Defendant resigned as receiver, and subsequently the contract was fully performed and the real property became vested in a corporation whose shares for the most part were issued to the defendant. In a suit brought by his successor to regain the property for the bank, Held: (1) That the transaction was a gross breach of defendant's duty as receiver; (2) That he was estopped to claim that the purchase of the property was beyond the powers of the bank, Case v. Kelly, 133 U.S. 21, distinguished; (3) That delay of the suit for sixteen years after the making of the contract and fourteen years after defendant's resignation as receiver was not laches, in view of the finding that his successors in the receivership had no knowledge or equivalent notice of the fraud. The seven year statute of limitations of Washington, Remington Ballinger's Ann. Codes and Stats., § 789, does not apply when the claim of title accompanying possession is not made in good faith.
We do not understand said decision, or other decisions of similar import, as declaring the legality of contracts for transfer to ineligible aliens, or stating that in no action except escheat proceedings initiated by the state may the question of alienage be raised. (See Case v. Kelly, 133 U.S. 21 [33 L.Ed. 513, 10 Sup. Ct. Rep. 216, see, also, Rose's U.S. Notes], and Ales v. Epstein, 283 Mo. 434 [ 222 S.W. 1012].) Certainly, a contract having for its object the transfer of land in violation of the express provisions of an act which provides that conspiracies to violate its provisions are punishable by fine and imprisonment cannot be said to contemplate a lawful object.
Had the assignment of the option been made to an ineligible person we would hold that the assignment violated the act of 1920 and consequently a court of equity would not compel specific performance of an act forbidden by law. Likewise we are of the opinion that the ineligible alien could not have compelled a conveyance to himself. ( Ales v. Epstein, 283 Mo. 434 [ 222 S.W. 1012]; Case v. Kelly, 133 U.S. 21 [33 L.Ed. 513, 10 Sup. Ct. Rep. 216, see, also, Rose's U.S. Notes]; Suwa v. Johnson, supra.) The policy of the state forbade it.
It would be an anomaly in equity to say that the State of Texas by a proceeding in court could forfeit its right to this land, if legal title had vested; and to assert in the same connection that the company in a court of equity, with its hands covered with this violation of law and public policy, could resist the assertion of legal title by defendants in error. Good faith can not be based upon a violation of law. Lyons-Thomas Hardware Co. v. Manufacturing Co., 86 Tex. 143; Ware v. Hylton, 3 Dall. (U.S.), 240; Phillips v. Dobbins, 56 Ga. 617; Case v. Kelly, 133 U.S. 21; Coleman v. San Rafael Turnpike Co., 49 Cal. 517; Hale v. Darter, 10 Humph., 95. BROWN, ASSOCIATE JUSTICE.
The first question is: (1) Is a railroad corporation authorized to own mineral rights to property which is not necessary for the operation of the railroad under section 190.02 (3) and other relevant sections of the statutes and Case v. Kelly, 133 U.S. 21 (1889), Waldo v. Chicago, St. Paul Fond du Lac Railroad, 14 Wis. 625 (1861) and other relevant cases? The answer to this question is no.
This statute was a public act, R.L., c. 175, § 72, and may be referred to here. See Covington Draw Bridge Co. v. Shepherd, 20 How. 227, 232; Case v. Kelley, 133 U.S. 21, 27; Harris v. Quincy, 171 Mass. 472. The statute was, therefore, in force when the plaintiff in error was incorporated, and it became subject to it.
That corporation is not here seeking the aid of the court to invest it with title to real estate it could not legally acquire for the purposes of its charter. If it were, it might be the duty of this court to inquire as to its right, under the laws that created it, to take and hold such title. Case v. Kelly, 133 U.S. 21. The question is whether Congress embraced these lands in its grant to that company of May 4, 1870. If it did, then the title passed to it from the United States, subject to be defeated by breach of condition subsequent and subject, it may be, to any proceeding the State of Oregon might institute to compel a corporation created by its laws to keep within the limits of the powers granted to it. Whether the Oregon Central Railroad Company could, under its charter, take title to those lands was and is a matter that concerned only that corporation and the State of Oregon. It is sufficient, for this case, to say that the lands here in dispute were not included in the grant of 1864 or in that of May 31, 1870, to the Northern Pacific Railroad Company. If, as we hold, Congress did not intend to include them in the latter grant, and even if we should also hold that the Oregon Central Railroad Company was incompetent, under its charter, to take title to them, the lands, never having been grante
See for reference purposes, 48 C.J. 755 et seq. Case v. Kelly, 133 U.S. 21, 29, 10 S.Ct. 216, 33 L.Ed. 513; Ducker v. Butler, 70 App.D.C. 103, 104 F.2d 236, and authorities there cited; Green v. Brophy, 71 App.D.C. ___, 110 F.2d 539, 541-542. We have considered carefully all the other contentions of appellants and find them to be without merit.
It is next contended that the contract was ultra vires Acoustic, and hence its directors and officers violated no fiduciary duty in taking stock which the corporation could not legally acquire. See Case v. Kelly, 133 U.S. 21, 10 S. Ct. 216, 33 L. Ed. 513; Lancaster Loose Leaf Tobacco Co. v. Robinson, 199 Ky. 313, 250 S.W. 997. Without pausing to determine the soundness of the asserted conclusion, we pass to a consideration of the premise. Access to the De Forest patents was concededly essential to Acoustic. It was thought that access to them could be obtained by buying a minority stock interest because four of the De Forest Company's nine directors were to be named by Acoustic and it was to have the opportunity to make a contract to manage the De Forest Company. It is true that the terms of such contract were yet to be drafted and submitted to the De Forest board of directors, but, with four directors committed to it, the prospect of getting the contract seemed bright.
In such a case the court will not lend its aid to enable the corporation to acquire a thing it cannot hold. Case v. Kelly, 133 U.S. 21, 10 Sup.Ct. 216, 33 L.Ed. 513; Chestnut v. Shane's Lessee, 16 Ohio, 599, 47 Am.Dec. 387. Where, however, the grantor has passed his title to an entity competent in any degree to hold it, although not for the specific use for which it is empowered to hold, then it is clearly a matter for the state to determine whether it should properly retain and enjoy the property. The grantor, having parted with his property, can have no further interest to subserve.