Emma Silver-Min. Co. v. Emma Silver-Min. Co. of N.Y.

• Decision Date: 30 September 1880
• Citation: 7 F. 401
• Parties: EMMA SILVER MINING CO. (Limited) v. EMMA SILVER MINING CO. OF NEW YORK and others.
• Court: U.S. District Court — Southern District of New York

7 F. 401

EMMA SILVER MINING CO. (Limited) v. EMMA SILVER MINING CO. OF NEW YORK and others.

United States Circuit Court, S.D. New York.

September 30, 1880

J. G McCullough, J. E. Burrill, and E. J. Phelps, for defendants.

H. L Burnett and E. W. Stoughton, for complainant.

Final hearing upon several pleas filed by the defendant company Park, and Baxter, in bar of the bill of complaint.

On or about April 28, 1871, the defendant company became the owner of certain mining property in Utah known as the Emma mine. The defendants Park and Baxter were large shareholders in that company. It was, shortly, determined to sell the mine in England. In pursuance of this determination, Park proceeded to London with full authority to represent Baxter and the defendant company in the matter. After much negotiation the complainant company was organized by Park and others for the purpose of purchasing the mine. This was upon November 8 1871, and soon afterwards the mine, together with certain ore and a balance in money alleged to be on hand, was conveyed by the defendant company to the complainant. At the same time, Park, individually, executed an agreement guarantying to the complainant the quantity of the ore on hand and the title of the mine. The consideration was 500,000 pounds in money and 25,000 full-paid shares of the complainant. This consideration was paid to Park in behalf of the defendant company. Park and Baxter, as stockholders in that company, received with knowledge of the facts a portion of the consideration proportioned to the amount of stock held by them. The complainant went into occupation and began vigorously working the mine. In the latter part of the year 1872, some litigation was had in the courts of Utah by complainant, with a corporation known as the Illinois Tunnel Company, growing out of conflicting claims to the same body of ore. A settlement was effected by which complainant gave the tunnel company notes for $100,000. The mine proved unremunerative, and in September, October, and November, 1872, Park advanced to complainant, to enable it to continue payment of dividends, sums amounting in all to $120,000.

Upon December 10, 1874, the complainant began an action, in the United States circuit court for the southern district of New York, against Park and Baxter, to recover from them damages for deceit, alleged to have been practiced by them in the sale of the mine. The complaint set forth in detail numerous fraudulent representations and concealments, and alleged that plaintiff had been damaged to the extent of $5,000,000. The answer traversed the allegations of the complaint. This action was tried before a jury, and, upon April 28, 1877, a general verdict was rendered for defendant. Judgment was entered in accordance therewith upon February 8, 1879. Upon May 12, 1875, the complainant began another action, in the same court, against Park alone, upon his individual agreement to deliver the ore on hand and the mining property agreed to be sold. The complaint set forth that the quantity of ore on hand was much less than the amount called for in the agreement, and that the litigation with the Illinois Tunnel Company constituted a breach of the agreement to deliver the property sold. Issue was joined, and upon October 15, 1877, the complaint was dismissed upon plaintiff's failure to appear and prosecute his action.

The notes given in settlement to the Illinois Tunnel Company passed into the hands of Park. Upon May 22, 1876, Park recovered judgment, in the district court of the third judicial district of the territory of Utah, for the amount of said notes, against complainant. In December, 1874, the mine was seized, upon an attachment by Park, in a suit brought in the said district court to recover the moneys loaned by him to complainant for payment of dividends. Judgment was recovered therein against complainant. Upon February 6, 1875, execution was issued upon that judgment, and upon September 8, 1876, the mine was sold upon that execution, and bought in by the defendant Lincoln, in Park's interest.

