Mr. Justice F. A. Smith
delivered the opinion of the court.
The principal contention of complainant is that the deed of the' real estate and the bill of sale of the personal property were in fact mortgages, and that Mr. Morgan is mortgagee in possession, and that the bill, therefore, presents grounds of equitable relief.
The bill alleges that the bill of sale and deed were made in pursuance of a resolution by the stockholders at a meeting duly called, the owners of 94 per cent, of the issue of capital stock being present or represented. The resolntion is set forth in the statement preceding this opinion. It purports to set forth the exact facts of the indebtedness of the Sieg Company and its condition at the time the resolution was adopted; and the deed and bill of sale were executed in pursuance thereof.
The bill states that complainant’s decedent owned one-half of the stock of the Sieg Company, and that the decedent’s husband was secretary of the Sieg Company at the time of the adoption of the resolution and the execution of the deed and bill of sale, and as such secretary, signed the bill of sale. It appears, therefore, from the bill itself, that the stock of complainant’s decedent was voted for the resolution by her husband as her representative; and complainant without stating any facts, contradicting, or in any manner questioning the action of the Sieg Company, or the facts stated in the resolution, or setting forth any false or fraudulent representations by which the Sieg Company was induced to make the deed and bill of sale, seeks now to have the transaction declared a mere mortgage, and the defendants to account for the property as such mortgagees. There are no facts stated in the bill, giving the deed and bill of sale the character of a mortgage, and that theory of the transaction rests simply upon the inferences of the pleader. A demurrer does not admit the correctness of inferences of the pleader. Greig v. Russell, 115 Ill. 483.
There is no averment in the bill that Morgan did not carry out the conditions of the resolution passed by the Sieg Company, and under which the deed and bill of sale were executed. There is no showing in the-hill that Fred W. Morgan or Morgan & Wright are claiming any debt or debts against the Sieg Company as still'existing, or that the express terms and conditions of the resolution passed by the Sieg Company stockholders have not been fully and in good faith carried out.
In order to overcome the express terms of the deed, a debt must exist and there must be a liability to pay it. Klock v. Walter, 70 Ill. 416.
‘1 To render such transactions a mere security there must be mutuality. Both parties must be able to treat and enforce it as a mortgage.” Shays v. Norton, 48 Ill. 100.
In our opinion, the hill shows that the deed and bill of sale were given in satisfaction of the indebtedness of the company, and received as such, and for that reason the bill cannot be maintained. Rue v. Dole, 107 Ill. 275; Pitts v. Cable, 44 Ill. 103.
The bill does not set up any writing of defeasance, or claim that any such writing was made. In order to convert a- deed absolute into a mortgage, the evidence must be clear, unequivocal and convincing, and the bill should aver such facts from which the court could determine that, if true, the deed was not absolute, but was a mere security for a debt. This the bill does not do. Keithley v. Wood, 151 Ill. 566. In our opinion, upon the averments of the bill, the court cannot infer that the deed and bill of sale in question was a mortgage given to secure a debt. The allegations of the bill upon this question are too uncertain and indefinite to justify any interference to that effect by a court of equity upon the facts stated.
The complainant claims no personal knowledge of any of the transactions leading up to the execution of the deed and bill of sale described in the bill, and the averments are, therefore, necessarily made upon information and belief. The bill further alleges that neither decedent nor her husband, although he was her representative, and was secretary and treasurer of the company, had any definite knowledge of many of the matters set forth in the bill. No sources of information as to the facts stated or averments made in the bill are set out. Where the averments of a bill are made upon the information of the party complaining, the sources of such information must be set out. Blondheim v. Moore, 11 Md. 365.
The bill fails to show any fraudulent representations of facts made by Morgan or his representative Worsley, or by Morgan & Wright, upon which the directors and stockholders of the Sieg Company transferred its property to Fred W. Morgan. The bill shows that the company was largely in debt; that it was in a position where it could not continue its business and meet its indebtedness; that its creditors, large and small, were pressing their claims, and upon the giving of the mortgage to Morgan & Wright the smaller creditors obtained judgments and filed bills in Illinois, and that the Sieg Company was unable to pay its debts and continue in business without assistance. The Sieg Company seems to have accepted the assistance of Fred W. Morgan and Morgan & Wright, in its financial difficulties, and by malting the deed and bill of sale in question, secured the contract of responsible parties to pay off its indebtedness; and there is no showing in the bill that the consideration thus agreed upon with the company was not fully performed and carried out by the defendants, Fred W. Morgan and Morgan & Wright, or that it was not adequate and reasonable.
