the contracts require the execution of a ed for the coal lands, and while the execution of such deed was hardly required in order to carry out the true intent and purposes sought to be accomplished, yet it is true, as shown by the evidence, that this action on behalf of the company has been done, as it had in the very nature of things to be done, by the authorization of these six stockholders and directors and of them only, for no other interest of any kind was in any way interested.
This coal corporation is therefore in my judgment a wholly unnecessary party, as such, and can well be dismissed from the proceeding. The grave doubt that existed in my mind upon former hearing as to how far defendant Elkins could be bound in these transactions has been wholly dissipated by the allegations of his answer conjoint with his codefendant Sutherland, in which he admits that the latter was acting in effect as his agent with full authority, that he has beneficial interests in the contracts, and has taken possession of the railroad property under one of thein. Viewing these two contracts as substantially one, for reasons hereafter to be stated, and regarding the actual conveyance of the coal field by deed to be substantially immaterial to the true intents and purposes of the contracts (for the transfer of the stock, franchises, and rights of the company unincumbered accomplishes such transfer of its said realty just as effectively as it could be by deed), there are three reasons why I think the statute of frauds, requiring contracts for the sale of realty to be in writing, set up in his fifth ground of demurrer by Elkins, will not avail his release from liability. First. Because there is here a sufficient “memorandum or note in writing,” clear and distinct contracts in fact touching such sale of real estate signed by Sutherland, his agent. "A person owning lands may authorize another to make a contract for the sale thereof; and, if a contract be made under such authority, the owner of the lands may be charged by virtue of the contract, provided there be a memorandum thereof in writing signed by the person authorized to make it. The signing by the agent of his own name as agent is sufficient.” Conaway v. Sweeney, 24 W. Va. 613. Kennedy v. Ehlen, 31 W. Va. 540, 8 S. E. 398, is exactly in point. In that case Ehlen was held bound for a sale of real estate made direct to Buchanan, although his name was not mentioned in the writing and his liability was not known, simply because he had an interest in the purchase and Buchanan was acting as his agent. These cases and others construe the West Virginia statute of frauds, and, under well-settled principles, must be followed by this court. Second. Because there has been part performance, as I have said, by reason of the taking over of the railroad by Elkins. A part performance makes the contract enforceable specifically in equity. Middleton v. Selby, 19 W. Va: 168; Kennedy v. Ehlen, 31 W. Va. 558, 8 S. E. 398; Lester v. Lester, 28 Grat. 737. Third. Because, notwithstanding the statute, courts of equity, in order to