Fitzpatrick v. O'Neill

• Citation: 118 P. 273,43 Mont. 552
• Parties: FITZPATRICK v. O'NEILL et al.
• Decision Date: 21 October 1911
• Court: Montana Supreme Court

118 P. 273

43 Mont. 552

FITZPATRICK v. O'NEILL et al.

Supreme Court of Montana

October 21, 1911

Appeal from District Court, Silver Bow County; John B. McClernan Judge.

Action by J. B. Fitzpatrick against Frank D. O'Neill and others. From a judgment for plaintiff and from an order refusing a new trial, defendants appeal. Affirmed.

M. P Gilchrist, for appellants.

Walsh & Nolan and John E. Corette, for respondent.

SMITH J.

This action was begun in Silver Bow county, to compel the defendants O'Neill and Flanigan, who are president and secretary, respectively, of the defendant corporation Open Range Sheep Company, to transfer to the plaintiff, on the books of the company, 23 shares of its capital stock theretofore standing in the name of C. B. McCarthy, and to issue to plaintiff a certificate of stock in his own name for said number of shares. The district court found generally in favor of the plaintiff, and entered a judgment as prayed for. The cause was tried without the assistance of a jury. Defendants appeal from the judgment, and also from an order denying their motion for a new trial.

The record is voluminous, but careful examination thereof discloses but few contested questions of fact, all of which are presumed to have been resolved in favor of the respondent.

There is substantial evidence to warrant the following specific findings of fact: In the summer of 1906, the appellant O'Neill owned a sheep ranch near Miles City, which was mortgaged; the mortgage was about to be foreclosed, and O'Neill gave to C. B. McCarthy an option to purchase the ranch. McCarthy associated himself with the respondent Fitzpatrick, and, after spending some time in perfecting the necessary preliminary arrangements, on November 21 1906, they organized the Open Range Sheep Company, with a capital stock of $95,000, divided into 950 shares of $100 each, and (apparently) five directors; O'Neill received 175 shares of the capital stock for his ranch, and the company assumed his indebtedness; Fitzpatrick and McCarthy at that time president and secretary, respectively, issued to themselves 345 shares as promotion stock, and each purchased 65 shares, paying cash and par therefor. The company then sold to the appellant Flanigan 50 shares of treasury stock for $5,000 in cash. On March 25, 1907, a meeting was held in the office of Judge McHatton, at Butte, which meeting was attended by Sydney Sanner, Esq., as attorney for O'Neill Judge McHatton, who had theretofore been named as a director, but who was not a stockholder, McCarthy, and Fitzpatrick. The purpose of this meeting was to settle differences which had arisen relative to the 345 shares of so-called promotion stock held by McCarthy and Fitzpatrick. Judge McHatton and Mr. Sanner informed them that they had no right to these shares of stock issued to themselves without authority, but Judge McHatton said that they were entitled to some remuneration for promoting the company. Mr. Sanner said: "They certainly are. What do you think is right?" Fitzpatrick replied: "About 50 shares, or $5,000." Mr. Sanner said: "That is very reasonable, and I will advise Mr. O' Neill to do that;" also stating that he expected that they would charge $10,000. Some one then suggested that McCarthy write to Flanigan, who was at Hot Springs, Ark., relative to the matter under discussion, and McCarthy immediately wrote a letter, of which the following is a copy: "March 26, 1907. Friend Jerry: There will be a meeting of the stockholders of the Open Range Sheep Company, held at its offices in Butte, Montana, for the purpose of electing a board of directors and officers of the company and such other business that might properly come before it. Said meeting to be held within two weeks from this date or as soon as we can get your proxy, which proxy we would like that you send here at the earliest possible date. This meeting was discussed last evening by the directors, that is Judge McHatton, Mr. Fitzpatrick, Mr. Sanner (representing Mr. O' Neill), and myself, and it was the sense that you be written with request that you sign the enclosed proxy for your wife, Mrs. Flanigan, in order that she might vote for you at said meeting, in your stead. The proposition of what would be fair to allow McCarthy-Fitzpatrick for their trouble in getting the property of the company together, and in organizing it, was the opinion of those present that fifty shares would be reasonable for said work, all of which would be satisfactory to us. Now, in order to make this legal it would be necessary for the stockholders to vote this amount of stock to us as compensation for the organization of the company, at a meeting to be held within two weeks. If you think it reasonable you might instruct Mrs. Flanigan to so vote. We have, as you know Jerry, put in all of our time in the organization of this company, and have paid in cash for shares of stock we have. We have never made any charge for looking after the business thus far, and we thought it only fair that the company allow us a reasonable amount for our services rendered. This will, of course, be in stock. The company is in excellent shape, and will, I am sure, be able to pay a handsome dividend on the investment this year. Trusting that you will give the matter of signing the enclosed proxy your early attention, in order that it will reach us at the earliest possible date, we are, Respectfully, yours, McCarthy-Fitzpatrick, Inc., per C. B. McCarthy." Inclosed was a blank proxy, drawn by Judge McHatton. Flanigan replied: "I have instructed Mrs. Flanigan that you are [or] Fitz would instruct her Mc what is right is right please find enclosed proxy as you requested." Inclosed in this letter was the power of attorney or proxy, running to Mrs. Lou Flanigan, and duly signed by her husband. By this power of attorney, authority was expressly delegated to vote in favor of the issuance of 25 shares of stock each to McCarthy and Fitzpatrick. The 345 shares of promotion stock held by McCarthy and Fitzpatrick were surrendered and canceled on March 26, 1907. On April 6, 1907, a directors' meeting was held in Butte, at which Fitzpatrick, O'Neill, and McCarthy were present. At this meeting the matter of giving McCarthy and Fitzpatrick 25 shares of stock each for promoting the company was discussed; a stockholders' meeting was subsequently held on the same day. The following is a minute of what took place at this stockholders' meeting: "Minutes of a special meeting of the stockholders of the Open Range Sheep Company, held at its offices in Butte, Montana, this 6th day of April, 1907. Those present: F. D. O'Neill, representing 175 shares of stock; J. J. Flanigan (by proxy Mrs. Lou Flanigan) representing 50 shares; J. B. Fitzpatrick, representing 65 shares; and C. B. McCarthy, representing 65 shares. The following business to be acted on: F. D. O'Neill moves that the company deliver to C. B. McCarthy and J. B. Fitzpatrick 50 shares of the capital stock of the Open Range Sheep Company, to be in full payment for all services rendered in promotion of the said company. J. J. Flanigan (by proxy Mrs. Lou Flanigan) representing 50 shares, in favor of the resolution; F. D. O'Neill, representing 175 shares, in favor; C. B. McCarthy, representing 65 shares; and J. B. Fitzpatrick, representing 65 shares, in favor of the resolution. No other business being before the meeting, on motion adjourn. Frank D. O'Neill. J. J. Flanigan, Prox. Mrs. Lou Flanigan. J. B. Fitzpatrick. C. B. McCarthy." The minutes of the directors' meeting of April 6th show an attempt to substitute O'Neill for Brophy as a director, and the former afterwards acted and voted as such. On the day before the stockholders' meeting of April 6th, McCarthy called on Mrs. Flanigan, and showed her the letter from her husband, together with the proxy. The latter document was present, on the table, during the stockholders' meeting, and was then filed with other papers of the company. As to what took place at the meeting, O'Neill testified as follows: "I explained to Mrs. Flanigan and those there that these men felt they were entitled to certain remuneration, and that it had been decided by attorneys and others that they were entitled to $5,000 in stock, with the understanding that they would proceed to promote and further and make a success of the business, and settle all our little...