There is no allegation in the bill as to the respective values of the real estate and personal property. Construing the bill against the pleader, the bulk of the value was in the personal estate. This, however, appears from the bill, for the inventory of partly and completely manufactured bicycles is shown to amount to $22,301.15. The large schedule of tools and machinery may be fairly assumed to be worth as much or more than the goods manufactured and in course of manufacture. The statute relied upon (R. S. Ill., Chap. 95, Sec. 12) has no application to the personal property. It applies to deeds of real estate intended only as mortgages. The representations of Worsley, which it is claimed the corporation relied on, were that Morgan had a use for the property—that he would be able to sell it, and that it would help him in his deal with the Bicycle Company. These statements themselves showed plainly that Morgan did not intend the transaction as a mortgage. He was getting a clear title to the property on which he and Morgan & Wright then held two past due mortgages, and was giving a discharge of the indebtedness in return. The statute, therefore, could not apply to the deed conveying the real estate.
The bill avers that Morgan refused to give any writing of defeasance, but that his agent said that he could be trusted to do what was right. No obligation was, therefore, assumed, either by Morgan or his agent, and Morgan or Morgan & Wright, were under no obligation or duty to return any part of the property or the proceeds, according to the averments of the bill, to the Sieg Company. “This court has often held that where a conveyance is in form absolute in order to change its character to that of a mortgage, the proof must clearly and satisfactorily show that such was the contract and intent- of the parties.” Strong v.
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Mr. Justice F. A. Smith
delivered the opinion of the court.
The principal contention of complainant is that the deed of the' real estate and the bill of sale of the personal property were in fact mortgages, and that Mr. Morgan is mortgagee in possession, and that the bill, therefore, presents grounds of equitable relief.
The bill alleges that the bill of sale and deed were made in pursuance of a resolution by the stockholders at a meeting duly called, the owners of 94 per cent, of the issue of capital stock being present or represented. The resolntion is set forth in the statement preceding this opinion. It purports to set forth the exact facts of the indebtedness of the Sieg Company and its condition at the time the resolution was adopted; and the deed and bill of sale were executed in pursuance thereof.
The bill states that complainant’s decedent owned one-half of the stock of the Sieg Company, and that the decedent’s husband was secretary of the Sieg Company at the time of the adoption of the resolution and the execution of the deed and bill of sale, and as such secretary, signed the bill of sale. It appears, therefore, from the bill itself, that the stock of complainant’s decedent was voted for the resolution by her husband as her representative; and complainant without stating any facts, contradicting, or in any manner questioning the action of the Sieg Company, or the facts stated in the resolution, or setting forth any false or fraudulent representations by which the Sieg Company was induced to make the deed and bill of sale, seeks now to have the transaction declared a mere mortgage, and the defendants to account for the property as such mortgagees. There are no facts stated in the bill, giving the deed and bill of sale the character of a mortgage, and that theory of the transaction rests simply upon the inferences of the pleader. A demurrer does not admit the correctness of inferences of the pleader. Greig v. Russell, 115 Ill. 483.
There is no averment in the bill that Morgan did not carry out the conditions of the resolution passed by the Sieg Company, and under which the deed and bill of sale were executed. There is no showing in the-hill that Fred W. Morgan or Morgan & Wright are claiming any debt or debts against the Sieg Company as still'existing, or that the express terms and conditions of the resolution passed by the Sieg Company stockholders have not been fully and in good faith carried out.
In order to overcome the express terms of the deed, a debt must exist and there must be a liability to pay it. Klock v. Walter, 70 Ill. 416.
‘1 To render such transactions a mere security there must be mutuality. Both parties must be able to treat and enforce it as a mortgage.” Shays v. Norton, 48 Ill. 100.
In our opinion, the hill shows that the deed and bill of sale were given in satisfaction of the indebtedness of the company, and received as such, and for that reason the bill cannot be maintained. Rue v. Dole, 107 Ill. 275; Pitts v. Cable, 44 Ill. 103.
The bill does not set up any writing of defeasance, or claim that any such writing was made. In order to convert a- deed absolute into a mortgage, the evidence must be clear, unequivocal and convincing, and the bill should aver such facts from which the court could determine that, if true, the deed was not absolute, but was a mere security for a debt. This the bill does not do. Keithley v. Wood, 151 Ill. 566. In our opinion, upon the averments of the bill, the court cannot infer that the deed and bill of sale in question was a mortgage given to secure a debt. The allegations of the bill upon this question are too uncertain and indefinite to justify any interference to that effect by a court of equity upon the facts stated.
