Campbell v. Argenta Gold & Silver Min. Co.

• Decision Date: 18 April 1892
• Parties: CAMPBELL v. ARGENTA GOLD & SILVER MIN. CO. et al.
• Court: U.S. District Court — District of Montana

51 F. 1

CAMPBELL v. ARGENTA GOLD & SILVER MIN. CO. et al.

United States Circuit Court, D. Montana.

April 18, 1892

Henry G. McIntire and Henri J. Burleigh, for complainant.

Forbis & Forbis, Edwin Norris, and Word & Smith, for defendants.

KNOWLES District Judge.

This is a bill in equity seeking the foreclosure of a mortgage upon certain real property belonging to the defendant the Argenta Gold & Silver Mining Company. The property is situate in Beaverhead county, this state. The Argenta Company is a corporation organized under the laws of Montana. Most of the defendants reside in Montana, and are citizens of this state. None of the defendants are citizens of the state of Minnesota, of which state the plaintiff, it appears from the bill of complaint, is a citizen. The bill has the further object of declaring its mortgage lien a prior lien to that of liens claimed by the defendants, other than the Argenta Company, upon the property embraced in the mortgage. It is set forth in the bill that these defendants claim, for certain reasons which appear in the bill, that the mortgage securing the bonds held by plaintiff is void. The bill alleges that a certain other corporation, known as the 'P. J. Kelly Placer & Quartz Mining & Reduction Company,' was the owner of the premises described in plaintiff's mortgage. That it became involved, and judgments were obtained against it which it was unable to liquidate. With the view of raising money to pay this indebtedness, it appears that it was proposed that a new company be formed and incorporated, and the property of the Kelly Company should be conveyed to it and an arrangement made by which it should become the property of said new corporation freed from the liens of the said judgment creditors. That then this new corporation should issue bonds in the sum of $75,000, which should be secured by a first mortgage upon the said premises. In pursuance of this agreement, the indebtedness of the Kelly Company was all assigned to one H. Howes, and the said premises conveyed to him. The Argenta Gold & Silver Mining Company was incorporated. Howes then conveyed the said property to this new corporation, and received as a consideration therefor $75,000 in the first mortgage bonds of said Argenta Company, and a mortgage to secure their payment. Some of the creditors of the Kelly Company received some of these bonds in payment of their claims against it. The balance were sold, and the proceeds applied to the payment of the said Kelly Company indebtedness, which had been assigned to Howes. Two thousand dollars, or about that sum, was received in excess of the amount required to settle the Kelly Company claims, and this was turned over to the Argenta Company, which used it in its mining operations.

There is no dispute but that the Kelly Company complied with all the provisions of the statute law bearing upon the matter before transferring its property to Howes. The real controversy in this case arises as to the validity of the mortgage of the Argenta Company to Howes. The bill alleges that this company on the 12th day of December, 1889, at a meeting thereof held at Dillon, Mont., all of the stockholders being present and assenting thereto, voted and resolved, in substance, that, for the purpose of raising funds to buy said property of the said Kelly Company, the Argenta Company issue its bonds in the sum of $75,000, in denominations of $500 each, running five years, with interest at the rate of 10 per cent. per annum, payable semiannually to be secured by a mortgage upon said property to be purchased from the said Kelly Company, in case a purchase thereof could be effected; and the president of the Argenta Company was, by the unanimous vote of the stockholders, duly authorized and empowered to make all necessary arrangements for procuring and negotiating said bonds, with full power in the premises; that is to say, to procure a conveyance of said property to the Argenta Company, execute said mortgage thereon, and issue said bonds secured thereby, and negotiate the same. That in pursuance of these resolutions the president and secretary of the Argenta Company executed for the same said mortgage, and signed the said company's name thereto. There was no notice of the meeting of the stockholders published in any newspaper or otherwise, for any time. There was no record of any resolutions or authority duly authorizing the trustees of the Argenta Company to make said mortgage filed in the office of the county recorder in and for said Beaverhead county. What was done by the stockholders in regard to the mortgage was done before the company had obtained the title to the property. The creditors of the Argenta Company, parties herein, and alleged to claim liens upon the premises described in the aforesaid mortgage, filed their demurrer to this bill, in which it is set forth that from the showing in the same it appears that the plaintiff is not entitled to the relief asked. It is contended by defendants that the mortgage is void, because it appears in the bill that it was not executed in the manner provided in the statute law of Montana. Said statute is as follows:

