California Supreme Court Dec 18, 1897 No. S. F. No. 1011Published
Before: Chipman
Synopsis
Mining Corporations—River Mining—Use of Dredging Boat—Failure to Post Accounts—Statutory Liability of Directors.—A corporation organized under the laws of this state for the purpose of mining, which carried on mining operations in the bed of the Sacramento river, by the use of a dredging boat, and appliances for the purpose of extracting gold from the debris in the bed of the stream, is within the provisions of the act of April 23,1880, for the better protection of the stockholders in such corporations, and the fact that the purpose of the corporation was very feebly prosecuted, and that the work done was without profit, cannot dispense with or excuse the discharge of the duty of the directors to post an itemized account or balance sheet in the office of the corporation, as required by the terms of that act, and, upon their entire failure so to do, they are liable under the statute to a judgment at the suit of a stockholder for the sum of one thousand dollars liquidated damages, as penalty for the violation of that act.
Id.—Intentional Failure of Directors—Case Distinguished—Ignorance of Law.—The case of Eyre v. Harmon, 92 Cal. 580, in reference to the necessity of a willful and intentional violation of the statute by the directors of a mining corporation, has no application where there is an entire failure of the directors to comply with the statute, and no facts of excuse are set forth, or attempted to be proved other than their ignorance of the statute.
Id.—Construction of Statute—Penal and Remedial Act.—The act of April 23,1880, for the better protection of stockholders in mining corporations is not only penal in its nature, but it is also remedial and of much consequence and value to stockholders, and it must receive a construction with reference to its beneficent objects as well as to its penal character.
Id.—Immaterial Evidence—Bad Faith of Plaintiff—Discharge from Ser vice—Revenge—Knowledge of Accounts.—Evidence of letters of the plaintiff offered for the purpose of showing that the suit was brought in bad faith “solely 'to get even with defendant for removing him from his berth of assistant superintendent,” and not offered for purposes of impeachment of the plaintiff as a witness or to contradict his testimony, was properly excluded as immaterial; nor can the fact that plaintiff, by reason of his connection with the company, had knowledge of the accounts, and had the means of learning about them after his discharge, excuse noncompliance of the directors with the law.
CHIPMAN, C. This action is brought under the act approved April 23,1880, entitled “An act amendatory of an act for the better protection of the stockholders in corporations formed under the laws of the state of California for the purpose of carrying on and conducting the business of mining, approved March 30, 1874.” Trial by the court, and plaintiff had judgment for $1,000 liquidated damages and as penalty for the violation of said act. From the judgment and order denying defendants’ motion for a new trial this appeal is taken on a statement of the -case.
It appears from the evidence that the corporation of which defendants were directors, and in which plaintiff was a stockholder, fitted up a boat for dredging for gold in the sand in Oakland creek (Alameda county), but it does not appear that any work was done there. The boat was moved up the Sacramento river, and the dredger operated more or less in that river near sand below the mouth of the American river during the months of January, February, and March, 1896, and finally the scheme was abandoned as a failure. Plaintiff was employed as assistant superintendent about three months, and ceased work as such on the last of January, 1896. The only mining operations carried [360]on were with the dredger, and the plan was to elevate the mud and sand from the bed of the river by an endless chain with buckets on it, and discharge the contents of the buckets in screens on the boat, and there, by an amalgamator and concentrator, save the gold supposed to be in this debris. There were never any returns from this mining. The books of the secretary showed expenditures of $617.77, and receipts $759.20, for the month of January; and for the month of February, disbursements $345.10, and receipts $319.10. All the receipts came from subscriptions of stockholders. It is not claimed by defendants that they at any time complied with the statute by making and posting the itemized accounts or the balance sheet required by its provisions.
1. Appellants contend that the dredging boat was merely experimental, and its operations were not “mining” in the sense of the statute of 1880; that the gathering of gold dust from the bottom of the Sacramento river or any other navigable stream would not be such. “mining”; that the bottoms of navigable rivers are not the subject of private appropriation by individuals for the purpose of mining; that the shores of navigable rivers and the soil under the rivers belong to the state and not to the United States. We do not feel called upon to examine the numerous authorities submitted in support of the foregoing propositions.
It was held in Francais v. Somps, 92 Cal. 503, that the act in question applies to all corporations formed for the purpose of carrying on and conducting the business of mining. It is admitted that the corporation here was formed for that purpose, and it is also admitted that it carried on to some extent the business for which the company was organized, to wit, to take gold from the bed of the Sacramento river.
It is true in this case, as it was in Francais v. Somps, supra, that the purpose of the corporation was very feebly prosecuted. But it Was there said: “The itemized accounts or balance sheets and reports would have shown very little, but that little might, in some cases, be of interest to stockholders, and we cannot apply the maxim, De minimis non curat lex, in this case, because we think the law does care for little things.”
The principal contention is, that the particular work done by [361]the company was not “mining,” and therefore appellants Avere not called upon to make any reports whatever under the act. It may be that if a corporation formed for mining purposes should engage in business entirely foreign to those purposes, and having no sort of relation to them, that the act would not require the directors to do those things mentioned in it. But that was not the case here. The company was organized “for the purpose of securing and working placer mines, to deal in mines and mining claims, and the erection of plants for working the same, and to do any other business connected thereAvith as the board of directors shall deem necessary.”
It was held in Miles v. Woodward, 115 Cal. 308, that the law applies not only to corporations which extract gold or silver from ores, but equally to those which extract it by the methods of placer or hydraulic mining. Among the various methods of placer mining those of turning river and creek channels to expose the placers in their beds, and of dredging the beds where it is impracticable to divert the channel, are well known and recognized. Placer mining is simply extracting the gold from placers, wherever situated—in dry channels and in channels for the time filled with water. It does not make the process any the less placer mining that the gold is found in deep channels, in naigable streams, or in estuaries or creeks and rivers where the sea ebbs and flows. One of the defendants testified: “We went there for the purpose of raising the sand from the bottom of the Sacramento river for the purpose of getting what gold there was out of it.” He testified further: “We filed mining claims on the river and had them recorded. ..... This was all the mining property we had.”