The complainant claims no personal knowledge of any of the transactions leading up to the execution of the deed and bill of sale described in the bill, and the averments are, therefore, necessarily made upon information and belief. The bill further alleges that neither decedent nor her husband, although he was her representative, and was secretary and treasurer of the company, had any definite knowledge of many of the matters set forth in the bill. No sources of information as to the facts stated or averments made in the bill are set out. Where the averments of a bill are made upon the information of the party complaining, the sources of such information must be set out. Blondheim v. Moore, 11 Md. 365.
The bill fails to show any fraudulent representations of facts made by Morgan or his representative Worsley, or by Morgan & Wright, upon which the directors and stockholders of the Sieg Company transferred its property to Fred W. Morgan. The bill shows that the company was largely in debt; that it was in a position where it could not continue its business and meet its indebtedness; that its creditors, large and small, were pressing their claims, and upon the giving of the mortgage to Morgan & Wright the smaller creditors obtained judgments and filed bills in Illinois, and that the Sieg Company was unable to pay its debts and continue in business without assistance. The Sieg Company seems to have accepted the assistance of Fred W. Morgan and Morgan & Wright, in its financial difficulties, and by malting the deed and bill of sale in question, secured the contract of responsible parties to pay off its indebtedness; and there is no showing in the bill that the consideration thus agreed upon with the company was not fully performed and carried out by the defendants, Fred W. Morgan and Morgan & Wright, or that it was not adequate and reasonable.
There is no allegation in the bill as to the respective values of the real estate and personal property. Construing the bill against the pleader, the bulk of the value was in the personal estate. This, however, appears from the bill, for the inventory of partly and completely manufactured bicycles is shown to amount to $22,301.15. The large schedule of tools and machinery may be fairly assumed to be worth as much or more than the goods manufactured and in course of manufacture. The statute relied upon (R. S. Ill., Chap. 95, Sec. 12) has no application to the personal property. It applies to deeds of real estate intended only as mortgages. The representations of Worsley, which it is claimed the corporation relied on, were that Morgan had a use for the property—that he would be able to sell it, and that it would help him in his deal with the Bicycle Company. These statements themselves showed plainly that Morgan did not intend the transaction as a mortgage. He was getting a clear title to the property on which he and Morgan & Wright then held two past due mortgages, and was giving a discharge of the indebtedness in return. The statute, therefore, could not apply to the deed conveying the real estate.
The bill avers that Morgan refused to give any writing of defeasance, but that his agent said that he could be trusted to do what was right. No obligation was, therefore, assumed, either by Morgan or his agent, and Morgan or Morgan & Wright, were under no obligation or duty to return any part of the property or the proceeds, according to the averments of the bill, to the Sieg Company. “This court has often held that where a conveyance is in form absolute in order to change its character to that of a mortgage, the proof must clearly and satisfactorily show that such was the contract and intent- of the parties.” Strong v. Strong, 126 Ill. 301. The bill must aver the facts showing the contract and intent of the parties.
During all the years that elapsed after the transaction and before the filing of the bill, no averment is made tending to show that the Sieg Company regarded itself as still owing an indebtedness to Morgan and Morgan & Wright, and that it was eventually to pay the indebtedness. Nothing is shown by the bill of any obligation to pay any indebtedness, or of the holding of the property in trust as mortgagee in possession, save and except what must be regarded as the' inferences of the pleader, who knew nothing of the transaction and possesses no information in regard to it, and discloses no sources of information. There is no basis for any implied promise on the part of Morgan, or Morgan & Wright, to pay back any surplus that might be realized from the property conveyed; nor is there any averment showing that the Sieg Company agreed to keep its debt alive and thus place Morgan & Wright, or Morgan, in the position of a mortgagee, or mortgagees in possession. Nothing is shown except from the inferences of the pleader, which are not admitted by the demurrer, that the parties intended that the transaction involved in the deed of conveyance and bill of sale was intended as a mortgage by the parties. In the absence of a corporate intention that the bill of'sale and the deed should be considered as a mortgage or mortgages, and that the debt secured thereby was to continue, the stockholder filing this bill is bound by the corporate act, and cannot be heard to allege a different effect for the conveyances of the corporation from that given them by the corporation itself. Allen v. Wilson, 28 Fed. Rep. 677; 2 Clark & Marshall on Corporations, Sec. 544; 1 Morawetz on Corporations, 2d Ed., Sec. 244.
