Beltz v. Great Western Lead Mfg. Co.

• Decision Date: 08 May 1918
• Docket Number: 339.
• Citation: 251 F. 696
• Parties: BELTZ v. GREAT WESTERN LEAD MFG. CO. et al.
• Court: U.S. District Court — District of Delaware

251 F. 696

BELTZ v. GREAT WESTERN LEAD MFG. CO. et al.

No. 339.

United States District Court, D. Delaware.

May 8, 1918

Edward G. Bradford, Jr., of Wilmington, Del., and Thomas Watson, of Pittsburgh, Pa., for complainant.

Daniel O. Hastings, of Wilmington, Del., and James Balph, of Pittsburgh, Pa., for defendants.

BRADFORD District Judge.

This suit was instituted by John Beltz against the Great Western Lead Manufacturing Company, a corporation of Delaware hereinafter referred to as the company, to obtain, among other things, certain relief touching capital stock of the company claimed by him together with dividends declared thereon. In 1905 the complainant and some associates acquired a lease of a tract of land containing 104 acres in Jo Daviess County, Illinois, and began prospecting on it for lead and zinc ore. In October, 1908, the lead company was incorporated, with a capital of $500,000, divided into 10,000 shares of the par value of $50 each, and in November, 1908 by action of its board of directors and its stockholders the company purchased the above lease by issuing to the complainant and his associates its entire capital stock, full paid and non-assessable. Prior to April 10, 1912, the complainant acquired title to all the shares of the other stockholders, and $36,000 had been spent upon the leased tract, partly in the drilling of test wells to learn whether lead and zinc ore existed on the property, resulting in the discovery that such ore did exist there, but the limits of the ore deposit had not been definitely ascertained. The complainant had interested George H. Fritch and Samuel Garrison, two of the defendants, in the property, and an independent investigation had been made by or in behalf of those two defendants which disclosed the existence of a valuable deposit of ore. Finally, April 10, 1912, the complainant, F. E. McGillick, Fritch and Garrison, entered into an agreement, under seal, bearing that date, as follows:

'Memorandum of Agreement, made this 10th day of April, A.D. 1912, between John Beltz, F. E. McGillick, George H. Fritch and Samuel Garrison, all of the city of Pittsburgh, Pennsylvania.

'Whereas said Beltz is the owner of all the capital stock of the Great Western Lead Manufacturing Company, a corporation organized under the laws of the State of Delaware, having its principal office in the town of Dover, in said state, which said corporation holds a lease on certain partially developed ore lands in Jo Daviess County in the State of Illinois-- and whereas, the parties hereto have agreed to further develop said ore lands and, if ore is found in paying quantities, to operate the same, upon terms and conditions hereinafter set forth:

'Now this agreement witnesseth-- First. That said Beltz shall and will deliver to the treasurer of the corporation all of the capital stock. Second. That of said capital stock, 2,000 shares shall remain in the treasury and be known as treasury stock, to be hereafter sold when and as ordered by the board of directors. Third. Three shares of stock shall be forthwith issued to each of the parties hereto, and three shares to M. J. Dain and J. McF. Carpenter, as required by the laws of Delaware-- the shares issued to M. J. Dain and J. McF. Carpenter to be surrendered on request to the other parties hereto. Fourth. That when the development work has been completed, and if ore is found sufficient in quantity and quality to justify the erection of a mill, the remaining stock shall be issued in equal amounts to each of the parties hereto. Fifth. That upon signing this agreement each of the parties hereto shall pay to the treasurer of the corporation the sum of two hundred and fifty ($250.00) dollars, and a like sum, if necessary-- to complete said development work and pay incidental expenses, said payment to be made within 30 days after notice that said sum, or any less sum is necessary to complete said work; it being distinctly understood that failure to make said payment as herein provided be deemed and taken as a surrender and cancellation of all right, title and interest of said defaulting party arising out of this agreement.

'It is further agreed, that if ore is found in paying quantities a mill for the reduction of said ore shall be erected, and that if sufficient stock has not been sold or cannot then be marketed, to pay the cost of constructing said mill, an assessment may be levied upon the stock issued, none of the parties hereto shall sell or pledge his stock or any part thereof, until he shall have offered same to the other parties hereto at such price as the proposed purchaser has offered in good faith to pay.

