C. Haydon Ltd. v. Montana Min. Properties, Inc.
| Decision Date | 16 December 1997 |
| Docket Number | No. 97-142,97-142 |
| Citation | 286 Mont. 138,951 P.2d 46 |
| Court | Montana Supreme Court |
| Parties | C. HAYDON LIMITED and Dr. K.M. Clews, Plaintiffs and Respondents, v. MONTANA MINING PROPERTIES, INC., a Montana corporation; Oro Fino Placer Mining Corporation, a Montana corporation; Bluebird Mining Co., a Montana corporation; West Butte Metals, Inc., a Montana corporation; Goldbrick Mining Co.,a Montana corporation; East Ridge Mining Co., a Montana corporation; Silver Bow Consolidated Corp., a Montana corporation; Black Rock Mining Co., a Montana corporation; Yankee Mining Co., a Montana corporation; Wabash Mining Co., a Montana corporation; Eureka Mining Co., a Montana corporation; Original Butte Mining Co., a Montana corporation; Mountain Con Mining Co., a Montana corporation; Western and Pacific Resources Corp., a British Columbia corporation; Allan Ferguson; S. David Anfield; Steven A. Sanders; Richard M. Cawood; and Jacobs, Persinger & Parker, a business association, Defendants and Appellants. v. Frank CROWLEY, Plaintiff and Respondent. |
David M. McLean, Knight, Dahood, McLean & Everett, Anaconda, for C. Haydon Ltd. and Dr. K.M. Clews.
Greg J. Skakles and Patrick T. Gallagher, Skakles & Gallagher, Anaconda, for Frank Crowley.
K. Malcom Clews commenced this action in the District Court for the Second Judicial District in Silver Bow County to recover damages from the defendant, Montana Mining Properties Incorporated (MMPI), for breach of contract. MMPI filed a third-party complaint against Frank Crowley and William Murray for common law fraud, conspiracy, and breach of fiduciary duty. William Murray was dismissed by order of the District Court and Crowley filed a counter claim against MMPI. Following a jury trial, judgment was entered against MMPI on November 7, 1996. The jury verdict awarded Clews $298,275.33 for breach of a written agreement for his consulting services, and $8,268,851.78 for breach of MMPI's promise to deliver stock. The jury verdict also awarded Crowley $2,000,000 for breach of MMPI's promise to deliver stock. On November 18, 1996, MMPI filed a motion for new trial or in the alternative to alter or amend judgment. On January 10, 1997, the District Court denied MMPI's motion. MMPI filed its notice of appeal on February 7, 1997. We affirm the jury's verdict and the judgment of the District Court.
The issues on appeal are:
1. Did the District court err when it excluded evidence related to Clews' and Clive Smith's pending criminal charges of fraud and conspiracy?
2. Did the District Court err when it allowed testimony from another trial, regarding the agency relationship between Clive Smith and MMPI, as admissions against interest, and when it offered a jury instruction which characterized this testimony as a judicial admission?
3. Did the District Court err when it failed to give MMPI's jury instruction regarding subsequent contracts?
4. Was there sufficient evidence to support the jury's verdict?
5. Did the District Court err when it denied MMPI's motion for a new trial?
Historically, the Anaconda Company owned a large block of mineral interests in Butte, Montana, which it sold to the Atlantic Richfield Company (ARCO). ARCO subsequently disposed of all these mineral interests to Dennis Washington. An option to acquire these mineral rights was given to two Australian men, Laith Reynolds and Kerry Harmanis. Reynolds and Harmanis sought financial backing and entered into a joint venture agreement with named Clive Smith, a citizen of England, who became the financier of the joint venture. The members of the joint venture decided to form a series of Montana corporations to provide ownership vehicles to which they could transfer various mining claims, equipment, etc. One corporation, Montana Mining Properties, Incorporated (MMPI), was formed to act as agent for the other corporations.
On January 27, 1987, the members of the joint venture, Smith, Reynolds, and Harmanis, acting through MMPI, signed a contract with Dennis Washington to buy mineral rights and properties, and to obtain certain other benefits. Over the next two years, other Montana corporations were formed to provide ownership vehicles for various mining claims or equipment. All of these corporations specifically authorized MMPI to act as their agent and to provide management. That was the only reason for MMPI's corporate existence.