'Sec. 492. The board of trustees or officers of any mining corporation organized under the provisions of article one, chapter fifteen, of the fifth division of the Revised Statutes (chapter 25 of the Compiled Statutes) of this territory, shall not have power to sell, lease, mortgage, or otherwise dispose of the whole or any part of the mining ground, quartz mills, smelters, concentrators, or reduction works of such corporation, unless they shall have first called a meeting of the stockholders of such corporation in the manner prescribed in section four hundred and sixty-eight of said article, (chapter 25,) for the purpose of submitting to the stockholders of such corporation the proposition so to sell, lease, mortgage, or otherwise dispose of the property of such corporation, or some portion thereof. The notice so required to be published and sent to each stockholder shall distinctly specify each particular tract or piece of property so to be leased, sold, mortgaged, or otherwise disposed of, and the particular disposition to be made thereof.'

The 468th section, above referred to, so far as it affects this question, is as follows:

'Whenever any company shall desire to call a meeting of stockholders for the purpose of availing itself of the privilege of this chapter, or for increasing or diminishing the amount of its capital stock, or for extending or changing its business, it shall be the duty of the trustees to publish a notice, signed by at least a majority of them, in a newspaper in the county, if any shall be published therein, at least six successive weeks, and to deposit a written or printed copy thereof in the post office, addressed to each stockholder at his usual place of residence, at least six weeks previous to the day fixed for holding such meeting, specifying the object of the meeting, the time and place when and where such meeting shall be held,' etc.

Section 493:

'If, at the time and place specified in the notice provided for in the preceding section, stockholders shall appear in person or by proxy, representing not less than three fourths of all the shares of stock of the corporation, they may organize by choosing one of their number chairman of the meeting, and also a suitable person for secretary, and proceed to vote on the proposition mentioned in said notice. If there are distinct pieces or parcels of property embraced in the proposition, each separate piece of property capable of being disposed of in one parcel, without;material injury to the remainder, shall be voted on separately. If, on canvassing the votes, it shall be found that at least two thirds of all the shares of the capital stock of such corporation have been voted in favor of selling, leasing, mortgaging, or otherwise disposing of a given piece or the whole of said mining property, then the chairman and secretary of such meeting shall make a certificate showing the total number of shares of the capital stock of such corporation represented in such meeting, and by whom voted, the number of shares voted in favor of the proposition, and the number of shares voted against the same. Such certificate shall be signed by the chairman, countersigned by the secretary, and verified by their oaths, taken before some officer qualified to administer oaths. Such verification shall be to the effect that the matters and things therein contained are true, and that the meeting at which such proceedings were had was called and held in pursuance of law, to the best of their knowledge, information, and belief. Such certificate shall be spread at length on the record of stockholders' meetings of such corporation, and a copy thereof under the seal of said corporation, and attested by its president and secretary, and duly acknowledged, shall be recorded in the office of the county recorder of every county wherein any of such property is situated.'

It appears affirmatively from the bill that the trustees of the Argenta Company did not perform any of the duties required in the above statutes, and that no record in the county recorder's office of the action of any meeting and votes of stockholders of that company was anywhere made. The property mortgaged consisted of a number of mining claims and reduction works. The legal decisions as to the validity of a mortgage, made under the circumstances presented in this case, are not uniform, and often not entirely satisfactory. In Cook on Stock and Stockholders of Corporations, (2d Ed.,) section 682, it is said: 'There is no defined principle of law that determines whether a particular act is ultra vires or intra vires. The decisions...