Cates v. Sparkman

• Decision Date: 30 April 1889
• Citation: 11 S.W. 846
• Parties: CATES <I>v.</I> SPARKMAN <I>et al.</I>
• Court: Texas Supreme Court

11 S.W. 846

CATES

v. SPARKMAN et al.

Supreme Court of Texas.

April 30, 1889.

Commissioners' decision. Appeal from district court, Wise county.

On the 21st day of August, 1885, plaintiff, Charles D. Cates, sued L. C. Sparkman, the Wise County Coal Company, J. R. Stephens, J. G. Halsell, J. J. Lang, H. Greathouse, and J. C. Carpenter, alleging that he was the owner of certain tracts of land described in the petition on the 4th day of September, 1882, situate about 12 miles from Decatur, in Wise county, which were valuable coal lands; that, prior to said date, he had sunk shafts and thoroughly tested said coal, found it to be of good quality, and in quantity almost inexhaustible, and that he had also leased large tracts of coal lands adjoining the same, which was of equal value, being underlaid with coal; that under his leases he had the exclusive right to mine coal on said land for 25 years, provided work was commenced thereon within two years, otherwise the leases should be forfeited; that Decatur was the nearest railroad station to the lands; that, in order to successfully develop and carry on said coal mines, it was necessary to have railroad connections with the markets of the state, and being financially unable to build said railroad, and fully develop and mine said coal, he made an agreement with the defendants Stephens, Halsell, Lang, Greathouse, and Carpenter to incorporate a company for that purpose, to be called the Wise County Coal Company, said defendants, together with D. Waggoner, J. W. Hale, J. M. Holmes, and Sam Levy, as officers, directors and members; that a charter was obtained August 23, 1882; that plaintiff and the defendants Stephens, Halsell, Lang, Greathouse, and Carpenter were the incorporators, the number of directors was nine, the directors for the first year were plaintiff and above-named defendants, and Hale, Holmes, W. Waggoner, and Levy, the capital stock was $250,000, divided into 5,000 shares of $50 each; that it was agreed between plaintiff and said defendants that said lands owned by him and the leased lands should be conveyed to the company, but the terms had not been agreed upon; that it was agreed that, in order to get other persons of capital and experience interested, that the company should organize under the charter, and stock be issued and sold; Holmes withdrew, and no stock was issued to him; that, with that end in view, plaintiff, on the 4th of September, 1882, made a deed to the company of the land owned by him, and his leasehold interest, and had a large number of certificates of stock issued to each of the defendants, and one each to Waggoner, Hale, and Levy, nothing being paid for any of said stock; the deed for the land was not delivered at that time, but held to be afterwards delivered; that no stock was sold or could be sold, as there were no means of transporting coal from the mines; that the deed made by plaintiff to the company was made subject to a lien for about $10,600, given to plaintiff to secure Carpenter, Lang, and Hale as his sureties on a note to the First National Bank of Fort Worth, and it provided that the grantee should pay off said debt; that said deed, as first made, recited a consideration of $125,000 paid in the stock of said company, the understanding then being

that, in consideration of said transfer of said lands, plaintiff should own one-half of the stock of said company, but failing to sell any stock on the 29th of September, 1882, plaintiff and defendants Stephens, Halsell, Lang, Greathouse, and Carpenter, as individuals, and not as officers of the company, agreed that, instead of one-half, plaintiff should have one-fourth of the stock; that Stephens, Halsell, and Lang should each have 937½ shares, and Greathouse and Carpenter each 430¾ shares; said defendants to furnish means to pay off the said note to the bank, and to loan plaintiff $5,000 for two years, — said last sum to be secured by deed of trust on 625 shares of stock and two tracts of land. Said defendants further agreed to furnish all money necessary to work and develop said mines for six months next to follow, and to work said leased lands, —plaintiff to repay his share of said expenses in 18 months; that, as a part of said agreement, said defendants Stephens, Lang, Halsell, Greathouse, and Carpenter agreed to build and equip a standard gauge railroad from Decatur to said mining lands; that Waggoner, Hale, and Levy took no part, and had no interest, in the management, and contributed nothing; that, on said 29th of September, 1882, pursuant to said agreement, the consideration expressed in the deed was erased, and a different consideration inserted, and it was delivered to the corporation, and the stock that had been issued was all returned and canceled, and new stock issued in accordance with said agreement; that the stock so issued was signed by said Halsell as president, and said Greathouse as treasurer, of the company; that said defendants furnished the money to pay the note to the bank, and loaned plaintiff $4,375 of the money agreed to be loaned him, and plaintiff gave to each his note due two years from date for the sums furnished by each, to-wit, to Stephens, Lang, and Halsell each for $1,250, and Greathouse and Carpenter each $625, although Carpenter never did furnish plaintiff any part of the money for which he gave his note; that, to secure said loan, plaintiff made a deed of trust to J. M. O'Neill, trustee for said defendants, on two tracts of land, one for 738 and the other 108 acres, and 25 shares of stock; that said 108 acres was afterwards released from the deed of trust; that said deed of trust provided that, should J. M. O'Neill fail or refuse to act, said defendants should have the right to appoint a trustee by written agreement to act; that said defendants and plaintiff were the directors of said corporation; that the said defendants held a majority of the stock; that they elected plaintiff as superintendent of the work at the mines, and he employed hands, and began mining and selling coal, and developing said mines; that, at the end of a month, said defendants, as directors, discharged most of the working force, and, at the end of two months, most of the remainder, although there was no more than were needed to carry on the work, and without plaintiff's consent; that, for the said two months, said defendants paid plaintiff's pro rata share of the expenses, but after that refused to pay his part of said expenses, and continued to reduce the working force, and, before the expiration of six months, discharged all hands, stopped the work, and sold all tools and machinery to defendant Carpenter for less than their value, all of which was against the protest of plaintiff; that, by reason of the stoppage of work, the leases aforesaid were forfeited; that said defendants failed and refused to build said railroad, or to further develop said mines, as they agreed to do; that, but for said agreement, plaintiff would not have given said deed of trust, or said deed to said land and leases, but said agreement was a large part of the consideration therefor; that said defendants, either as individuals or officers of said company, have never, since the said work stopped, done anything towards the building of said railroad or developing said mines; that, had they complied with their agreement, and built said road, and fully developed said mines, plaintiff's stock would have been worth far more than the property by him conveyed; that the actions of said defendants, as directors and officers of said company, in stopping said work, and failing and refusing to build said road, were for the purpose of financially ruining plaintiff, and defrauding him out of his property; that the object of said defendants...