Jones Mining Co. v. Cardiff Min. & Mill. Co.

• Decision Date: 28 April 1920
• Docket Number: 2401
• Citation: 56 Utah 449,191 P. 426
• Parties: JONES MIN. CO. v. CARDIFF MIN. & MILL. CO. et al
• Court: Utah Supreme Court

191 P. 426

56 Utah 449

JONES MIN. CO. v. CARDIFF MIN. & MILL. CO. et al

No. 2401

Supreme Court of Utah

April 28, 1920

Rehearing denied July 15, 1920.

Appeal from District Court, Third District, Salt Lake County; Wm. H Bramel, Judge.

Action by the Jones Mining Company against the Cardiff Mining &amp Milling Company and others. Judgment of dismissal, and plaintiff appeals.

AFFIRMED.

James Pardee and A. B. Sawyer, Jr., both of Salt Lake City, for appellant.

Wm. M. McCrea, of Salt Lake City, for respondents.

FRICK, J. CORFMAN, C. J., and THURMAN, J., concur. GIDEON, J. WEBER, J., dissenting.

OPINION

FRICK, J.

This action was instituted for the purpose of having the defendants declared trustees and as holding in trust for the use and benefit of the plaintiff a certain mining claim hereinafter referred to. The complaint is very long, and the statements therein are somewhat loose and inartificial, with many repetitions and some conclusions. The material and controlling facts alleged are as follows:

It is alleged that the Jones Mining Company of Utah, hereinafter called plaintiff, is a mining corporation, and that the defendant Cardiff Mining & Milling Company, hereinafter designated company, is a corporation; that in the year 1902 plaintiff was the owner, subject to the paramount title of the United States, and in possession of what is known as the Wrexim mining claim in Salt Lake county, Utah; that the notice of location of said mining claim was duly recorded in Salt Lake county in 1891; that the assessment or representation work upon said claim was performed up to and including the year 1901, and that the same was not open for relocation until after the 1st day of January, 1902; that in September, 1902, one Thomas B. Jones, now deceased, and the defendant Reamer, were the only directors of the plaintiff. (It is, however, stated in plaintiff's brief that "at the time of the commitment of the fraud [1902] Jones was a director and the only director of the company," the plaintiff.) Then it is alleged that the number of directors provided for by the articles of incorporation of plaintiff was five; that all the other acting directors (except Jones) had died prior to 1902 and no successors had been elected; that in the fall of 1902 Jones, Price, and Reamer entered into a conspiracy to defraud the plaintiff of its interest in said claim by relocating the same; that said claim was accordingly relocated in September, 1902, in the name of said Reamer as the "Mountain Chief"; that the location notice was duly recorded in Salt Lake county; that said Reamer, as a part of said conspiracy, "in about a year's time was to convey it to Jones," but that said Reamer at no time conveyed the same to said Jones; that said Reamer thereafter conveyed a one-half interest in said mining claim to his codefendant Price, and thereafter "said Price and Reamer were holding the legal title to said property as trustees in trust for the benefit and use of the Jones Mining Company of Utah," the plaintiff herein; that on December 6, 1906, said Price and Reamer "conveyed to the defendant Cardiff Mining & Milling Company the entire interest in said Mountain Chief mining claim, and said company received it and based its organization with other claims on said Mountain Chief mining claim, and the defendant Cardiff Mining Company now holds the legal title thereto"; that said company purchased with full knowledge of plaintiff's interest in said mining claim and that it is not an innocent purchaser; that said Price and Reamer promoted and organized the company and became stockholders and officers therein, said Reamer owning 186,000 shares and said Price 250,000 shares of the capital stock; that in the month of March, 1905, said Jones died; that said Reamer was a son-in-law of said Jones and acted as the executor of the last will and testament of said decedent, but made no mention in the inventory or in the final decree of distribution of said estate that it had any interest in or held any stock in the plaintiff; that Reamer's wife was an heir of said decedent and a beneficiary under his will, but none of the other heirs or beneficiaries under said will knew of the decedent's interest in said mining claim, and they did not know until about the month of July, 1917, that they, as heirs of said decedent, owned any stock in plaintiff; that plaintiff never knew that any development work had been done on said claim, and that no work was ever done upon the surface or any ore taken from the surface thereof; that up to the time said Jones died no stockholders' meeting was ever called or held, and that no stockholders' meeting was called or held until in the month of July, 1917, at which time the stockholders of the plaintiff elected a new board of directors, and that at that time the plaintiff, for the first time, became aware of the fraud and misconduct of the defendants; that the books of the plaintiff were lost in or about the year 1901 and were not found until the year 1917; that one Thomas Miller was the first president of plaintiff, and at the time of his death, in September, 1901, owned a majority of the stock of plaintiff; that his heirs lived in New York City and did not know, nor did the plaintiff know, that they, as heirs of said Miller, owned any stock in plaintiff; that the estate of said Miller was administered upon and final distribution thereof made in 1912, and that no stock of plaintiff was ever inventoried and the administrator of said estate did not know that said Miller was a stockholder in the plaintiff; that "Margaret Miller, a daughter of Thomas Miller, visited in Salt Lake City, Utah, about 1903, hearing that her father had an interest in a mining claim, but not knowing that his interest consisted of shares of stock in the plaintiff mining company, inquired of Thomas v. Jones at that time about the matter, and he told her that they were not shipping any ore from the premises, but if they ever did anything with it that the heirs of Thomas Miller would be protected." It is also alleged that one Robert Jones, an heir of said Thomas B. Jones, had instituted a suit in May, 1917, for the purpose of appointing a receiver for the plaintiff, but that the same failed because no legal service could be made upon it. It is also alleged in general terms that all the stockholders had exercised due diligence in instituting an action and that none of them had any notice of the wrongs that were perpetrated by the defendants Price and Reamer with respect to the property in question. There are some other allegations which are material to which special reference will be made in the course of the opinion. There are also some additional allegations to which I have not specially referred, but they are merely conclusions and have no controlling influence here.

