Beach v. Cooper

Temple, J. The plaintiff, a stockholder in the Alexander Mining Company, commenced this action against the individual defendants, who are the directors of the company, making the corporation also a defendant. The suit was brought on behalf of the corporation, alleging numerous frauds committed by the directors, and praying an account, and a recovery by the corporation of moneys of which it had been so defrauded. Judgment was rendered for the plaintiff, and this appeal is from the judgment, and from an order denying a new trial.

The corporation was formed in 1877 for the purpose of mining, and owned a lode of gold and silver bearing o,re in the state of Nevada. It had constructed expensive works upon the mine, mostly upon credit, and was largely indebted, and in the year 1880 found itself financially embarrassed and the demands against it pressing.

Defendants J. B. Cooper, McNeil, and San Pedro owned a large majority of the stock of the corporation. Cooper and San Pedro owned individually several mining claims, located contiguous to or near the mine owned by the corporation. They concluded to sell the mines owned by themselves and the corporation. Accordingly, in June, 1880, Cooper and San Pedro executed a bond for the sale of their individual mining property and two thirds of the capital stock of the corporation, to Baldwin and McLaughlin.

The latter sent to New York one Welsh to effect, if [101]possible, a sale of the mines owned by the individuals, and also the property of the corporation. McLaughlin loaned money for the use of the corporation to the amount of sixty thousand dollars. Defendants Cooper and San Pedro became personally liable for this money. The individual defendants then endeavored to sell the property in New York, and at the same time to borrow, if possible, a large sum of money to meet the urgent demands.

Substantially it is found, —

That in December, 1880, the defendants caused the corporation to make a promissory note, payable to one L. E. Chittenden of the city of New York, for the sum of two hundred and fifty thousand dollars, with interest at the rate of nine per cent per annum, secured by mortgage upon all the property of the corporation.

That the defendant Ball, who was vice-president of the corporation, proceeded to New York, and while there, as the agent of J. B. Cooper and San Pedro, entered into a conspiracy with Brown, Chittenden, and Welsh to cause the note and mortgage to be assigned to Brown for the sum of one hundred and forty thousand dollars; that this purpose was accomplished and the money was paid to J. B. Cooper individually, and was used by him in violation of his trust, and not paid to the corporation until long afterwards; that as part of the fraudulent scheme they caused the corporation “to execute another note for sixty-five thousand dollars to Brown on the fifth, day of April, 1881, which was antedated as of December 22, 1880, also secured by mortgage upon the property of the corporation; that there was no valuable consideration whatever for this note received by the corporation.