216 F. 242 | D. Mont. | 1914
This is a suit to avoid an executed sale of all the property of the defendant Parrot Company to the defendant Anaconda Company, both defendants Montana mining corporations.
Plaintiffs own 1,210 shares of 230,000 shares, 229,850 issued, the capital stock of the Parrot Company.
'I'he complaint alleges that in 1899 A. C. Burrage, William Rockefeller, H. H. Rogers, and more than 15 named “other persons,” purchased the majority of Parrot stock and at all times thereafter controlled the corporation pursuant to a conspiracy by them entered into to dissipate the company assets and to acquire them at less than real
The prayer is avoidance of the sale, a receiver to take an account between defendants, payment of any excess due from Anaconda to Parrot, and sale of all assets *of Parrot with distribution of the proceeds to stockholders.
The answers are denials and explanations of specific transactions attacked in the complaint.
A great volume of testimony and other evidence has been submitted, entirely by deposition and master’s report.
lliese statutes vest power, unknown at common law, in holders of two-thirds of the issued stock of any Montana mining corporation, for
In a fraudulent sale he has a choice of remedies — appraisal or avoidance of the sale. He cannot have both, and the choice of either estops to thereafter claim the other or at'least a choice of appraisal with knowledge of all material facts is in its nature condonation of the fraud and acquiescence in the sale, and he cannot thereafter inconsistently maintain suit to avoid the sale. All this is of the general law of sales, as applicable to corporate sales by virtue of these statutes as to any sale.' Defendants contend plaintiffs, having elected appraisal, are estopped from this suit.
The complaint sets out that plaintiffs proceeded to appraisal and does not allege lack of knowledge of acts and facts which might relieve them from their election. Having elected, prima facie they are estopped from the right and remedy of this suit, and the burden is on them to plead and prove otherwise. Regardless of the pleadings and burden-of proof, consideration of the evidence discloses that when plaintiffs begun their appraisal action they had knowledge of all facts and fraudulent acts alleged in this suit, in so far as they are sustained by proof, to the extent any stockholder has or may have of corporate transactions openly accomplished.
It follows they so far acquiesced in the sale as to elect appraisal and so cannot recede therefrom and secure the inconsistent remedy of avoidance of the sale.
At the same time it is considered the court’s findings on all issues should appear. In addition to the insufficiency of the complaint to excuse election, it is doubtful if the complaint can be maintained in any event. It is upon the theory of rescission or avoidance of a fraudulent sale, yet for all expressly alleged therein plaintiffs and all stockholders may have had at the time they directed the sale knowledge of all the actS-alleged to constitute the fraud.
So far as the evidence goes, it is that in 1899 some few of the “other persons,” including Burrage, Rockefeller, and Rogers, purchased a little more than half of Parrot stock. About two years thereafter this stock was sold to Amalgamated, and it thereafter controlled, as it lawfully might, Parrot operations. Therein, methods and instrumentalities changed. A refinery, an operating smelter, and an unfinished smelter were dismantled and sold. Some thereof, particularly salvage, were sold to Anaconda, but for fair prices.
The developed Parrot mine was of the earliest in the Butte, Mont., mining district. Its productive operations covered some 25 years. Several million dollars in dividends were paid. But several years before this sale its commercial ore bodies were practically exhausted, dividends ceased, operations were at a loss, and much exploration developed no new and valuable ore deposits. Complex geological conditions involved Parrot in “apex” controversies with neighbors, and these were settled in the main to Parrot’s advantage. True and correct reports, accounts, and books were made and kept, accessible to all stockholders and inspected, experted and copied so far as desired by plaintiffs before this suit. At the time of this sale, Parrot was but a shadow of its former self. But its main mining property was well located, and it owned outlying mining property of no developed worth, so that taken as a whole it had probabilities and possibilities and was of actual and speculative value. All this and all acts of management were open and known at the time of occurrence and before and at the time of the sale. As an illustration the complaint alleges a loss to Parrot of $50,000,000, in that it was constrained to convey without consideration to another corporation in which the “other persons” were interested the “Blue vein” ore bodies to which Parrot’s title had been finally determined by litigation, the truth being that there were “apex” controversies over the “Blue vein,” said ore bodies were neither large nor of great value, there was no litigation, the adverse claims passed to a corporation in which Amalgamated had no interest though some of the “other persons” had, and a compromise was authorized by a meeting of Parrot stockholders in September, 1906, which compromise was effected and wherein Parrot received more than it yielded. The complaint is replete with allegations of fraudulent acts so variant from what the evidence shows to be true, from what plaintiffs knew to be true, or could have so known, that it appears reckless and in part to the point of willful falsehood.
To this another illustration is the allegation of conveyance of Parrot property in trust for the “other persons”; no such property ever having existed. All this appearing, any suit is discredited. It is argued
Herein the fraud charged must be proven and by legal evidence, and not merely alleged in pleadings and for proof rested upon argument and oratorical endeavor. Finding no fr,aud in the sale, finding the stockholders’ consent was free, it is unnecessary to inquire into the purchase price. That was determined by the holders of two-thirds of Parrot stock; Amalgamated holding a little more than half said stock. They satisfied, hone can complain. They could direct a corporate sale for any consideration, even as they individually could make personal sales. Doubtless gross inadequacy might be a circumstance in a fraudulent sale. Aside from that, the dissenting stockholder has a plain, speedy, and adequate remedy at law in the appraisal proceedings provided by the statutes, wherein he secures the value of his shares though the others receive from the sale but a tithe thereof. It appears, however, that when this sale was made Anaconda stock had a market value ranging from $35 to $45 per share. Conditions were such that Parrot was not worth to itself or to any other independent concern the amount Anaconda in view of its resources and facilities could afford to and did pay.
The value of any mining property is a problem, and here it seems to have been solved fairly to Parrot. The purchase price was fair value and adequate, the sale was valid, plaintiffs elected the remedy of appraisal, they have no right, and there is no reason to rescind or avoid the sale, and decree accordingly will be entered.