It is immaterial, if true, that the river bed where navigable was not subject to location as a mining claim; the company didt mining there, or endeavored to do so, and expended money of the corporation in the effort; and the requirements of the Isav or the consequences of its violation cannot be evaded by showing that the company was Avrongfully searching for gold in a navigable stream. We do not think this view of the statute extends it beyond its ohvious purpose and intent, as is claimed in appellant’s second point. We are but following a reasonable construction already given the act in many cases.
[3622]. It is contended that the violation of the statute must be willful and intentional, and that no penalty can be incurred or imposed unless the breach be with express reference to violating its terms or with criminal intent. This it is claimed was so held in Eyre v. Harmon, 92 Cal. 580.
The language and meaning of the court upon the point, in the case cited, were to some extent explained in Miles v. Woodward, supra, in the opinion by Mr. Justice Henshaw. By reference to Eyre v. Harmon, supra, it will be seen that a statement of receipts and expenditures, duly verified, was posted, and it was admitted that this statement was a balance sheet, and that the statement was posted for the purpose of complying with the law and was in the form used ever since the passage of the act, and no stockholder had ever complained until that suit was brought. It was in view of these facts, the court said, that section 3 of the act “simply makes the directors liable, to the penalty named, for a willful failure to have such reports made and accounts posted as are referred to in section 1. If the directors cause the reports of the superintendent to be made, and the monthly accounts to be posted as'required by the statute, the law is complied with; otherwise not, and they incur the statutory penalty-if this failure to do so was intentional on their part.”
It was said in Schenck v. Bandmann, 81 Cal. 231, where this question of intent was under discussion (and which case, it was said in Miles v. Woodward, supra, should be read with Eyre v. Harmon, supra): “It may be that under possible circumstances the directors of a corporation, when they have failed to comply strictly with the law, should be held excused”; giving an example where circumstances rendered compliance impossible; “but, if so, the facts must be within the knowledge of the directors who are sued and should be set forth and proved.”
In the case before us, no attempt to comply with the law was made, and there is nothing to bring the appellants within the facts appearing in Eyre v. Harmon, supra. The only evidence offered excusing the admitted neglect and failure of defendants was by way of the following question put to one of the defendants as a witness: “What'did you know about this mining statute that plaintiff now invokes?” The court, properly we think, sustained an objection to the question. The maxim, “Ignorantia [363]legis neminem excusat” applies. Where there has been an entire failure to comply with the law, the mere ignorance of the law constitutes no exculpation. The act in question is not only penal in its nature, but it is also remedial and of much consequence and value to stockholders. (Eyre v. Harmon, supra; Shanklin v. Gray, 111 Cal. 88.) It must therefore receive a construction with reference to its beneficent objects as well as to its penal character.
3. The only remaining points found in appellants’ brief are that the action was not brought in good faith, and that the court erred in excluding certain letters written by plaintiff which, it is claimed, would have shown that the motive of plaintiff in bringing the action “was solely to get even with the defendants for removing him from his berth of assistant superintendent.”
(a) It may be true that plaintiff had knowledge, by reason of his connection with the company, of the accounts while Jie was in its employ, and that he had the means of learning about them after he was discharged by going to the books, but we think that such knowledge and means of knowledge would not excuse noncompliance with the law; there may have been other stockholders. (Shanklin v. Gray, supra.)
(b) When defendants offered certain letters of plaintiff in evidence, counsel stated that his object was to “show that this whole proceeding was instituted by plaintiff out of revenge.” The Court: “If you wish to show his animus you can do that as a witness. You can question him as to his feelings toward the parties on cross-examination of him as a witness, simply, but not as a party. If he have a cause of action—if he was suing on a note—it would not be competent to show that he had any difficulties with the defendants. I will sustain the objection.” The offer was not made for purposes of impeachment of the plaintiff as a witness or to contradict his testimony. The avowed purpose of counsel was to show revenge or animus, and nothing more. We see no error in the ruling.
The act of 1880 has been often challenged in this court. Efforts have been made to emasculate it by construction; its constitutionality and reasonableness have been assailed, without success. No doubt it has been used as an engine of malice and revenge. Still its objects are wise and praiseworthy and tend to [364]the protection of stockholders of corporations. It was amended February 26, 1897 (Stats. 1897, p. 39), so as to coniine its operation to corporations “whose stock is listed and offered for sale at public exchange,” and also in certain cases to limit recovery to the damage actually sustained. The amendment, however, came too late to serve the defendants.
It is recommended that the judgment and order be affirmed.
Searls, C., and Belcher, C., concurred.
For the reasons given in the foregoing opinion the judgment and order are affirmed.
Harrison, J., Garoutte, J., McFarland, J.
Hearing in Bank denied.
AI Brief
AI-generated · verify before citing
Holding. Directors of a mining corporation are liable for the statutory penalty for failing to post required financial reports, regardless of whether the mining operations were successful, experimental, or conducted on navigable waters, and ignorance of the law is no defense.
Issues
Whether dredging for gold in a river constitutes 'mining' under the Act of 1880.
Whether directors are liable for the statutory penalty for failing to post reports when they made no attempt to comply with the law.
Whether a plaintiff's motive for bringing a statutory penalty action is relevant to the merits of the claim.
Disposition. affirmed
Quotations verified verbatim against the opinion
“Where there has been an entire failure to comply with the law, the mere ignorance of the law constitutes no exculpation.”