Durfee v. Harper
| Decision Date | 28 March 1899 |
| Citation | 56 P. 582,22 Mont. 354 |
| Parties | DURFEE v. HARPER et al. THOMPSON INV. CO. v. DURFEE. |
| Court | Montana Supreme Court |
Appeal from district court, Granite county; Theodore Brantly, Judge.
Separate actions by F. M. Durfee against Joseph H. Harper, assignee of F. M. Durfee and F. W. Sherman, and others, and by the Thompson Investment Company against F. M. Durfee. From a decree against Durfee in both cases, he appeals. Modified.
The action under the first above mentioned title was brought by Durfee, plaintiff and appellant, against Harper, assignee of Durfee & Sherman, and the other defendants, to set aside a sale of two certificates of the capital stock of the Sunrise Mining & Milling Company, and to prevent the transfer of said certificates on the books of the company. The second cause was an action by the Thompson Investment Company for a writ of mandamus. It arose out of the transactions involved in the first suit, and was brought to compel F. M. Durfee, the defendant, as the president of the Sunrise Mining & Milling Company, to execute and deliver to the Thompson Investment Company, plaintiff, the shares of stock which it had bought at the sale heretofore referred to. By order of the district court, the causes were tried together, and one decree entered. The trial court refused the injunction prayed for by Durfee, enjoining the defendants from transferring the property and stock of the Sunrise Mining & Milling Company but granted the mandamus applied for in the second action.
It appears that the Merchants' & Miners' National Bank was a banking corporation at Phillipsburg, Mont.; that the Thompson Investment Company is a corporation doing business at Butte, Mont.; that in 1896 the plaintiff Durfee and one F W. Sherman owned in common 127,029 2/3 shares of the stock of the Sunrise Mining & Milling Company, and about ___, 1896 pledged the said shares of stock to the Merchants' & Miners' National Bank (which we shall hereafter call the "Bank") for the purpose of securing the payment of an indebtedness of Durfee & Sherman to said bank amounting originally to about $40,000, and $15,000 at the time of this suit. The authority of sale given to the bank was only such as the law generally confers upon pledgees. Civ. Code, § 3890 et seq. It further appears that on May 11, 1896, Durfee & Sherman made an assignment of all their joint and several property to the defendant James H. Harper for the benefit of their creditors. Harper qualified and has acted as assignee ever since. In this assignment made to Harper were included 138, 371 shares of the Sunrise Mining & Milling Company owned jointly by Durfee & Sherman. The certificates representing this latter number of shares were duly delivered to Harper as assignee, and the stock was issued to him as assignee upon the books of the Sunrise Company. D. M. Durfee was the secretary of the Sunrise Mining & Milling Company and at the time of the transactions hereinafter mentioned E. B. Howell was counsel for the assignee, Harper, and for the defendant the Thompson Investment Company. The complaint in the injunction suit avers that the defendant Harper and the bank, through its agent, one McDonald, and the defendant Howell conspired together for the purpose of obtaining the 265,400 2/3 shares of the stock of the Sunrise Company, which included the 127,029 2/3 shares that had been assigned as collateral to the bank, and, to defraud and cheat this plaintiff, F. M. Durfee, out of his rights in said property, agreed between themselves that they would sell the whole number of the shares of stock in one block; and that the bank never complied with the law with reference to the sale of stock so deposited as collateral with it, and never gave plaintiff any notice that the stock would be sold to satisfy the debt due it. It is then averred that Harper, pretending to act for this plaintiff, but in reality conspiring to defraud plaintiff, agreed with the bank to sell the stock and deliver the same to Harper, to be sold along with the 138,371 shares that had been assigned to Harper, that the bank entered into the conspiracy with Harper, and that Howell also conspired and directed Harper as to the method and manner of selling, and bid upon the purchase of the same at the sale. It is alleged that the property was advertised for sale on October 27, 1898, but that the sale was postponed to November 29th thereafter, and that on November 29, 1898, the whole number of shares in the Sunrise Company was offered for sale, and McDonald, the agent of the bank, bid for it the sum of $10,000. It is alleged that, over and above the debt due by Durfee & Sherman to the bank, there was a debt due to Hogue, Brownlee & Co. and the expenses of the assignment, amounting in all to not more than $2,500, and that the stock was sold first to satisfy the indebtedness of Hogue, Brownlee & Co., and the costs of