Opinion
December 5, 1938.
January 9, 1939.
Equity — Laches — Unavailability of testimony — Lack of due diligence — Assertion of rights — Laches apparent in bill — Preliminary objections — Averment of ignorance of rights — Sufficiency.
1. Laches will bar relief in equity to one who has slept upon his rights until the original transaction is obscured by lapse of years and death of parties, especially where the delay has made it impossible to produce evidence that would otherwise have been available. [396-7]
2. Where a party having the right to set aside a transaction stands by and sees another acting in a manner inconsistent with his alleged claim and makes no objection, the delay may bar a suit in equity. [396]
3. The question of laches does not depend upon the fact that a certain definite time has elapsed since the cause of action accrued, but upon whether, under the circumstances of the particular case, plaintiff is chargeable with want of due diligence in failing to institute or prosecute his proceeding. [396]
4. The assertion of plaintiffs' rights in an effort to adjust the claim is not sufficient to excuse an unreasonable delay. [396]
5. Where laches is apparent in the bill itself, it can be taken advantage of by the filing of preliminary objections. [397]
6. Where ignorance of rights or wrongs is relied on to account for laches, this fact must be plainly alleged in the bill. [398]
Argued December 5, 1938.
Before KEPHART, C. J., SCHAFFER, MAXEY, DREW, LINN and BARNES, JJ.
Appeal, No. 353, Jan. T., 1938, from decree of C. P. Luzerne Co., March T., 1937, No. 4, in equity, in case of The First National Bank of Pittston, executor, et al., v. The Lytle Coal Company et al. Decree affirmed.
Bill in equity.
Preliminary objections sustained and bill dismissed, opinion by VALENTINE, J., in part as follows:
"Redress is sought against alleged wrongful conduct covering a period of approximately forty years. The practices complained of in the bill originated in the years 1904, 1916 and 1918. The alleged wrongs for which plaintiffs seek relief arose in part out of a contract alleged to have been executed in 1895; the wrongful acts complained of having commenced in the year 1904. The amended bill alleges that the plaintiffs were ignorant of the transactions of which they complain until 1930, and that from 1930 to 1935 negotiations for the adjustment of the matters complained of were pending. The bill was filed in December [January] 1937. Since the filing of the bill one of the defendants, C. Henhoeffer, a director of The Lytle Coal Company has died. At the argument of the preliminary objections to the bill as amended, it was asserted by counsel for the defendants, and not controverted by counsel for plaintiffs, that Mr. Henhoeffer had been in charge of the records and books of the company for many years and that the absence of his testimony would seriously handicap the presentation of the defendants' case.
"The main question for determination is whether plaintiffs' right to relief is barred by laches.
"The question of laches does not depend, as does the statute of limitations, upon the fact that a certain definite time has elapsed since the cause of action accrued, but upon whether, under the circumstances of the particular case, plaintiff is chargeable with want of due diligence in failing to institute or prosecute his proceeding: Bankert v. Provident Trust Co., 314 Pa. 442.
"Equity will not lend its aid to one who has slept upon his rights until the original transaction is obscured by lapse of years and death of parties: Kinter v. Commonwealth Trust Co., 274 Pa. 436, and where a party having the right to set aside a transaction stands by and sees another dealing with the property in a manner inconsistent with his alleged claim and makes no objection, a delay of six years will bar a suit in equity: Brown v. Kemmer, 214 Pa. 521.
"The amended bill alleges that plaintiffs first acquired knowledge of the facts complained of in 1931. The bill was filed in 1937. In order to excuse the delay in filing the bill after having acquired knowledge of the facts, the amended bill asserts that from 1931 to 1935 plaintiffs negotiated with one of the defendants in an effort to adjust the controversy. The assertion of plaintiffs rights in an effort to adjust the claim is not sufficient to excuse an unreasonable delay. It was their duty to take proper legal steps to establish the claim which they asserted: McGrann v. Allen, 291 Pa. 574.
"If the protracted delay has seriously handicapped defendants' ability to produce testimony that would have been available had the claim been prosecuted at an earlier date, the delay is fatal to plaintiffs case, for nothing will call a court of equity into activity, but conscience, good faith and reasonable diligence: Kinter v. Commonwealth Trust Co., 274 Pa. 437, or, as expressed by Lord CAMPBELL in Bright v. Legerton, 2 D. F. J. 617, 'a court of equity will not allow a dormant claim to be set up when the means of resisting it, if unfounded, have perished.'
"The dates on which the acts complained of are alleged to have been committed appear from paragraphs 13, 14, 15, 16, 17 and 18 of the bill. We think that an analysis of the averments of said paragraphs leads to the conclusion that the inexcusable delay of the plaintiffs in asserting their alleged rights should bar them from relief in equity. . . .
"All of the data on which the bill of complaint is predicated has been available to the plaintiffs throughout the period involved. They have been in a position to inform themselves with respect to every act complained of shortly after such act was committed. The plaintiffs could have ascertained the manner in which the affairs of The Lytle Coal Company were conducted, of which complaint is now made, at any time after they had interested themselves to ascertain what course of conduct was being followed. After they discovered the alleged wrongs in 1930, they made no effort to assert their rights by beginning litigation until a period of almost seven years thereafter.
