Farrell v. Garfield Min., Mill. & Smelting Co.

• Decision Date: 14 November 1910
• Citation: 49 Colo. 159,111 P. 839
• Court: Colorado Supreme Court
• Parties: FARRELL v GARFIELD MINING, MILLING & SMELTING CO.

111 P. 839

49 Colo. 159

FARRELL v GARFIELD MINING, MILLING & SMELTING CO.

Supreme Court of Colorado

November 14, 1910

Appeal from District Court, Chaffee County; M.S. Bailey, Judge.

Action by the Garfield Mining, Milling & Smelting Company against John L. Farrell. Judgment for plaintiff, and defendant appeals. Affirmed.

Goudy & Twitchell and Wallace Schoolfield, for appellant.

C.A Chamberlin, for appellee.

HILL J.

Upon May 14, 1903, a contract was entered into between John L. Farrell and C.H. Abbott, of the first part G.R. Wysong, J.H. Tribby and Chas. Hamblen, of the second party. The appellee is the successor in interest to the parties of the second party.

The first parties were the owners of certain properties consisting principally of lode mining claims in the counties of Chaffee and Saguache. The contract states that the parties of the second part were desirous of organizing a company to purchase said properties. It provides, in substance, that the second parties would at once proceed to organize and incorporate a company with a capital stock of 1,000,000 shares, of the par value of $1 per share, for the purposes of purchasing, operating, and developing said mining claims. The first parties agreed to sell and convey said properties to the company for $50,000 and 490,000 fully paid up nonasssessable shares of its capital stock. The shares were to be issued and delivered upon its organization, and the sum of $5,000 was to be paid on or before July 1, 1903, and the remainder, in sums of $5,000 each, at stated periods until the $50,000 was paid.

The first parties further agreed that within 30 days they would make unto said company a good and sufficient mining deed to the properties. It was to be deposited in the First National Bank of Salida, in escrow, to be delivered upon the payment or deposit of the $50,000 and the issuance and delivery of the 490,000 shares, as aforesaid. It was further provided that said deed was to remain in escrow until such time as it should be delivered by reason of the payment in full of the purchase price, unless it was withdrawn by said first parties because of the failure of the second parties to make said payments or deposits, or either of them, or to issue or deliver the stock; but it the stock, or any part thereof, or the payments of $5,000 each, or any part of such payments, were not made at the times and in the manner specified, then the first parties could, at their option declare the contract terminated, and the privilege of purchasing forfeited, and could at once withdraw said deed from escrow, and in the event of so doing were to retain any and all payments or deposits theretofore made as liquidated damages.

It was further agreed that the first parties were to be named in the articles of incorporation as two of the directors during the first year, and the 510,000 shares of the stock of the company remaining after the issuance of the 490,000 shares aforesaid were to be disposed of as follows: 250,000 shares to be set apart as treasury stock, to be sold and the proceeds used for the working and developing of said mining claims. The remaining 260,000 shares, or so much of the same as was necessary, were to be sold for the purpose of providing funds to be used in meeting the cash payments above mentioned. The balance there was remaining after said payments, was to be issued and delivered to the second parties. Then followed the paragraph, the construction of which is the cause of this litigation. It reads as follows:

"In the event that there is a production from said mining claims sufficient to make the said payments, or any part thereof, the said parties of the first part are to receive dividends on 367,500 shares of said stock of the capital stock of said company, not purchased and held by parties other than the said parties of the second part, are to be applied upon the said payments for said property, as rapidly as such dividends may accrue, and the said parties of the second part are not to receive any part thereof until the said sum of fifty thousand dollars shall have been paid in full."

It was further provided that, as soon as the purchase price was paid, the first parties were to pay the second parties $5,000, and to assign to them, of their 490,000 shares of said stock, 25 per cent., amounting to 122,500 shares.

It was further provided that 5 per cent. of the net earnings of said mines were to be set aside as a sinking fund, and any stock remaining in the treasury after the property was on a dividend-paying basis was to be issued and distributed among the stockholders pro rata, according to the amount of stock held by each.

It was further provided that the company, as soon as incorporated, was to have the right and privilege of working said properties and extracting and selling ore therefrom for its own use and benefit. Such right and privilege was to continue as long as the contract remained in force; but if default was made in any of the payments, or if the company failed to do a certain amount of work during each calendar month, in such case the right and privilege of working said mining claims was to be forfeited, and the same, together with the right to the exclusive possession of the property, was to revert to said first parties at once.

It was further agreed that the second parties were to take care of the company's pay roll and guarantee its payment while the contract remained in force.

Under the provisions of this contract, the appellee, the Garfield Mining, Milling & Smelting Company, was incorporated and proceeded to work the properties. The appellant, John L. Farrell, acted as its superintendent for about two years, and as such drew a salary. During this period he received in proceeds from the sale of ore shipped from the property $4,761.25. He deposited $808.77 of this amount to the credit of the appellee. The remainder, $3,952.48, he failed and refused to turn over, but retained the same, under the claim that he and the heirs of Mr. Abbott (who has since become deceased) were entitled to a part of it as dividends upon their stock, and the remainder to apply upon the purchase price of the property, as provided for in the contract.

This action was brought by the appellee, plaintiff below, to recover this money. Trial was to the court, which found generally in favor of the plaintiff, appellee here, and gave judgment accordingly, which, including interest, was in the sum of $4,482.74, from which this appeal is prosecuted.

It was conceded at the trial that all of the $5,000 payments provided in the contract, that were then due, had been paid that $35,000 of the $50,000...