The joint venture consisting of Smith, Reynolds, and Harmanis owned and controlled all of the stock in the mining corporations through companies formed in the Jersey Isles called the "Limiteds," in proportion to their ownership percentages in the joint venture. Although the percentages of ownership in the joint venture were in a constant state of flux between the three men and a new stock holder, Robertson Research Limited, Smith eventually obtained the majority of the shares in the venture and absolute control over it and MMPI.
In an earlier lawsuit filed against MMPI by Dennis Washington, Smith indicated that he personally acted on behalf of MMPI on major matters; that he had procured all of the funding for MMPI acquisitions; and that he had personally caused $25 million to be expended in connection with the MMPI properties. He also testified on behalf of MMPI that all assets of MMPI were beneficially owned by the members of the joint venture. While on the witness stand, evidence was presented through Smith's testimony and his attorney's statements to the court, that Smith owned 77.5 percent of MMPI, and was the controlling person in that company.
In 1986, prior to the formation of the MMPI joint venture, Reynolds contacted Frank Crowley to inquire about valuable mineral deposits in Butte. Crowley has intimate knowledge about the mines on the Butte Hill and, at the time, had a lease arrangement with ARCO. As part of this lease arrangement, Crowley obtained a wealth of valuable geological and mining information which the Anaconda Company had accumulated over a period of 100 years. He referred to these records as the "golden records." Crowley informed Reynolds that the mineral deposit on the Butte Hill was extremely valuable and very promising. Reynolds and Harmanis continued to solicit information from Crowley, who shared his opinions on the mineral deposits and the wealth of geological information found in the "golden records."
Soon after, Reynolds and Harmanis purchased the property as part of the joint venture with Clive Smith. During the entire process of negotiation with Dennis Washington, Crowley provided his advice and opinions at the request of Reynolds and Harmanis. As a result of the purchase, MMPI owned, through the other twelve corporations several mining blocks on the Butte Hill, along with a considerable amount of valuable mining equipment, including hoists, head frames, and compressors. Smith, Reynolds, and Harmanis requested that Crowley assist them with the management and development of the properties. They orally promised Crowley that they would pay his fees, expenses, and give him a management position in the new company and a substantial block of stock.
Sometime after the purchase of the mining interests on the Butte Hill, a dispute arose between Reynolds, Harmanis, and Smith which eventually led Reynolds and Harmanis to relinquish their interest in the joint venture. Smith then assumed the management and sole right to control and direct the MMPI operations.
During this time period, in April 1988, Smith, on behalf of MMPI, approached Malcom Clews and offered him employment with MMPI. At the time, Clews was associated with Robertson Research, one of the four parties who held stock in MMPI. Clews entered into an oral agreement to work for MMPI pursuant to Smith's request. Initially he was to be paid a daily consulting fee, his out-of-pocket expenses, and was promised an executive position in any public company formed upon MMPI's "realization," along with a block of stock in the public company. Clews sent monthly invoices to MMPI in Butte, in accordance with the terms of this agreement.
In 1989, Clews and MMPI modified the oral agreement to require that Clews forgo his daily fee in return for a larger block of stock in the public company. Clews gave a credit against his monthly invoices for the daily fees charged from September 1988 to January 1989. The remainder of the original agreement was unchanged.
In March 1990, Clews and MMPI made a second modification to the oral consulting agreement. According to this modification, Smith, on behalf of MMPI, promised Clews a monthly consulting fee of 5000 (pounds sterling). The remainder of the original oral agreement was unchanged.
In May 1990, a potential realization on the American Stock Exchange looked promising for MMPI. During that time, an attorney who worked for the joint venture reduced to writing the portions of Clews' and Crowley's oral consulting agreements which dealt with fees and expenses. As a result, Crowley's general manager agreement, which had previously been oral, was reduce to writing, as was Clews' consulting agreement. The remaining portions of their oral agreements were unchanged. After these agreements were reduced to writing, both Clews and Crowley were made officers and directors of the various corporations constituting MMPI, and were listed on the vendors' list as shareholders in the MMPI group of companies.
After several failed merger attempts, MMPI's realization finally occurred. In 1991, a new company called Newco No. 393497 was specifically created to hold the assets and stock of the MMPI Butte mining corporations. Clews and Crowley were listed on the schedule of stockholders of this numbered company. This company was then merged with an existing British Columbian corporation called Nor Quest, which produced Western and Pacific Resources...
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