State v. Coal Land Co. , 98 W. Va. 563 ( 1925 )

Upon the rehearing, and after the argument by counsel, and consideration thereof, we are of opinion, for the reasons stated, to adhere to the several propositions comprehended in the first point of the syllabus in the written opinion prepared by Judge MEREDITH on the original hearing.

On the second proposition, however, it is undoubtedly true as a general rule that where fraud is relied on it must be pleaded as well as proved. This rule is especially applicable where a plaintiff in equity relies on fraud as the basis of relief against defendant. As to the defendant fraud may generally be proved under the general issue, as at common law.Bowyer v. Continental Casualty Company, 72 W. Va. 333, 337, and cases cited. This rule is considered in Interstate FinanceCompany v. Schroder, 74 W. Va. 67, 71, cited by Judge MEREDITH in the original opinion. Is the fraud relied on in this case available to appellant without pleading of some kind putting the fact in issue? But for the pretentions of the Dingess Rum Coal Company, appellant's right to redeem the 66 acres would be and remain beyond controversy. The facts stipulated by counsel respecting appellant's rights and title put this proposition beyond cavil. Its petition pleads all the essential facts agreed upon. But the Dingess Rum Coal Company, impleaded as a claimant to the land, interposes its claim to transfer under the constitution, and opposes redemption by appellant; it prays on the facts alleged by it, that the Altizer Coal Land Company be not permitted to redeem the land. Its petition is in the nature of an answer to appellant's petition, and seeks relief against the owner of the older and admitted title. To prevail over the Altizer Coal Land Company, it is bound to show by pleading and proof that it lawfully acquired the title of the State to the forfeited land by complying with all the requirements of the law to that end. In its effort to do this and to establish its color of title, it first pleads the deed of Caldwell and wife to it, of June 1, 1909. At the time Caldwell executed this deed to the Dingess Rum Coal Company, he owned an adjoining tract of 301.24 acres; but it is not pretended that he had the semblance of right or title to the 66 acres; on the contrary it is agreed that in surveying the land preparatory to executing his deed, his engineer discovered the outlying 66 acres, and on appraising Caldwell of the fact, he was directed to include it in the survey; and Caldwell included it by description in his deed to the appellee company, but as a tract of 301.24 acres only, manifestly for the purpose of evading taxation on the additional acreage, as the grantee did for nearly ten years thereafter, and up to the year 1918; and it is conceded further that the only purpose of so compassing the additional acreage was to get the State's title to the 66 acres by constitutional transfer, but in such a way as to escape the imposed burden of taxation. Agreeably to our holding in State v. West Branch Lumber Company, 64 W. Va. 673,691, one who thus sets out to obtain the title of the State and to defeat the former owner, must begin with an honest belief in the verity of his claim, and with a purpose to fulfill the obligation exacted by the State in aid thereof. To this extent at least he must have a bona fide claim. The rule may be different when he sets up a claim and seeks to acquire title to another's land by possession under an adverse and hostile title. But a scheme conceived in fraud, and without shadow of right to deprive the State of her title to forfeited land, and the former owner of his lawful right of redemption, should not succeed in a court of equity, when the State sues and impleads such conflicting claimants. These were the principles upon which we denied appellees the right to prevail over the appellant King, in State v. King, 77 W. Va. 37. The fourth point in the syllabus in that case is as follows: "A deed made by a person to a trustee for himself, or to himself by another, at his solicitation and without consideration, for land he does not own nor occupy and in which he has no interest, or for such land in addition to his actual possession, with specific intent and purpose to use the same as color of title, cannot be so used by him. His fraud denies it the virtue, force and effect of color of title in his hands."

It seems to us that the claim of Caldwell and the Dingess Rum Coal Company as against the rights of the Altizer Coal Land Company and the State, to the 66 acres involved must be disposed of upon the principles announced in the King case. The facts pleaded or agreed to bring the case presented here clearly within the rule of that case, unless for want of proper pleadings or otherwise it can not be so disposed of. To allow the Dingess Rum Coal Company to prevail over the State and the appellant, the State would sustain a loss of its taxes from 1909 to 1918 on the 66 acres, and appellant of its right to redeem. It is a very pertinent fact bearing on the equities of the Altizer Coal Land Company, and a fact stipulated by counsel, that at the time Caldwell made his deed to the Dingess Rum Coal Company, he was a director and stockholder, owning twenty-two percent of the stock, of the Altizer Coal Land Company, and charged with knowledge of this company's rights in the land. He was at the same time president, and a director and a very large stockholder in the Dingess Rum Coal Company. Manifestly his interest in the latter company far exceeded his interest in the Altizer Coal Land Company. What additional consideration, if any, he received directly for including the 66 acres in his deed does not appear; but may it be safely assumed that, if it had not been to his interest to include the land in his deed to the Dingess Rum Coal Company, rather than to conserve it for the Altizer Coal Land Company, to which he owed a duty in respect thereto, he would not have undertaken to so acquire the rights of the State and the Altizer Company?

