Fox v. Mackay

California Supreme Court Jun 14, 1899 No. S. F. No. 1039Published

Before: Garoutte

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Holding. The court affirmed the trial court's judgment, holding that the evidence supported the findings that the milling contracts were fair and honestly performed and that the defendants did not control the mining corporation or commit fraud.

Issues

Whether the evidence supported the trial court's findings that the milling contracts were fair and honestly performed.
Whether the defendants exercised control over the mining corporation's board of directors to commit fraud.

Disposition. affirmed

Quotations verified verbatim against the opinion

“These findings of fact are strong against the allegations of the bill, and, unless overthrown, stand as a stone wall, forever barring a recovery by the plaintiff.”

“As to the milling contract of December, 1885, entered into with the mining company by Jones, the court has found that it was a fair contract for the mining company, and was honestly performed, and there is an abundance of evidence to support that finding.”

“In view of the fact that neither Mackay nor Flood was ever a director of the mining company, and in view of the further fact that the findings supported by the evidence declare that neither collectively nor individually did they control the directors”

Synopsis

Mining Corporation — Action by Stockholder—Alleged Fraud in Milling of Ore—Questionable Faith of Plaintiff.—In an action by a stockholder of a mining corporation for an accounting of ores claimed to have been fraudulently milled as the result of an alleged conspiracy between certain stockholders of the mining company, who had organized the milling company, the good faith of the plaintiff in bringing the action is open to question, where it appears that he purchased five shares of the stock, and held it but a single month, for the purpose of bringing the action, while the holders of the remaining two hundred and fifteen thousand nine hundred and ninety-five shares appear to he satisfied with the past management of the corporation, and that the plaintiff also brought five similar actions against other corporations on the same day.

Id.—Findings and Evidence Against Fraud.—Findings supported by evidence showing that the contract for the milling of the ore was fair, and that the milling was honestly done, and yielded an average per cent of the pulp assay in excess of that required by the contract, though in certain months of incompleted runs the yield was less, and that none of the stockholders of the mining company who organized the milling company were directors of the former, or participated in or controlled in any manner its action in thé making of the contract, are a bar to any recovery by the plaintiff.

Id.—Concealment of Interest in Milling Contract—Duty of Stockholders.—The stockholders of the mining corporation, merely as such, owed no duty to inform it of their interest in the contract made with the milling company, and the concealment of such interest is not a fraud per se upon the mining company, if its action in making the contract was not controlled by them in any manner.

GAROUTTE, J. —Plaintiff brings this action as a dissatisfied stockholder and on behalf of the Consolidated California & Virginia Mining Company, which corporation is made a party defendant. The defendant, the Comstock Mill and Mining Company, was never served with process and is not interested in the litigation. John W. Mackay and John P. Jones are the real parties defendant. The corporation represented in this litiga[60]tion by plaintiff has two hundred and sixteen thousand shares. Plaintiff is the owner of five shares of this stock.

By the bill a conspiracy is charged against Mackay and Flood to defraud the Consolidated California & Virginia Mining Company. It is claimed that at all times prior to Flood’s death he and Mackay controlled this mining corporation, and that subsequent -to Flood’s death Mackay alone controlled it. That upon December 23, 1885, the mining company entered into a three years’ contract with J. P. Jones for the milling of its ores; that this contract was entered into by the connivance and procurement of Mackay, Flood, and Jones; that Mackay and Flood were interested with Jones in the profits of the contract, and also controlled the directors of the mining company, and that the contract was greatly to the disadvantage and loss of the mining company; and that by Jones’ contract he agreed to transport the ore from the dump to the mill, and mill the same for six dollars per ton, returning to the mining company at least seventy per cent of the pulp assay. It is next alleged that upon January 8, 1886, the Comstock Mill and Mining Company was organized by Jones, Mackay, and Flood, and that this milling contract was thereupon assigned to said milling company. It is further charged that upon December 24, 1886, this milling contract was modified and changed at the instigation of Mackay, Flood, and Jones, to the great loss of the mining company. It is further alleged that forty-one thousand tons of ore were milled, and less than seventy per cent of the pulp assay returned upon such ore. By the bill, reduced to its lowest terms, it is claimed that Mackay and Flood are the moving, controlling parties in both corporations, and by the contract of milling and the unskillful and careless manner of milling, and by violations of the contract of milling, they defrauded the mining company out of immense sums of money. After the introduction of evidence upon issue joined, findings of fact were made by the trial court. These findings of fact are strong against the allegations of the bill, and, unless overthrown, stand as a stone wall, forever barring a recovery by the plaintiff. Realizing these conditions, plaintiff has assaulted the findings as without support in the evidence. A few errors of law in the admission and rejection of evidence are relied upon by plaintiff, but we find them of such minor importance as not to demand consideration.

Fox v. Mackay

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