Pearce v. Sutherland

• Decision Date: 12 October 1908
• Docket Number: 1,549.
• Citation: 164 F. 609
• Parties: PEARCE v. SUTHERLAND et al.
• Court: U.S. Court of Appeals — Ninth Circuit

164 F. 609

PEARCE v. SUTHERLAND et al.

No. 1,549.

United States Court of Appeals, Ninth Circuit.

October 12, 1908

The appellant appeals from a decree sustaining demurrers to his third amended bill and dismissing the same. In substance the bill alleges the following facts: That in 1901 one Joseph T Gilbert, the owner of a group of lode mining claims in the Harris mining district, Alaska, proposed to the appellant that, if he could find a purchaser of the same for the sum of $200,000, he would pay for such services a fee largely in excess of the usual commission on such sales. That the appellant, who is an expert miner and mining engineer of experience, accepted the offer, and in quest of a purchaser went to the appellee Sutherland, a promoter and seller of mines, who represented that he was well and favorably known in financial circles in New York and London, and could there interest persons financially to purchase said property at a sum far in advance of $200,000. That said Sutherland proposed that he and the appellant enter into a copartnership for the sale and promotion of mining claims, especially the said Gilbert group of mines, and such others as they might obtain control of, and that they procure from said Gilbert a bond and option to purchase his said group of mines, and that the appellant return to Alaska, explore said group, and demonstrate its value, and that Sutherland go to financial marts and interest investors and procure funds to open explore, promote, and sell the same, for the benefit of such copartnership, and find and procure, in addition to the money necessary for such development, a monthly allowance to the appellant while he was so engaged in opening and developing said mines. That the proposition was greed to, and the copartners went to New York, where the appellant obtained from Gilbert a bond to purchase his mines in consideration of $200,000 which bond, at the instance of Sutherland, was taken in the latter's name for the use and benefit of the copartnership. That thereupon a copartnership agreement was made between the appellant and Sutherland, which provided that they should work together in obtaining, promoting, and disposing of all properties in which they were then or should thereafter become jointly interested, and that out of the net profits received by Sutherland he should pay and deliver to the appellant one-third thereof in money, bonds, and stocks and that out of the net profits received by the appellant he should pay and deliver to said Sutherland one-half thereof in money, bonds, and stocks.

That after the execution of said agreement Sutherland proposed to the appellant to form a corporation under the laws of New York to take over the record title to said option, and thereafter the record title to be acquired from said Gilbert to said group of mines, the corporation to be known as the 'Alaska Perseverance Mining Company,' and to be incorporated for the sole purpose of holding the bare legal title to the mining claims and other property of the copartnership, in trust for the use and benefit of the appellant and said Sutherland, the capital stock to be $500,000, divided into 100,000 shares, and that immediately after the organization of said corporation Sutherland should convey to it the said bond and option, and said corporation should in return therefor issue to Sutherland, for the joint use of the appellant and himself, 99,995 shares of the capital stock. That thereupon the Alaska Perseverance Mining Company was incorporated under the laws of New York, as suggested. That 5 shares of the capital stock were subscribed for by the five incorporators, among whom were the appellant and Sutherland, and that no other shares were then issued or subscribed. That the subscribing incorporators were elected the board of directors of the corporation, and the bond and option were transferred by Sutherland to the corporation, and he received from the corporation the 99,995 shares still held in the treasury, which shares were taken in trust by Sutherland for the benefit of himself and the appellant. That the bond was transferred to the corporation for the sole purpose of making the corporation a trustee to hold the same for the use and benefit of said Sutherland and the appellant. That thereafter the appellant returned to the mines and entered upon the operation, management, and development of the same, as superintendent of the corporation, and said Sutherland, who was made president of the corporation obtained money in New York, London, and Paris upon the faith and credit of said capital stock for the development of said mines and for the payment of the appellant's monthly salary of $300. That the appellant, upon the advice and recommendation of Sutherland, located certain other claims for said partnership in the name of the corporation, to be held by it in trust for the benefit of Sutherland and the appellant, and the said claims so located are of great value, and of far greater value than those in the original Gilbert group of mines. That from the summer of 1901 until July, 1905, the appellant remained constantly upon said mining claims and properties, projecting the development and developing paying ore bodies of the value of several millions of dollars. That during said period Sutherland obtained from the financial marts of New York, London, and Paris, and elsewhere, upon the faith and credit of the capital stock of said corporation so issued to him in trust, funds amounting to $110,000, which were expended by the appellant and Sutherland in developing the properties so held by the corporation. That during said period Sutherland constantly represented to the appellant that the mines were about to be sold, but that he kept the appellant in total ignorance of the manner in which he was obtaining the said funds, and refused to furnish such information. That in the year 1905 Sutherland sent to the appellant for record a deed from said Gilbert of the said property so held by him. That the appellant requested from Sutherland an explanation as to how said purchase had been made and from what source the money had been obtained to pay for the same, but that Sutherland refused to furnish the appellant with such information. That the appellant believes and alleges the fact to be that said money so paid for said properties was money obtained by Sutherland upon the faith and credit of shares of the capital stock of said corporation, and was the property of the copartnership, and alleges that said property was deeded to the said corporation in trust for the appellant and Sutherland. That immediately after the recording of said deed Sutherland proceeded to let contracts for the erection of a mill to work the ore from said mines, and for other work thereon which indicated his intention not to sell or dispose of the same, but to hold and operate the same. That the appellant sought from said Sutherland an explanation of this course of conduct, and Sutherland refused to give the appellant any explanation. That in June, 1905, Sutherland, ignoring the copartnership agreement, and in violation of his promises and agreements, and in an attempt to defraud the appellant of his right, title, and interest in and to said property, conspired with the board of directors of said corporation, and caused them to pass a resolution removing the...