The bill does not show any corporate act making the bill of sale and the deed mortgages. The representations shown by the averments of the bill were made to two of the three directors of the corporation before any corporate action was taken. On the contrary, this theory of the plaintiff’s action is negatived by a fair construction of the corporate act. We do not think that representations made on behalf of the grantee of the deed and bill of sale to individual members of the board of directors of the Sieg Company before the board meeting, would impress upon the bill of sale and deed the character of corporate mortgages, when that character is negatived by the resolution passed by the stockholders. The complainant’s decedent participated in the corporate act, and by her representative, signed the deed and bill of sale in question, having voted to authorize the corporation to execute them.
Tn our opinion, the averments of the bill fall far short of any proper showing that the complainant had made application to the board of directors at any time, requesting such board to proceed to have the deed and bill of sale declared mortgages. No facts are shown by the bill, making it appear that the corporation has refused to act, or that the application to the corporation would be futile and useless. Baker v. Admr. of Backus, 32 Ill. 79; 2 Clark & Marshall on Corporations, See. 543.
A mere averment that Week has moved away and has no further interest as a stockholder in the company and that Sieg is friendly to the defendants named in the bill does not furnish a sufficient excuse, in our opinion, for failure to request the corporation to act.
This bill was filed some six years after the deed and bill of sale were made. A bill to redeem from a chattel mortgage, if maintainable at all, must be prosecuted with promptness and diligence. We do not think this bill was filed within a reasonable time, and before the parties had changed their positions. McDearmon v. Burnham, 158 Ill. 55; Walker v. Warner, 179 Ill. 16. This rule applies with stronger reason, we think, to a bill by a stockholder not in his own right, but asserting a corporate right. By some authorities laches for two years has been held sufficient to defeat the stockholder’s right to file such a bill. Chicago, etc., R. R. Co. v. Northern Trust Co., 90 Ill. App. 460; Kent v. Quicksilver Mining Co., 78 N. Y. 159; Babe v. Dunlap, 51 N. J. Eq. 40.
Laches appearing on the face of a bill is a proper defense upon demurrer. Henry County v. Winnebago Swamp Drainage Co., 52 Ill. 454; Ilett v. Collins, 103 Ill. 74; Turner v. Littlefield, 46 Ill. App. 169.
An alleged agreement is set out in this bill, purporting to have been entered into on October 28, 1898, between F. W. Morgan, Walter E. Lindsay and the Charles H. Sieg Manufacturing Company, by which it appears that Morgan agreed to advance $15,000, and Lindsay to advance the cash to buy in claims at twenty cents on the dollar, and to accept the Sieg Company’s undertaking to make five thousand wheels and pay part in cash therefor, and to discharge the receivers, and providing that the company would pay $10,000 on the first mortgage in one year, and the second mortgage should remain unreleased until certain contingencies should happen, but which have never happened, and the company would pay Morgan & Wright $20,000 in one year and give endorsed paper therefor, and that the $20,000 of Osborne stock was to be transferred and deposited with the other stock as security for the repayment of the advances, does not appear by the bill to have been acted upon by the parties to the agreement or any of them. The bill shows that it was never submitted to or voted upon or approved by the board of directors of the Sieg Company. We are unable to decide from the bill what, if anything, was done under the agreement, and we cannot discover that it was ever in any manner carried into effect. At all events, it seems to have been subsequently abandoned or merged into the deed and bill of sale made in August, 1899. The averments of the bill are so vague and indefinite with reference to this agreement that we cannot see that any equity in favor of the complainant arises out of it, or that it in any way supports any other equity shown by the averments of the bill.
The bill does not show by what means or in what manner the property conveyed by the deed and the bill of sale passed from the possession of the Wisconsin court to any of the' defendants in the cause, or what disposition was made of the property in the foreclosure proceedings. The bill shows that the property came into the possession of the court, or of the receiver of the court, in a foreclosure proceeding instituted by Morgan & Wright, but it does not show that thereafter the Sieg Company ever obtained possession of the property, or that the defendants obtained possession of the property from the receiver, and the only inference that can be drawn from the averments of the bill is that if defendants came into possession of the property after it passed into the possession of the receiver of the court, it must have been through and by means of a foreclosure sale to such defendant or defendants. In that event, we are unable to discern from the bill any equities which can be asserted in behalf of the Sieg’ Company to the proceeds of the property, or the property itself, or any surplus in the proceeds of the property, in favor of the Sieg Company.
In our opinion the decree of the court sustaining the demurrer of the defendant is correct, and must be affirmed.
Decree affirmed.