We must not be understood as tending to cast any aspersions on the name or memory of Mr. Caldwell, a most honorable and respected business man and citizen. We are speaking only of the legal effect of his transactions respecting this land. As against the Altizer Coal Land Company, his transaction could not be allowed to stand for a moment. But the Dingess Rum Coal Company relies also upon its position as a purchaser from Caldwell, for a valuable consideration, of the land in controversy. The record gave it constructive notice at least that Caldwell had no title to the land, that the title was in the State with right of redemption in the Altizer Coal Land Company. Besides all this, Caldwell was president and a director and large stockholder of the grantee in his deed, and to that extent he was deeding the land to himself, just as in the King case, McDonald without right or title conveyed the land to Lowry, Trustee; and it was admitted that the beneficiaries of the trust were the grantee and two other McDonalds. Wherefore, did not the Dingess Rum Coal Company have full and complete notice through Caldwell of his want of title and of the fraud involved in the transaction? It does not appear who or what officer represented the grantee company in the transaction with Caldwell. Not unlikely it was Caldwell himself, he being its executive head and so largely interested. His personal interests were not likely opposed to the interests of the company, and his position of grantor, and in effect grantee also, were not so incompatible as not to import the notice he had to the company also. The rule recognized in prior decisions is that: "When an officer of a corporation does an act which constitutes fraud upon a third person, or upon another corporation, of which he is also an officer, the first mentioned corporation is chargeable with knowledge of the nature of the transaction, although the fraud is perpetrated for his own benefit, where he also represents the corporation in the transaction." Powers-Taylor Drug Co. v. Faulconer, 52 W. Va. 581,592. Of course, notice to one of the directors of a matter affecting the interests of the corporation which it is to the interest of such director to conceal, is not notice to the corporation. Bank v. Lowther-Kaufman Oil Co., 66 W. Va. 505;Dollar Savings Trust Co. v. Crawford and Ashby, 69 W. Va. 109,117; Rusmissell v. White Oak Stave Co., 80 W. Va. 400. It is only where an officer while acting for himself acquires notice or knowledge of the fact, that such notice will not be imputed to the principal. 2 Thompson on Corporations, (2nd ed)., § 1655. In 4 Fletcher Cyc. Corp., § 2245, it is said that where the interests of the corporation and of its officer or agent are in reality not adverse, the general rule does not apply. In this case the interests of Caldwell and the Dingess Rum Coal Company were in reality practically the same. There is no conflict between the two interests. So we hold that the knowledge and notice of Caldwell of appellant's rights, and of the invalid and fraudulent character of Caldwell's title or claim to the 66 acres must be imputed to the grantee in his deed.

But further on the subject of want of pleading, if we should hold as on the original hearing, that the fraud should have been pleaded, should we not on the facts agreed, have given appellant an opportunity to amend its pleadings so as to make out such a case as the facts warranted? We have examined the record in State v. King, cited and relied on by counsel for appellant. The fraud does not appear to have been set up by any pleading in that case; the point does not appear to have been raised. But when a plaintiff, in this case a cross-plaintiff, comes into the court to oppose the rights of others, and shows by his evidence or facts stipulated that the right and title relied on to defeat the other party originated in fraud, he proves himself out of court. He must come with clean hands. In State v. Central Pocahontas Coal Co,. 83 W. Va. 230,242, a school commissioner's suit like this, we held that it was not error to allow a defendant to file an amended and supplemental answer, when the matter set up therein was of such a character that it was necessary that the same should be before the court for a proper determination of the matters involved in the suit and not contradictory of the matters alleged in the original answer. And we have decided here more than once, that where the court doubts the right of plaintiff to relief on the case stated in his bill, and a good cause for relief appears by the proofs, the decree below should be reversed and plaintiff given leave to amend his bill. Blue v.Campbell, 57 W. Va. 34, 36; Lamb v. Laughlin, 25 W. Va. 300;Doonan v. Glynn, 26 W. Va. 225, 228; VanWinkle v. Blackford,33 W. Va. 573; Blumberg Bros. Co. v. King, 98 W. Va. 275. And this rule respecting amending pleadings applies also in actions at law. Gilchrist v. Oil Company, 21 W. Va. 115.

For the foregoing reasons we are of opinion to reverse the decree below, and to remand the cause to be further proceeded with in accordance with the rules and principles herein declared.

Reversed and remanded.