The record shows that a demurrer to a former complaint had been overruled and an answer duly filed; that thereafter the case was transferred to another judge who, without a withdrawal of the answer (as he might do), entertained the demurrer now in question namely, that the complaint does not state facts sufficient to constitute a cause of action, that the action is barred, and that the plaintiff cannot recover on account of laches, and sustained the same. It also appears from the record that a patent was obtained by Price and Reamer for the claim in question in December, 1906. In view, however, that it is expressly alleged in the complaint that Price and Reamer obtained the legal title to said claim and that in 1906 they conveyed the same to the company, who is now holding the legal title, the record referred to is of no importance except by way of explaining plaintiff's contentions, since it is not claimed that fraud was practiced against the United States in obtaining the legal title, but plaintiff confirms the legal title obtained by Price and Reamer and conveyed to the company by them, and prays judgment that the same be conveyed to it.

The plaintiff appeals from a judgment dismissing the complaint and assigns the ruling of the court in sustaining the demurrer as error.

The statute upon which defendants rely, Comp. Laws Utah 1917, section 6468, subdiv. 4, provides that "an action for relief on the ground of fraud or mistake" shall be begun within "three years; the cause of action in such case not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake." In considering whether this action is barred, it is important to keep in mind: (1) The relationship of the corporation directors to their corporations; (2) the character and condition of the mining claim which is the subject-matter of this action; and (3) the dormant condition and utter inactivity of the plaintiff corporation and the stockholders for a period of fifteen years or more preceding the beginning of this action.

While corporation directors are constantly spoken of as trustees they are not trustees in the true sense of that term. They are the managing agents of the corporation, and, as such, sustain a fiduciary relation both to it and to the stockholders collectively, and in case they wrongfully deal with or appropriate the money or funds of the corporation they may be charged as trustees with respect to such property precisely the same as any other agent or person who sustains a fiduciary relation to his principal may be charged. Corporation directors are therefore not trustees of an express trust by virtue of their office, and hence cannot be subjected to the consequences arising out of that relation. Mr. Pomeroy, in his excellent work on Equity Jurisprudence (3d Ed. section 1088), defines the relation of corporation directors as being "analogous" to that of trustees. In section...