'The net profits derived from the operations contemplated shall be applied and distributed as follows: First, to the repayment to said parties of the sums severally advanced by them herein provided. Second after said sums have been repaid fifty per cent. (50%) of the net profits shall then be applied to the repayment of the sum of thirty six thousand ($36,000.00) dollars, which the said Beltz has already expended upon the leased premises above mentioned, and fifty per cent. (50%) shall be applied as dividends upon the stock of the corporation, until said Beltz has been paid in full. It is also agreed, that the parties hereto shall pay, if required, the sum of six hundred ($600.00) dollars in settlement of present debts against said corporation-- said Beltz agreeing to pay any additional amount necessary to fully pay said outstanding claims. Said Beltz also agrees to protect his associates against any demands or claims of persons heretofore associated or interested with him in said lease.

'Witness our hands and seals the day and year aforesaid.

'John Beltz. (Seal.) 'F. E. McGillick. (Seal.) 'Geo. H. Fritch. (Seal.) 'S. Garrison. (Seal.)

'Witness: John H. McCloskey.'

The complainant claims that he performed all things necessary to be performed on his part and that all necessary conditions had been complied with to entitle him to the relief he seeks in this suit. He charges that the company has appropriated to itself and refuses to deliver to him one equal fifth part of its capital stock, which fifth part he contends was held for his benefit or in trust for him by it under the terms of the agreement of April 10, 1912; and prays that the company be compelled to deliver to him the said one-fifth part of capital stock under and in accordance with the provisions of that agreement, and also to account to him for any and all dividends which have become payable thereon.

It appears that the complainant in November, 1914, brought a suit in equity in the court of common pleas of Allegheny County, Pennsylvania, against Garrison, McGillick, Fritch and the company, and also H. L. Williams, J. E. McGinnis and William I. N. Lofland. In that suit the complainant, to use the language employed by the counsel for the defendant, sought to do two things, namely:

'(1) To compel the defendant corporation to pay to the complainant 50% of the net earnings of the company declared in dividends until he had received $36,000, as provided in the contract of April 10, 1912, known as Exhibit B.

'(2) To compel an accounting by the individual defendants with respect to stock and to compel them to deliver to complainant the stock they unjustly withheld from him.' A decree was made in September, 1915, in favor of the complainant so far as payment of the debt or sum of $36,000 out of net profits of the company was concerned, but the court made no decree touching his asserted right to an accounting for stock wrongfully withheld from him. The decree of the court of common pleas was affirmed by the supreme court of Pennsylvania May 23, 1916 (Beltz v. Garrison, 254 Pa. 145, 154, 98 A. 956, 958) which declared:

'After due consideration of all the assignments of error filed by the appellant, and the argument of learned counsel in support of them, we have not been convinced that any of them ought to be sustained, and the decree is, therefore, affirmed at appellant's costs on the facts found and the legal conclusions reached by the learned trial judge.'

The defendants contend that the complainant is not entitled to any relief in this case for various reasons, one of them being that the cause of action under the contract of April 10, 1912, was single and entire and could not be divided, and that the affirmance on appeal of the decision of the lower court worked a final adjudication of the complainant's rights under that contract. Both the supreme court and court of common pleas recognized that the judicial tribunals there could not decide the question of the right asserted by the complainant to receive stock under the agreement of April 10, 1912, as involving the consideration of a matter of internal administration of the affairs of a foreign corporation 'over which we have no jurisdiction. ' And for the same reason they could not go into the question whether the complainant had paid to the lead company an amount of money, or rendered to it services as superintendent, sufficient to entitle him to the receipt of stock. On this latter point the court of common pleas in its opinion on exceptions said:

'We made no finding relative to Beltz's right to stock, arising out of the agreement testified to by him that he was to receive a salary as superintendent so that we might not make any finding with reference to holdings of stock which is a question of internal management.'

It is insisted on behalf of the defendants that the proceedings in Pennsylvania preclude the granting to the complainant in this suit of relief touching any part of the subject-matter covered by the agreement of April 10, 1912. It is not asserted that the claim now made by him with respect to...