Federal Mining & Engineering Co. v. Pollak

• Decision Date: 04 January 1939
• Docket Number: 3213.
• Citation: 85 P.2d 1008,59 Nev. 145
• Parties: FEDERAL MINING & ENGINEERING CO., Limited v. POLLAK.
• Court: Nevada Supreme Court

85 P.2d 1008

59 Nev. 145

FEDERAL MINING & ENGINEERING CO., Limited v. POLLAK.

No. 3213.

Supreme Court of Nevada

January 4, 1939

Appeal from Fifth Judicial District Court, Mineral County; Wm. D Hatton, Judge.

Action by Robert M. Pollak against the Federal Mining & Engineering Company, Limited, to foreclose a mortgage on certain mining property and personal property appurtenant thereto. From a decree for the plaintiff and from an order denying a motion for a new trial, the defendant appeals.

Decree and order affirmed.that order was not made during trial of case but on the settlement of the findings on question of corporation's ratification and estoppel to deny validity of mortgage, where the case was tried on the theory that ratification and estoppel were in issue.

Walter Rowson, of Reno, for appellant.

Forman & Forman, of Reno, for respondent.

DUCKER Justice.

The plaintiff in the lower court, respondent here, commenced this action for the foreclosure of a mortgage on certain mining property and personal property appurtenant thereto.

It was alleged in the complaint that the mortgage was given by the defendant to secure a promissory note made, executed and delivered by it to plaintiff in the sum of $25,000. Facts showing the necessity of appointment of a receiver to take possession of the mortgaged premises and property were alleged. Defendant answered, denying generally the material allegations of the complaint. It was alleged that the note sued on was procured by plaintiff by means of false and fraudulent statements and representations, fraudulent concealment of facts and without proper corporate action. Like allegations were made with respect to the mortgage. It was also alleged that both note and mortgage are invalid and without consideration, and that the mortgage is therefore void. The necessity of appointing a receiver was denied.

The affirmative allegations of plaintiff's answer were denied in the reply.

The trial court found in favor of plaintiff to the extent of seventeen thousand nine hundred and one dollars and forty-three cents, and a decree of foreclosure was entered accordingly. The appeal, which was taken by defendant, is from this decree and from an order denying its motion for a new trial. The parties will henceforth be referred to respectively as appellant, or the corporation, and respondent.

The following salient facts appear in evidence: Appellant, a mining corporation, on or about August 1933, secured from one Hanson, a lease and option to purchase the mining claims situate in Mineral County, Nevada, described in the mortgage involved. By the terms of the lease and option the purchase price was to be $15,000, payable in installments, with final payment of $14,000 to become due the last of July 1934. Hanson was to pay $1,500 of the purchase price to O. J Belleville, one of the directors of the appellant corporation as a ten percent commission for consummating the deal, and $3,000 thereof to one Howell, for certain maps and data pertaining thereto. After securing the lease and option of the corporation entered into possession of the mining property and began operation of the same.

In January 1934 appellant sold to respondent and received payment therefor in cash, stock in the corporation to the amount of $5,000. Shortly thereafter appellant commenced to borrow money from him for the purposes of the corporation in connection with said mining property. Beginning in March 1934 and extending to and including August 31st of that year respondent had at various times advanced sums of money to appellant for such purposes, amounting to $6,221.55.

A stockholders meeting was held in April 1934 at which respondent was elected a director of the corporation. The remaining directors elected at that time were O. J. Belleville, P. B. Beamer, Edwin E. Sprague, Elmer E. Sprague, H. W. Lang, Dr. Barnard, Harry Kankamp and M. E. Bohannan, who thereafter, with respondent, constituted the board. A directors meeting was held at that time at which respondent was elected president of the corporation. Elmer Sprague was elected secretary and H. W. Lang treasurer at this meeting.

