HAZARD':i1. t:REDIT MOBIL1ER OF AMERICA.
195
PARDEE,"]). The 'Mexican Improvement was organized under, the generltllaw of the state of Louisiana pro,viding for the organization of corporations for works of puJ>lic improvement and other purposes. It has neither charter rior privilege from the legislature of the state of Louisiana. The objects and purposes of the. organization, as declared in the charter, are: "To construct, operate, maintain, promote, and develop various works of public and in the· republic of Mexico." The present case shows that the real objects and purposes of the organization were the purchase of lottery' franchises and privileges, and the carrying on of the lottery business. It had 'no other purposes, nor has it any other business. The ,charter is a fraud on the law of the state. Unless the lottery privilege is specially granted by the state, the lottery business is prohibited by the law of Louisiana; See Const. 1879 and act No. 44 of 1879. The interest of the complainant and of the intervenor is that of stockholders of the organization in the original issue of $1,000,000 of stock upon which not one dollar has been paid, but all of which was issued as full-paid, and all of which was given out and distributed under the pretense of paying for labor and services rendered; but in fact for the purchase of lottery privileges. Such issue of stock is in violation of'the constitution of the state, and entitled to no protection in the courts. The complainant and the intervenor, at the time they acquired their stock, knew, or ought to have known, the object,scope, and illegality of the organization, and the tainted nature and consideration of the stock they acquired. The interests of the complainant, the intervenor, and the defendants, for the reasons above given, are illegal, and for their adjustment or protection can have no judicial aid. In pari ,delicto potior est conditio po88identis. The motions for an injunction and the receiver are denied. The restraining order heretofore issued in the case will be discharged. BILLINGS,
J I concurs.
HAZARD v. CREDIT MOBIUER
OF
AMERICA et al. January 15, 1889.)
Court, B. D. Pennayl'lJania.
1.
CORPORATIONS-STOCKHOLDERS-RECEIVER-INJUNCTION-LACHES.
A motion was made to dismiss the receiver of a corporation, and to vacate an injunction restraining its stockholders from making a fraudulent settle· ment of a suit. A claim was made al:{ainst the corporation for back dividends, etc.. and the motion was opposed by the claimant, who, however,had had for many years full. knowledge of his claim. Held, even if not barred by the statute oflimitations, he had no standing to oppose the motion.
SAME-CLAIM FOR TAXES.
A motion was made to dismiss a receiver of a corporation, and to vacate an injunction restraining a majority of its stockholders from making a.fraudulent settlement of a suit; when before the master. a claim was made by the state'of Pennsylvania for back taxes, and the motion to dismiss was opposed
196
FEDERAL REPORTER,
vol. 38.
by it. Held. that the motion to dismiss. which. being granted, would deprive the state of all remedy, should be held over until the state should try its right to the taxes, provided it made no delay, and, upon its succeeding, furnished a sufficient sum to prosecute the suit, even thoug-h the exercise by the state of its present vigilance would have resulted in the previous discovery of the right now claimed. (Syllabu8 by tM Oourt.)
