Cerro Cobre Development Co. v. Duvall

147 P. 695 | Ariz. | 1915

CUNNINGHAM, J.

Upon the trial the controversy centered about the terms and conditions of the Sharples-Duvall contract of April 12, 1907, the defendant contending that Sharpies purchased 150,000 shares of the Cerro Cobre Development Company’s treasury stock, paying therefor 10 cents per share, or $15,000, and, as an inducement to purchase the said stock, W. B. Duvall offered to give him 750,000 shares of his, Duvall’s personal stock as a bonus, and that Sharpies accepted that offer, and the $15,000 was. paid upon no other condition. On the other hand, Duvall contends that the 750,000 shares of stock was transferred to Sharpies in consideration of Sharpies’ promise to finance the mines. Both parties agree that Sharpies bought and paid for and became the absolute owner of the 150,000 shares of Cerro Cobre Development Company stock. If Cerro Cobre Development Company had issued Sharpies the 750,000 shares of its stock •on condition that he finance the mines, and he failed to perform that condition, he would be liable to the Cerro Cobre Development Company for a breach of his contract. Sharpies could not avoid liability by showing that he had made a contract with and paid W. B. Duvaill to furnish the money that he (Sharpies) had agreed to furnish, and therefore the Cerro Cobre Development Company must look to Duvall for the damages. Such a showing would not present a defense, for the reason there is shown no contractual relation between the Cerro Cobre Development Company and Duvall by which the duty of Duvall to the Cerro Cobre Development Company was violated. That is this case. Sharpies owed no duty to the Cerro Cobre Development Company to furnish the required sum of money by his contract with Duvall, if the contract did or did not contain the condition Duvall contends for. In the event the contract was, as Sharpies contends, that contract was fully executed when Sharpies paid the $15,000 to the Cerro Cobre Development Company and he received the 150,000 shares of its treasury stock. If he paid the money for the treasury stock, and was induced to do so by Duvall’s promise to give Sharpies 750,000 shares belonging to Duvall as a bonus in consideration that Sharpies would advance the additional money required to finance the mines, then Sharpies assumed a duty, not to the Cerro Cobre Development Company, but to Duvall, because Sharpies’ promise was to Duvall, and the consideration for the promise moved from Duvall. It is not contended that the contract was made by Duvall for the Cerro Cobre Development Company, or that the contract was a contract between Sharpies and the Cerro Cobre Development Company represented by Duvall. The consideration paid to Sharpies was paid with the individual property of Duvall. Any duty that such contract cast upon Sharpies was owing to W. B. Duvall, and not to the Cerro Cobre Development Company-, in either view of the contract. The controversy over the terms and conditions of the Sharples-Duvall contract was immaterial to a decision of this cause.

The defendant, Cerro Cobre Development Company, on April 26, 1907, accepted the offer of W. B. Duvall by which Duvall proposed to transfer all the capital stock of the Sierra de Cobre Development Company, S. A., to it in consideration of its issuing to him all of its capital stock. The stock was issued to Duvall, and Duvall transferred the stock of the Sierra de Cobre Development Company, S. A., to defendant. At the same time, and as a part of this transaction, the following was transacted:

“To provide the necessary funds for the different properties now controlled by this company (Cerro Cobre Development. Company), said W. B. Duvall assigns for $1 in hand paid and. other valuable considerations, one million, four hundred, ninety-nine thousand and nine hundred ninety-seven (1,499,-997) shares of the capital stock of this company to the treasury. ’ ’

Duvall thereby provided the corporation with a property to. be used by it to raise the necessary money. Out of a part of' this property it raised $15,000 by a sale of 150,000 shares to Sharpies. Thereupon Sharpies and Duvall became the controlling stockholders of defendant company. In order to protect their respective rights, Sharpies advanced $15,000 in money to the corporation, and the money so advanced was. used by the corporation for the Sierra de Cobre Devlopment Company, S. A., mines. Sharpies refused to furnish the Cerro Cobre Development Company with any more money. Duvall then borrowed $15,000 and secured the loan with his individual note and collateral belonging to him. He ascertained that his attorney in fact had failed to carry out instructions, and that the mines and options remained in his name and had not been placed in the name of the Sierra de Cobre Development Company, S. A. Five thousand dollars had been paid on the option, and $95,000 of the purchase price remained unpaid, and $15,000 of that sum would mature on October 1, 1908. He believed that he had made a contract with P. M. Sharpies by which Sharpies had agreed to furnish the money with which to pay the purchase price of the mines covered by the optional contract, and Sharpies had refused to furnish the money, and thereby had forfeited all right to the 750,000 shares of stock. In order to protect his rights, Duvall disregarded his promise to transfer the option and convey the mines standing in his name, to the Sierra de Cobre Development Company, S. A., and caused the option to be transferred, to and the mines conveyed to the Tecolote Copper Company, S. A., a corporation he caused to be organized for that purpose, and took all, save three qualifying shares issued to. directors, of the stock of that company and gave to that company $15,000 which he had borrowed. Then the Tecolote Copper Company, S. A., paid the $15,000 installment due on that day and Duvall caused a new optional contract to be drawn, executed, and delivered by the Aguilars and Torres to the Tecolote Copper Company, S. A., providing for the payment of $30,000 .on May 1, 1909, and a final payment of $50,000 on November 1, 1909. The contract of the Aguilars and Torres with W. B. Duvall was in force on October 1, 1908, providing for a payment of $15,000 on that day, the payment of $30,000 on May 1, 1909, and a final payment of $50,000 on November 1, 1909. Such payments, with the payment of July 1, 1907, which had been made, constituted the full purchase price of $100,000 required to be paid for the mines.

There is no pretense that the Sierra de Cobre Development Company, S. A., or its holding company, the Cerro Cobre Development Company, took any part in the transaction of October 1, 1908, by which the Tecolote Copper Company, S. A., acquired the transfer and conveyance therein involved, or consented to any such transaction or ratified the same at any subsequent time. Consequently, applying the well-recognized rule of equity that equity will regard that as actually done which ought to have been done, Duvall had no rights in the mining claims to convey to the Tecolote Copper Company, S. A., nor any rights in the optional contract to surrender to the Aguilars and Torres, for the reason he had promised to convey his rights in the mines and transfer and assign his rights in the optional contract to the Sierra de Cobre Development Company, S. A., for a consideration of all its capital stock, and he had received and retained this consideration. Equity will regard that transaction as one in which W. B. Duvall had actually conveyed and assigned said properties as he promised. "When Duvall caused the properties to be transferred to the Tecolote Copper Company, S. A., it took only such title as Duvall had, because it was chargeable with full knowledge of the matters and conditions under which the title to that property stood in Duvall’s name.

If Duvall had directly paid the $15,000 from his own funds upon the optional contract, the payment would have accrued to the benefit of the Sierra de Cobre Development Company, S. A., and its stockholder, the Cerro Cobre Development Company, and those corporations would have become the debtors of Duvall to the amount of the money paid. Duvall, indirectly, caused the same thing to be done. He surrendered the optional contract which did not belong to him, before it expired. He paid the Tecolote Copper Company, S. A., $15,000 for all of its stock, and then, as controlling stockholder, but to his individual interest, caused that money to be paid to preserve his rights to the property under option. The Tecolote Copper Company, S. A., thereby became the holder of an interest in the mines, but it held that interest as Duvall had previously held it, in trust for the use of the Sierra de Cobre Development Company, S. A., and that corporation became its debtor to the amount paid for its benefit. When the subsequent payments were made to the Aguilars and Torres by Duvall’s agent the West Coast Smelting & Refining Company, the Sierra de Cobre Development Company, S. A., became its debtor to the amounts so paid, and when the said West Coast Smelting & Refining Company paid the P. M. Sharpies note, in effect it thereby discharged the installment due and payable by the Sierra de Cobre Development Company, S. A., on the Aguilar-Torres option on May 1, 1909, and thereby became the creditor in that sum.

By reason of all the corporations participating in the transactions resulting in the West Coast Smelting & Refining Company acquiring the beneficial titles of the mining claims and the mines affected by the Aguilar option, being chargeable with full knowledge of Duvall’s relation to the titles, and Duvall being the controlling spirit in each of the steps taken by which the West Coast Smelting & Refining Company furnished the money and received the said titles; it received the titles burdened with all the infirmities incident thereto while the property stood in the name of its real grantor, W. B. Duvall. The effect of the various transactions is that the Sierra de Cobre Development Company, S. A., is still entitled to have the Tecolote Copper Company, S. A., convey to it the mines denounced in the name of W. B. Duvall, and to have the Tecolote Copper Company, S. A., convey to it the mines covered by the Aguilar-Torres option, when it has satisfied the equities of the holder of the record title—the holder of the Duvall title in the mines denounced by him, and the holder of the Aguilar and Torres title to the mines held under the Duvall option. The Sierra de Cobre Development Company, S. A., lost none of its rights in the property by reason of the numerous transactions resulting in the Tecolote Copper Company, S. A., succeeding Duvall and the Aguilars and Torres as the holders of the record titles to the property involved, and by reason of the West Coast Smelting & Refining Company discharging Duvall’s liabilities to the Aguilars and Torres, and certainly Duvall acquired none of defendant’s rights by those transactions.

The defendant had no beneficial interest in the 1,000,000 shares of stock issued to Duvall as trustee. That stock represented no property belonging to defendant in any sense. By means of the resolution of April 17, 1909, Duvall offered to give the Cerro Cobre Development Company the beneficial interest in the 1,000,000 shares of stock, in consideration that it ratify the sale of the five mines denounced to the Tecolote Copper Company, S. A., the beneficial title to which was vested in the Sierra de Cobre Development Company, S. A. The offer of Duvall, at most, was an offer which, .if accepted as proposed, would have resulted in a contract; but, on November 29, 1910, the Cerro Cobre Development Company, by a positive corporate act, refused the offer as made by Duvall, and attempted, it seems, to accept that part of the offer beneficial to it, viz.: the 1,000,000 shares of West Coast Copper Mines Company stock, but rejected the conditions under which the offer was made, viz.: .that the stock would, stand in the name of W. B. Duvall, as trustee, for 10 years, etc. The offer, not having been accepted as made, failed to become a contract of the parties, and conferred no rights upon either. The defendant company having refused the condition, in effect rejected the entire offer.

If said transaction had been effected, as attempted, the result would have been to vest the equitable and legal title of the said five mines in the Tecolote Copper Company, S. A., and the beneficial title in the West Coast Copper Mines Company as the stockholder of the Tecolote Copper Company, S. A., and in the Cerro Cobre Development Company as the controlling stockholder of the West Coast Copper Mines Company, but the Cerro Cobre Development Company refused to relinquish its equities in the five mines, as held by the Sierra de Cobre Development Company, S. A., by a corporate act positive in its nature, repudiating and declaring void the attempt of Duvall to bring about the change in its equities. The result was that so far as the rights of the defendant are concerned, its equities in the properties were unchanged, and Duvall retained all the property in the stock that he acquired when he received it. When the Cerro Cobre Development Company rejected the stock, the word “trustee” became descriptive of the person and conferred no rights upon this defendant.

There were no disputed matters of fact material to the case for the decision of the jury. The questions presented are questions of law for the court; all matters of fact material to the case being without dispute.

Upon the whole ease the verdict of the jury is correct, because under the undisputed evidence the defendant was not entitled to recover in any event.

The judgment is affirmed.

ROSS; C. J., and FRANKLIN, J., concur.

Rehearing pending.