Respondent advanced $2,000 to the company at that time, and in June following advanced $2,000 more. Soon thereafter the company was again in financial difficulties, and the time to make final payment to Hanson on the lease and option was nearing. Hanson extended the time to the last of August. In the latter part of that month the company was considerably in debt. It had no money to meet its obligations or to make the final payment on the lease and option. In this exigency, Elmer Sprague, on Aug. 20th, wired respondent at Fort Wayne, Indiana, where the latter lived, for financial help, and was told by a return wire on Aug. 22nd, that respondent could furnish no more capital. On the same day Sprague sent him another pressing wire of the same import. Being unable to secure any money from respondent, Sprague went to Fort Wayne and induced him to come to Nevada to pay off Hanson. While in Indiana Sprague also conferred with directors Kankamp and Dr. Barnard, concerning the matter. They understood that final payment was soon to become due; that a meeting of the directors was to be held in Mina about August 28th and it was expected to get the money from respondent to make the payment. Sprague informed them that their presence would not be necessary to form a quorum. Respondent and Elmer Sprague flew to Salt Lake City, where they met director Edwin E. Sprague, and discussed with him the proposition of respondent putting up the money to make final payment. From Salt Lake City respondent and Elmer Sprague went to Mina, in Mineral County, and thence to the mining property on August 31st. With the exception of Kankamp, Dr. Barnard and Edwin E. Sprague, the remaining directors were in Mina and went with respondent and Elmer Sprague to the mining property. On their return to Mina on the evening of the 31st of August a meeting of the directors was held at the Baker Hotel, at which it was agreed that if respondent would advance the money to make final payment to Hanson, and also money to the corporation to meet unpaid bills, taxes due, water rent due, and an additional accrued payroll, the corporation would execute and deliver to him the note and mortgage in question. This was done and respondent gave Hanson a check for $9,558, in payment of the balance of the purchase price, and gave the corporation his check for $2,720.45, for obligations of the corporation then due. The total of all the sums advanced by respondent to the corporation and in its behalf, was $18,500. To this was included in the note and mortgage the said sum of $5,000 paid by him to the corporation, and the sum of $1,500 for additional expenses of the corporation, making in all the sum of $25,000. Respondent testified that he had paid said additional expenses in the amount of $1,500. A resolution was adopted at the meeting authorizing the secretary and treasurer to execute the note and mortgage. Respondent testified that O. J. Belleville was present at the meeting, but the latter testified that he was not present, and the lower court accepted his testimony. The by-laws of the corporation provide that a majority of the directors plus one, shall constitute a quorum. So a quorum of the directors was not present at the special meeting at which the note and mortgage were given to respondent. No written notice of the special meeting was given to the directors, as provided by the by-laws.

The court found, among other findings, as follows:

"That at a meeting of the five directors of the defendant corporation held in Mina, Nevada, August 31, 1934, the said secretary and treasurer of defendant were purportedly authorized and directed to execute and deliver said mortgage; that no written notice was given to the remaining directors of the defendant corporation of the said meeting prior to the holding thereof, but that all of the remaining directors of said defendant corporation had knowledge that said meeting was to be held and the general purpose thereof; that the directors in attendance at said meeting, including the plaintiff, constituted a majority of all the directors of said defendant corporation, but that said directors constituted one less than a quorum (a majority plus one) provided for by the by-laws of the defendant; that the consideration of the said promissory note and mortgage consisted of moneys advanced by plaintiff to defendant corporation in the sum of $17,901.43, including taxes hereinafter mentioned; that a portion of the moneys so advanced were advanced simultaneously with the said signing and purported execution and delivery of said note and mortgage and to supply the purchase price of the mining claims described in said mortgage, and were advanced by plaintiff upon the purported condition, as adopted by said meeting of directors, that such moneys and any moneys theretofore or thereafter advanced by plaintiff to defendant corporation should be secured by said note and mortgage; that defendant corporation accepted said advancements in the sum of $17,901.43 so made by plaintiff, and said moneys were used by defendant corporation for its corporate purposes; that all of the directors, officers and stock-holders of the defendant corporation for a long time past, have been upon notice or have had knowledge of the advancement and acceptance of the said aggregate sum of $17,901.43, and of the use of the same as aforesaid, and of the execution and delivery of the said note and mortgage, and have by their acquiescence and the said corporation has by its acquiescence, ratified the same as the debt and mortgage of the corporation to the extent of $17,901.43, and is estopped to deny

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