The present suit was begun on November 28, 1877. Its object was a rescission of the sale of the mine and other property, and an accounting by the defendants for the purchase money. The bill of complaint set forth very fully various misrepresentations and concealments which had been practiced in effecting the sale. In particular it alleged that the sale was agreed to on behalf of complainant by a board of directors who were not the independent representatives of the stockholders, but were either agents of the vendors, or qualified as directors by receiving from the vendors the requisite qualification shares, and that some of them had other agreements with the promoters of the company which created, upon the part of the directors, a personal interest in assenting to the sale inconsistent with their duty to the corporation. The bill further alleged that the Illinois Tunnel Company settlement was made collusively between Park and the tunnel company, in reality, for a consideration smaller than the amount of the notes, and that Park's object was to acquire some interest or color of title for complainant in the ores claimed by the tunnel company, and thus avoid a breach of his guaranty of title. It is also alleged in the bill that the advances for payment of dividends were made by Park with full knowledge of the facts, and of the complainant company's inability to repay them, and were in fraud of the stockholders, being made in order to continue the false impressions produced by Park's misrepresentations, and to enable him to dispose of his stock. Judgment was demanded that the sale be rescinded; that the defendants repay to plaintiff the purchase money received by them; and that the defendant Park be perpetually restrained from collecting or transferring either of the notes given in settlement of the claims of the Illinois Tunnel Company, and also from collecting any portion of the moneys advanced by him for the payment of dividends.

Upon motion of the defendant company, Park, and Baxter, leave was granted to them to file several pleas in bar to the bill. The pleas filed were as follows:

1. A plea by the defendant company in bar of so much of the bill as prays for a rescission, setting forth the proceedings in the action in the United States circuit court for the southern district of New York, against both Park and Baxter, to recover damages for deceit upon their part in the sale of the mine set forth in the present bill, the verdict and judgment therein in their favor, and claiming that all questions of fraud, artifice, device, misconduct, or deceit involved in this suit have been adjudicated in that action, and that, by reason of the fact that Park and Baxter were its agents, defendant company is entitled to the benefit of that adjudication, and that the same is a bar to the cause of action for rescission set forth in the bill.

2. Three pleas of the defendant Park, which are in substance as follows: (a) The first plea sets up the proceedings in the action brought against Park alone by complainant company, in this court, to recover damages upon the individual guaranty by Park of the title to the mine and the quantity of ore, and the recovery of judgment in his favor in that suit, and alleges that all the questions involved in this suit were adjudicated therein. (b) The second plea is addressed to that portion of the bill referring to the Illinois Tunnel notes. It alleges that Park has recovered judgment in the district court of the third judicial district of Utah upon said notes against the complainant company. (c) The third plea is addressed to that portion of the bill referring to the alleged cash advances made by Park. It alleges that Park has recovered judgment in the same court of Utah against the complainant company for the amount of such advances, and that under execution issued on such judgment the mine has been sold and bought by the defendant Lincoln in behalf of Park, and that the judgment has been satisfied by application thereto of the proceeds of the sale on execution.

3. Three joint pleas of the defendants Park and Baxter, setting up the proceedings in the aforesaid action for deceit, brought by complainant against them in the United States

circuit court for the southern district of New York, and pleading its legal effect in three different ways: (a) As an adjudication of the cause of the action set forth in the bill; (b) as a determination of the same facts as those involved in this suit and charged in the bill; (c) as an adjudication of the cause of action set forth in the bill, styling the same 'a transaction of sale,' as in the bill, instead of a sale and conveyance.

4. A joint plea of the defendant company, and of Park and Baxter, setting forth the proceedings in the two suits in the United States circuit court above set forth, and pleading that by such proceedings complainant has elected to affirm, and has, in legal effect, affirmed, the sale, and cannot be heard in equity to demand a rescission thereof.

Defendants moved, at the same time, for leave to file a still further plea, setting up all the facts, and pleading that they established such laches or acquiescence as to constitute a bar to the present suit. Leave to file this plea was denied. Upon complainant's motion an order was made that defendants file exemplified copies of the records alleged in their pleas. Reported 17 Blatchf. 389; 1 F. 39. Such records were found to establish the facts pleaded, so far as the existence of the records pleaded was concerned. The pleas were thereupon set down for argument.

CHOATE, D.J.

1. The three pleas in bar of the defendants Park and Baxter, and the plea in bar of the defendant the Emma...