"If laches is apparent in the bill itself, it can be taken advantage of by the filing of preliminary objections: Kinter v. Commonwealth Trust Co., supra; McKessen v. Doyle, 312 Pa. 591; Riley v. Boynton Coal Co., 305 Pa. 365. During the period of time that plaintiffs delayed in asserting their rights, the situation of the parties has been changed by the death of one of the defendants. In the language of the Supreme Court in Kinter v. Commonwealth Trust Co., supra, at page 440: 'His mouth is sealed by death. He is not here either to defend himself, or the others, against the charges of fraud. His evidence is denied to the defendants because of the delay of the plaintiff in bringing his bill. The condition of the defendants has become so changed that it cannot be restored and it is extremely doubtful whether they could produce evidence necessary to a fair presentation of the cause on their part.'
"Throughout the entire period of which they complain, the plaintiffs, as stockholders of The Lytle Coal Company, had the right to examine its books. An examination of the books would have disclosed every matter of which complaint is now made. There is no contention that they made any effort whatever to acquaint themselves as to the real situation. There is no allegation that the plaintiffs at any time sought any information from any officer, stockholder or employee of the company until the making of the alleged audit by the accountant in 1930 and 1931, and even after having ascertained the facts which they allege the report of the auditor revealed, they waited an additional period of seven years before asserting their rights.
"Where ignorance of rights or wrongs is relied on to account for laches, this fact must be plainly alleged in the bill. A general averment of plaintiff's ignorance of his rights is insufficient; he must allege why he was so long in ignorance and the means to keep him so, that the facts could not have been discovered by the exercise of due diligence, and must acquit himself of all knowledge of the facts which would put him on inquiry: Patton v. Commonwealth Tr. Co., 276 Pa. 95.
"There is no contention that from the period 1904 until 1930 any one of the plaintiffs made any effort to determine how the company in which they were stockholders was being operated. There is no averment that during this period of twenty-six years there was any attempt on the part of any of the defendants to mislead the plaintiffs or withhold such information from them. It is not charged there was any concealment of the manner in which the business of the company was transacted. During this entire period the plaintiffs were apparently satisfied to sit down and do nothing.
"The major complaints relate to matters alleged to have taken place thirty-four years ago and even the most recent cause of complaint (other than the erection of the power plant in 1924) had its inception nineteen years before the present bill was filed. After this protracted delay, it would be unreasonable to require the defendants to make an exhaustive examination of the books and records of the company from 1904 that would obviously be required to prepare the case for trial. . . .
"In the recent case of Grange National Bank of McKean County v. First Nat. Bank of Bradford, 330 Pa. 1, Mr. Justice DREW summarized the application of laches as follows: 'Laches bar relief in equity whenever in the chancellor's discretion a party has by his delay disentitled himself to the unusual remedies equity affords to those who deserve them: Riley v. Boynton Coal Co., 305 Pa. 364; Kinter v. Commonwealth Trust Co., 274 Pa. 436. Plaintiff knew of its rights in 1918; indeed, it brought an action of law to enforce them. But not until 1927 was there any resort to equity. Meanwhile nothing was attempted at all. . . . It makes no difference that laches were not pleaded in defense. When the fact of laches appears in the evidence or on the face of the bill the court may in its discretion and on its own motion deny relief on that ground: Sullivan v. Portland R. R. Co., 94 U.S. 806; Calivada Co. v. Hays, 119 Fed. 202; Akley v. Bassett, 189 Cal. 625, 209 P. 576; Raytheon Mfg. Co. v. Radio Corp. of America, 286 Mass. 84, 190 N.E. 1; Taylor v. Slater, 21 R.I. 104, 41 A. 1001. Plaintiff cannot complain because it has been visited with the consequence of its inexcusable delay.'
"We conclude that the delay of the plaintiffs in asserting their alleged rights has disentitled them to relief in equity and that the preliminary objections should be sustained."
Plaintiffs appealed.
Error assigned, among others, was decree.
William J. Fitzgerald and John P. Kelly, with them James P. Harris and H. R. Van Deusen, for appellants.
Robert T. McCracken, with him Edward G. Taulane, Jr., Mercer B. Tate, Jr., and C. B. Waller, for appellees.
Thomas Byron Miller, for appellee.
The bill was filed January 26, 1937, by minority shareholders in The Lytle Coal Company, a Pennsylvania mining corporation, against that corporation and other parties, corporate and individual, for accounting and other relief. Defendants filed preliminary objections under Equity Rule 48. When they came on for hearing in the court below, plaintiffs asked and obtained leave to amend. After the bill was amended, the preliminary objections were renewed. The case then came on for hearing before the four judges of the court below sitting in banc. They were of opinion that it appeared from the bill that plaintiffs' laches stood in the way of recovery. The bill was therefore dismissed in an opinion written for the court in banc by VALENTINE, J., certain extracts from which, fully supporting the conclusion reached, will be found in the reporter's statement of the case.
The decree is affirmed at the costs of appellants.