the assignment, but that this preferred debt applied only to the 138,371 shares of the stock assigned to Harper, and that the balance of the indebtedness against the said 138,371 shares, and the total indebtedness against the 127,029 2/3 shares, was the debt due to the bank as aforesaid; that notwithstanding the bid of McDonald of $10,000, and his offer to pay to the assignee all the money required to discharge the debt due to Hogue, Brownlee & Co., and to hold and retain the said shares of stock for and on behalf of the bank, the said Harper, as assignee, disregarded his duty, and demanded that the said McDonald should deposit and pay him, as assignee, $10,000 in cash; that McDonald refused to pay the same, and thereupon Harper, on the night of November 29th, sold the entire block of stock to E. B. Howell, his own attorney and agent, for $9,500. It is averred that in thus consenting, and directing the bank to sell the stock for the plaintiff, Harper committed a fraud, and that in demanding of the bank $10,000 in cash, when as a matter of fact only $2,500 or less was required to discharge all of the debt over and above the debt of said bank, Harper committed a fraud, and that, in consenting that the whole of the stock be offered in one block, he acted to the disadvantage of the plaintiff, because, if the stock had been sold in small blocks, it would have realized more. It is also averred that Harper is one of the creditors of the Sunrise Company, and that Howell at the time he bid for the stock was acting for the Thompson Investment Company; that the Thompson Investment Company in July, 1898, bought the whole property of the Sunrise Mining & Milling Company for the creditors of said company, including the defendant Harper; that the stock so sold to Howell was for the Thompson Investment Company, acting as the agent of the creditors aforesaid; that Howell deposited the stock, after the sale to him, with D. M. Durfee, the secretary of the mining company, and demanded the transfer of the same to him, or his assignee, on the books of the company; and that, unless Durfee is enjoined from making the transfer, he will transfer the stock to Howell, to the injury of plaintiff.
The defendants set up that the 127,029 2/3 shares which had been assigned to the bank were also assigned by Durfee & Sherman to Harper, subject only to the right of defendant bank in said stock as collateral security for the debt due by Durfee & Sherman to the bank. The allegations of a conspiracy are denied. They admit the bid of $10,000 by the bank, and plead that the aggregate number of shares, to wit, 265,400 2/3 constituted a majority of the capital stock of the Sunrise Company, and that the assignee, Harper, and McDonald, as the agent of the bank, believing that the stock would sell to better advantage if sold in a lump, agreed that it should be sold together, and that the bank thereupon waived the right to sell the 127,029 2/3 shares pledged to it, and delivered the same to Harper, to be sold with the 138,371 shares; that at the sale on November 29, 1898, it was announced that the terms would be for cash; that Howell, for the Thompson Investment Company, bid $9,500, and that McDonald thereupon bid $10,000 for the bank, but was unable to pay the said sum or any portion thereof; and that the costs of the assignment, together with the claims against the estate of Durfee & Sherman, which had priority over the debt due the bank, amounted to more than $2,500. It is also alleged that it was necessary for Harper to realize a sufficient sum to pay the costs and expenses and the prior claims, and that the said bank and its agent, being unable to pay the necessary amount of cash, requested Harper to resell the stock; that the assignment authorized the assignee to sell the property assigned, or any portion thereof, at public or private sale, as he might deem best for the interests of the creditors of Durfee & Sherman, and that thereupon Harper sold at private sale the whole number of shares of stock to defendant Howell, as the agent of the Thompson Investment Company, for $9,500 in cash, it being the next highest bid for said stock; and that said amount is the reasonable value of the stock, and the highest amount which Harper was able to obtain for the same at the time of its sale. Defendants admit that by reason of the failure of the bank to purchase the stock and to pay the cash, and by reason of the subsequent sale of the stock for $500 less than the amount bid by the bank, Durfee & Sherman, and Harper, as their assignee, became entitled to the credit of $500 upon the indebtedness of Durfee & Sherman held by the bank; but it is averred that the plaintiff, before the commencement of this suit, made no demand for such credit. Defendants also set up that the plaintiff, who is the president of the Sunrise Mining & Milling Company, refuses to sign the certificates of stock...
To continue reading
Request your trial