In Equity. On exceptions to master's report. Bill by Rowland G. Hazard against the Credit Mobilier of America, Royal E. Robbins and others, directors of the Credit Mobilier, and the Union Pacific Railroad Company, to restrain the majority of the stockholders of the Credit Mobilier from fraudulently discontinuing a suit brought by it against the Union Pacific Railroad Company in the state o( Massachusetts, on a note for $2,000,000, given by the railroad company to the Credit Mobilier. .It was alleged that the majority of the stock of the Credit Mobilier was held by stockholders of the Union Pacific Railroad Company; that it was the purpose of these stockholders to discontinue the suit in Massachusetts, whereby the claim against the railroad would be barred by the statute of limitations; that this claim was the only assets of the Credit Mobilier; and that plantiff would thereby be irreparably injured. The injunction was granted, and, defendants having endeavored to have the Massachusetts suit discontinued, a receiver was appointed. On September 4, 1888, a motion by the then receiver to vacate the injunction, to authorize him to withdraw from all pending litigation, and to dismiss the bill, was made and referred to a master. It was alleged by the receiver that all stock of the Credit Mobilier was now held in thE:! interest of the Union Pacific Railroad Company; that Hazard had no interest in it; that there were no claims against the Credit Mobilier; and that no moneys had come into his hands except a small sum allowed to him as remuneration for his services. A claim was presented by Barton H. Jenks for (1) a balance on a duebill of the Union Pacific Railroad Company for bonds; and (2) for unpaid dividends, allotments, etc., on stock of the Credit Mobilier. The dividends were in stock and bonds of the Union Pacific Railroad Company, and were alleged to have been declared in 1867 and 1868. There was another item of the claim which was withdrawn. The master held that even if Jenks was not barred by the statute of limitations he had no standing to oppose the motion, because of hislongdelay. After the close of the meetings before the master, the commonwealth of Pennsylvania applied to have the hearings reopened to prove a claim against the Credit Mobilier for a bonus on an increase of the capital stock under its acts of incorporation due in 1869-72 and interest thereon, and stated that it would call upon the company to furnish reports of capital stock for the years 1884-88, and requested a delay of action until the claims had been settled. It was found that part of the commonwealth's claim was erroneous, but that the portion for the taxes for the years 1884-88 was '3till due. The master thereupon recommended a decree dismissing the bill after the claims of the commonwealth have either been paid or secured, and reported $150 as the part of the costs chargeable to Jenks.
.. MAyER V.
DENVER,
T. &: FT. W. R. 00.
197
Plaintiff and Jenks excepted. After the filing of the report, the state of Pennsylvania filed a petition by leave of court to intervene, alleging & claim for baok taxes amounting to $224,868.67. George Tucker Bigpham and Artemaa H. Holmes, for Credit MobiIier. Weigly &: Oolton, for Jenks and the Commonwealth. BUTLER, J. The court is satisfied with the master's disposition of Barton' H. Jenks' claim, and the costs arising out of its presentation. The exceptions filed by Mr. Jenks on this account are therefore dismissed. We are also satisfied with the master's recommendation that the motion to dismiss the receiver and vacate the injunction be held over until the state has opportunity to test its right to taxes claimed. It is certainly true that the litigation which has extended over several years should not be unnecessarily continued. We are not entirely satisfied that an exercise of the vigilance now exhibited by the state would not sooner have discovered the facts on which its claim is based, and h.ave had its right to recover determined. In view, however, of all the circumstances, and especially of the fact tbat an allowance of the motion now would probably deprive the state of all remedy, we think it is proper to withhold action until it has had time to have the claim passed. upon, in the manner provided for, by the state statutes. If the claim shall be sustained, we will then allow the intervention prayed for, on condition that the state furnishes the funds necessary to enable the receiver to prosecute the claims of the Credit Mobilier against the Union Pacific Railroad Company. These claims have not been prosecuted heretofore for want of means to do it. There must be no lack of vigilance on the part of the state in recovering judgment for the taxes, nor in furnishing the funds referred to. If there shall be, the motion will be allowed, and counsel are at liberty to call it up hereafter whenever they believe, in view of what is here said, it should be allowed.
MAYER
V.
DENVER, T. & FT. W. R. Co.
al.
(Oircuit Oourt, 8.
n. New
York. March 18,1889.)
CORPORATIONS-STOCKHOLDERS-FRAUD.
A bill by a stockh,older of the P. Co. to restrain the D. Co. from issuing certain mortgage bonds intended to secure an illegal advantage to the C. Co., in breach of an agreement between the D. Co. and the F. Co., alleged that the P. Co. was the equitable owner of stock in the F. Co., and that it designed, when it acquired the legal title to such stock, to exchange it in disregard of plaintiff's rights for stock of the D. Co., and that the fraudulent issue of mortgage bonds by the D. Co. would place a lien for their amount before the stock, which complainant would be entitled to receive as a stockholder of the P. Co. The bill prayed that the D. Co. and the C. Co. be en· joined from disposing of the bonds, and that the P. Co. be enjoined from ex· changing its stock of the F. Co. for that of the D. Co. until the agreement between the F. and D. Cos. had been complied with. Held that, concp,ding