Logie v. Mother Lode Copper Mines Co. of Alaska

• Decision Date: 28 March 1919
• Docket Number: 15209.
• Citation: 179 P. 835,106 Wash. 208
• Court: Washington Supreme Court
• Parties: LOGIE et al. v. MOTHER LODE COPPER MINES CO. OF ALASKA et al.

179 P. 835

106 Wash. 208

LOGIE et al. v. MOTHER LODE COPPER MINES CO. OF ALASKA et al.

No. 15209.

Supreme Court of Washington

March 28, 1919

Department 1.

Appeal from Superior Court, King County; A. W. Frater, Judge.

Action by James Logie and another, individually and as copartners trading as James Logie & Co., and others, against the Mother Lode Copper Mines Company of Alaska and others, in which Jennie L. Miller intervened. From the judgment rendered, all parties appeal. Reversed, and cause remanded with direction to dismiss the action.

Scott Calhoun, J. W. Robinson, and Bogle, Merritt & Bogle, all of Seattle, for appellants.

Peters & Powell, of Seattle, for respondents.

MITCHELL J.

This action was brought by James Logie and David C. Isles individually and as copartners trading as James Logie & Co. and others, as plaintiffs, to perpetually enjoin defendants the Mother Lode Copper Mines Company of Alaska, a corporation of the state of Washington, and others, from consummating a proposed transfer and conveyance of substantially all of the property of the corporation. Jennie L. Miller intervened in the action, adopting all the allegations of the plaintiffs' complaint, and seeks the same relief. Answers containing certain denials and setting up an affirmative defense were interposed, to which affirmative defense appropriate replies were made. Upon trial the court by its judgment declined to perpetually enjoin the defendants, but did enjoin them from effecting the proposed transfer and conveyance unless and until they should thereafter be authorized to do so by the stockholders of the corporation at a meeting duly held for that purpose. