Pendery v. Carleton

87 F. 41 | 8th Cir. | 1898

THAYER, Circuit Judge,

after stating the case as above, delivered the opinion of the court.

It is urged in the first place, as a sufficient ground for the reversal of the decree of the circuit court, that the amended bill of complaint on which the case was tried differs so essentially from the original bill that it cannot be regarded as an amendment thereof, and ought to have been rejected by the trial court. We would doubtless be justified in overruling this contention for the sole reason that it was not urged in the trial court in any appropriate form, or in any form whatever, so far as we can discover. When, upon the first hearing of the case, the original bill was dismissed as to the then defendant William S. Ward, and the complainant by the same order was granted leave to amend his complaint as to the other defendants, no objection was made or exception taken to such action. Furthermore, when the amended bill was filed no exceptions thereto were taken, or motion made to strike it from the files, on the ground that the facts averred were essentially different from those alleged in the original bill, and that the amended complaint amounted to an abandonment of the original cause of action. It is true that four of the defendants joined in a demurrer to the second pleading on the general ground that the complainant was not entitled to the relief prayed for therein, but in due season they filed answers to the amended bill which were substantially the same as the answers which they had previously interposed to the original bill. Afterwards they took considerable testimony in support of the allegations of their respective answers, and eventually submitted the case for such final decree as the court might deem proper to enter, without a suggestion, so far as the record discloses, that an error to their prejudice had been committed in allowing the amended complaint to be filed. The defendants below were apparently willing to meet the charges contained in the amended bill, without reference to the manner in which they had been made. Under these circumstances, we are of opinion that they have waived whatever right they may at any time have had to object to the amended bill on the ground that it stated a cause of action different from the one alleged in the original complaint. We are not willing, however, to concede that the objection which is urged to the amended bill, based on the ground above stated, was ever tenable. The material facts entitling the complainant to relief as against the defendants other than William S. Ward are stated alike, and with the same degree of fullness, both in the original and in the amended bill. The facts so alleged in both bills are, in substance, that the mining company had received a conveyance of the complainant’s interest in the lode on the strength of its promise to issue to him 11/sz of °/<s of of its capital stock, that the promise had not been fulfilled, and that the defendants, acting as directors of the company, and with full knowledge of complainant’s rights, had caused the mining lode in question to be conveyed to the defendant Ward, with a view of depriving the complainant of his interest therein, and had thereby rendered the stock to which he was entitled, and which he ought to have received, valueless. On the first hearing under the original bill, the testimony showed to the satisfaction of the trial court that Ward was an innocent purchaser of the lode, for value; and by reason of that fact the trial court ruled that the specific relief prayed for in the original bill, namely, the cancellation of the deed to Ward, could not be granted. The complainant was accordingly required, as a condition precedent to obtaining any relief, to amend his complaint, to the end that such relief might be granted against the other defendants as the facts warranted. It may be admitted that the prayers for relief in the original and amended bills are essentially different, but we do not perceive any substantial change in the state of facts alleged in the respective bills, upon which the complainant predicated his right to relief as against the present appellants. It is not improbable, we think, that, under the prayer for general relief which was contained in the first complaint, the same decree could have been rendered by the trial court which was eventually rendered under the amended bill. We need not stop, however, on the present occasion, to consider this suggestion. It is apparent that the trial court deemed it necessary that the original bill should be amended, at least by changing the prayer for relief; and, whether that view was right or wrong, it is now unnecessary to determine. The original bill was amended to accord with the views of the lower court. The amendment consisted in changing the prayer for specific relief which was contained in the original bill, and in omitting those allegations which tended to show that the defendant Ward was not an innocent purchaser, for value, of the Portland lode. Such changes, in our judgment, do not sustain the contention that the original cause of action, as against the appellants, was thereby abandoned, and that the amended bill stated a new and independent cause of action. We think-that the second pleading may properly be regarded as possessing all the characteristics of an amended bill, and that, if any error was committed in requiring (he complainant to change the form and structure of his original bill, the error so committed was prejudicial to the complainant, rather than to the defendants.

The views last expressed will serve to dispose of another proposition, which was argued at some length in behalf of the appellants, namely, that the complainant’s right to relief is barred both by limitation and laches. This latter contention is founded altogether upon the theory that the amended bill stated a case other and different from the one which was staled in the original complaint, and that the amended pleading must for that reason be treated as an original bill filed on July 19, 1890. If this theory were tenable, it might well be that laches or limitation would be a good defense; but as we feel constrained to hold that both the original and amended bills allege substantially the same facts, and count upon the same transaction, there is no basis for the claim that the complainant has lost his rights by a failure to assert them at an earlier day. The original bill was filed in due season, to wit, on July 19, 1883; and as it stated the same cause of action, in substance, on which a recovery was eventually allowed, lapse of time cannot be successfully interposed as a defense. The litigation, since it was instituted, has progressed slowly, but we perceive no reason for holding that the complainant is solely accountable for the delay.

When the answers to the complaint were filed, it seems to have been the intention of- a part of the defendants to contend that the Portland Mining Company never promised to issue ll/*2 of 5/s of ^ of its capital stock to the complainant in exchange for a conveyance of Ms interest in the Portland lode, and to further insist that the representations to that effect which were made by «Tames Armstrong, the secretary of the company, in Ms correspondence with the complainant, were made without lawful authority, and that they were not binding upon the company. It is conceded in the briefs, however, that this position is untenable, and that the company, by accepting a conveyance from the complainant of his interest in the lode, and by retaining it, thereby became bound by the representations of Armstrong, its secretary, on the faith of which the conveyance was executed. In view of this admission, the only further questions of law or fact arising upon the record which require notice are: First, whether the damages which were awarded by the trial court aré excessive; and, second, whether the defendant Haver is jointly liable with the other defendants for such damages.

The testimony shows, without any substantial contradiction, that, when the complainant conveyed his interest in the Portland lode to the mining company, he was well aware that the company had reserved and intended to devote one-half of its capital stock, or such part thereof as might be found necessary, to realize funds for development purposes. That fact was stated, in effect, in the letter of Armstrong, the secretary of the company, on the faith of which the complainant claims to have executed a conveyance of his interest in the lode. The testimony further tends to show that all the stock of the company which was at any time issued or sold was so disposed of either to obtain funds to develop the mine, or to pay debts which had been contracted by the company for that purpose, hio stock seems to have been sold or distributed for other purposes. In view of these facts, we can perceive no reasons which will entitle the plaintiff to complain of the sale of at least one-half of the capital stock of the company. It was sold, as he was informed it would be; and the proceeds thereof were applied, as he understood they would be applied, to the development of the property, and he must be held to have assented both to the sale of at least one-half of the capital stock, and to the use which was made of the proceeds. Moreover, we do not understand that the complainant at the present time either denies the right of the directors of the mining company to sell the lode to William S. Ward, or that he questions the propriety of their action in that behalf, provided the property was at the time unproductive, and the company was without means to further develop it or make it productive. That such conditions did exist at the time of the sale is a fact concerning which we can entertain no doubt, on the testimony contained in the record. The proof shows to our entire satisfaction that, after considerable development work had been done on the lode in controversy, it proved to be of little or no value as a mineral-bearing lode, that all persons who were in any wise interested in the property were benefited by the sale thereof to the defendant Ward, and that the directors acted wisely in negotiating the sale. It is to be observed, further, that by his amended bill the complainant prays that the defendants be required to show what sums of money they have received from all sources for and in behalf of the mining company, how they have disposed of the same, and that after such accounting the defendants be required to pay to the complainant that proportion of whatever balance is found to be in their hands, to which he is entitled as the equitable owner of “/3 2 of Vo of £, or in other words, 1,430 shares of the capital stock. We are compelled to regard this prayer for relief as an election on the part of the complainant to accept in lieu of other damages such a part of the corporate assets as the ownership of 1,430 shares of the capital stock would entitle him to, after, the corporate debts are paid. The prayer is, in substance, that the defendants, as directors, may be. charged with all moneys received for and in behalf of the corporation, including moneys received from the sale of stock; that they be credited with all outlays for development work, or other legitimate corporate expenses; and that the residue in their hands be divided among the stockholders, treating the complainant as a shareholder, to the extent of 1,430 shares. We think that the complainant is justly entitled to the special relief so prayed for in his amended hill; and in view of the fact that the defendants were probably ignorant of the complainant’s right to 1,430 shares of the capital stock until after the sale of the mine, and the division of the proceeds among themselves, we are furthermore of opinion that he is not entitled to other or greater relief at this time.

The testimony contained in the record does not disclose that the mining company owed any debts at the time of the sale and conveyance of all of its property to the defendant Ward for the sum of $30,000, other than a commission of $3,000 for negotiating the sale. This latter sum was deducted from the purchase price of the mine at the time of the sale, leaving a net balance of $27,000. The money necessary for development work and other necessary corporate expenses had been obtained by sales of stock from time to time, substantially in accordance with a resolution of the directors that was passed on March 29, 1881, under and by virtue of which the directors profess to have acted in selling stock for development purposes. The evidence does not show that the four defendants who are now appellants, to wit, Pendery, Goddard, Thomson, and Sayer, ever bought and paid for an amount of stock to supply money for development purposes in excess of 5,300 shares. If other stock was issued to them, it must have represented their original interest in the lode. Some stock (but precisely how much is not shown) was issued to persons other than the four directors last named, which stock was accepted, as it seems, in payment for labor, materials, and supplies that had been furnished to the company; and, in view of that fact, it is fair to infer that a large part, and probably all, of the capital stock of the company had been sold when the company conveyed its property to Ward, and ceased to be a going concern. The four directors above named, who were in office wl^en the sale took place, admit that they divided among themselves the entire net proceeds of the sale, amounting to $27,-000, and that they did so upon the theory that they either owned, controlled, or represented the entire capital stock of the corporation, and were entitled to appropriate to their own use whatever remained of the corporate assets. They do not profess to have paid any debts of the company out of the proceeds of the sale, because all corporate debts had at that time been paid, or otherwise liquidated. It appears, therefore, that the corporation has ceased to do business; that it lias disposed of all its property, and become practically dissolved; and that four of the directors who were in office when it ceased to do business have divided among themselves a sum of money belonging to the corporation which was adequate to return to each shareholder $2.70 upon each share of stock by him held, if we assume that the entire stock had been issued when the dissolution took place. In view of these facts, we can entertain no doubt that the complainant is entitled to a portion of the fund which the directors divided among themselves on the assumption that they were the only shareholders; and, as he was the equitable owner of 1,430 shares of the capital stock of the mining coifipany, we think that he should be allowed $2.70 for each of the shares of stock by him held, or, in the aggregate, $3,861. Interest on this sum should also be allowed, at the rate of 6 per cent, per annum, from and after July 19, 1890, when the amended bill of complaint was filed. We think that no interest should be allowed prior to that date, because the defendants appear to have acted in ignorance of the complainant’s right to the 1,430 shares of stock in question when they sold the mine and divided the proceeds; also, because the complainant expressed no willingness to accept his pro rata share of the sum realized from the sale of the mine prior to filing his amended bill, but before that time demanded other and different relief, accompanied with charges of fraud and conspiracy which have not been sustained. For these reasons, we consider it inequitable to allow interest prior to the date last above mentioned.

Respecting the claim of the appellant Daniel Sayer that he is exempt from liability because he simply sold his stock to Ward, and was not otherwise concerned in the action taken by the other defendants to transfer the property to Ward, we deem it sufficient to say that an examination of the testimony has led us to conclude that Ward bought the Portland lode, and paid $30,000, rather than the stock of the Portland Mining Company. As a precautionary measure, he doubtless made it a condition of the purchase that the several stockholders should assign their stock in the company, either to him, or to such persons as he might designate, to give him complete control of the corporation; but the fact that he required a conveyance of the property from the mining company, and that his proposition to the mining company was to buy the lode, has served to convince us that he bought the mine, and not the stock, and that the true nature of the transaction was well understood by all the defendants, including Sayer, when it took place. Such being the case, it must be held that the several sums of money received by the several defendants, including Sayer, were the money of the corporation, and not their individual property, which they were bound to account for to the corporation, and see that it was properly distributed among the shareholders to whom it belonged. Inasmuch as the defendants appear to have acted in concert, and to have agreed with one another that a certain sum might be paid to each, to be by him retained, and not accounted for to the company, they all participated in a wrongful disposition of the funds of the company, and are jointly accountable for the money which they collectively received.

It results from these views that the decree of the circuit court —the same being for an excessive amount — must be reversed. The case is accordingly remanded to that court, with directions to vacate its former decree, and in lieu thereof to enter a decree against the defendants, and in favor of the complainant, for the sum of $3,861, with interest to be computed thereon at the rate of 6 per cent, per annum from July 19, 1890, until the decree shall be fully satisfied, together with all costs accrued or to accrue in the circuit court. The costs incurred in this court will he divided between the parties in the following proportions: Those incurred by the separate appeal of the defendant Daniel gayer will be taxed against him. The balance of the costs will be taxed against the appellee.