Gerry v. Bismarck Bank of North Dakota
| Decision Date | 08 February 1897 |
| Citation | 47 P. 810,19 Mont. 191 |
| Parties | GERRY et al. v. BISMARCK BANK OF NORTH DAKOTA et al. |
| Court | Montana Supreme Court |
Appeal from district court, Silver Bow county; J. J. McHatton Judge.
Action by Walter S. Gerry and others against the Bismarck Bank of North Dakota and others. From a decree for plaintiffs, and an order denying a new trial, defendants appeal. Affirmed.
This action was instituted by plaintiffs, a minority of the stockholders of the Bannister Mining Company, a corporation operating in Silver Bow county, Mont., to set aside a deed conveying a certain mining claim to said corporation, and also a mortgage executed by it to a trustee to secure the purchase price of said claim. The defendants are the corporation, four of its five directors, the trustee named in the mortgage, and a stockholder. Certain allegations of the complaint are as follows: Plaintiffs are the owners of about 75,000 shares of the capital stock of the Bannister Mining Company. During the year 1891, Bannister was a trustee and the president of said company, Child was a trustee and treasurer, Anderson was a trustee and secretary, and Beattie was a trustee. In the month of October, 1891, Bannister and Child conspired to cheat and defraud the Bannister Mining Company, and particularly the plaintiffs. In that year Bannister and Child went to Boston, and represented to plaintiffs that Bannister was the owner of the Valley lode claim; that he had paid $95,000 for it; that its value was $110,000; that the vein of the Tecumseh claim (the mine owned and theretofore worked by the Bannister Mining Company) was dipping beneath the Valley, which lay adjacent to the Tecumseh, and that it was necessary for the company to purchase the Valley claim in order to avoid litigation; that they and the other stockholders residing in the West could purchase said Valley claim whether they (plaintiffs) would agree to it or not, but that they desired plaintiffs' consent for the sake of harmony. That all of these allegations were false, and known at the time to be so by said Bannister and Child. That said Bannister had not paid $95,000 for the Valley claim, but, on the contrary, had not paid over $35,000 for the same, and that its value did not exceed $25,000. It is further averred that plaintiffs believed and relied upon the false representations made to them, and that in pursuance of the conspiracy aforesaid, on November 3, 1891, a meeting of the board of trustees or directors of the Bannister Mining Company was held at Helena Mont.; that there were present at said meeting said Bannister, said Child, and the defendant trustees Beattie and Anderson; that, at said meeting of the trustees, said Child said Beattie and Anderson (the latter two well knowing of the fraud, and being parties to the conspiracy), voted to purchase the Valley claim; that on December 17, 1891, a stockholders' meeting was held, for the purpose of authorizing the execution of a mortgage on the Valley lode claim, and the Tecumseh mine as well, to secure the purchase price of said Valley claim; that the number of shares voted at said meeting, through said fraud and conspiracy, was 190,898; and that, therefore, there was no legal authorization for the execution of the said mortgage. The complaint, proceeding, states that the mortgage so illegally voted upon was executed to the defendant the Bismarck Bank as a trustee for said conspiring trustees; and that, in furtherance of the conspiracy, subsequent to its execution the trustee defendants misappropriated funds of the Bannister Mining Company, and thereby procured a default in the sinking fund provided for in the said mortgage; and that the defendant the Bismarck Bank, as trustee, is about to foreclose and sell the mortgaged property. The prayer for relief is that the foreclosure of the mortgage be restrained; that the deed and mortgage both be declared null and void; and that the conspiring trustees be required to account for all sums due by them to the company by reason of the fraud aforesaid. The answer of the defendants denied the allegations of the complaint. The case was tried to the court, without a jury. Judgment was rendered for plaintiffs. The finding, as appears from the decree of the lower court, is "that the allegations in the plaintiffs' complaint, except as to the allegations that the defendants Bannister, Child, and Beattie had fraudulently appropriated to their own use or misapplied any funds of the Bannister Mining Company, in any sum whatever, were fully sustained and proved." The appeal is from the order denying a motion for a new trial, and from the decree.
McConnell, Clayberg & Gunn, for appellants.
J. F. Forbis, for respondents.
BUCK J. (after stating the facts).
After a careful review of the evidence in the record we are satisfied that from what the lower court was justified in finding to be the truth where the testimony was conflicting, and from what is virtually conceded to be the truth by the parties to the suit, the following condition of facts is presented: E. D. Bannister was a trustee and the president of the Bannister Mining Company, and the owner of 47,501 shares of the capital stock. W. C. Child was a trustee, and its treasurer, and the owner of 1 share of the capital stock, his wife, Mary Child, being the owner of 133,395 shares. E. W. Beattie was a trustee, and the owner of 10,000 shares. J. W. Anderson was a trustee, and its secretary, and the owner of 1 share of stock. Bannister and Child were the directors and officers who superintended and directed the operations of the corporation. The Valley, and unpatented mining claim, was adjacent to the Tecumseh, the patented mine belonging to the Bannister Mining Company, which had yielded some $66,000 in dividends. The value of the Valley claim was largely speculative, and depended chiefly upon its proximity to the Tecumseh mine. In the progress of development of the Tecumseh mine, Bannister, in his official capacity, became aware that legal complications might possibly result from the fact that the vein of the Tecumseh showed a tendency to dip into the Valley ground. There was no certainty, however, that these complications would arise. He thereupon acquired title in his own name to the Valley, paying or agreeing to pay therefor the sum of $45,000. This was all it was ever worth. Under the pretext that the presence of himself and Child (whom he had taken into his confidence) was necessary in Boston, Mass., to manage the exchange of new for old certificates of stock held by owners residing there, the two men went to that city, at the expense of the company. Taking advantage of the trust reposed in them by virtue of their official positions, and with intent to deceive, they represented falsely to certain of the plaintiffs that Bannister had paid $95,000 for the Valley claim; that the Valley claim was actually worth $110,000; that it was necessary for the Bannister Mining Company to acquire...
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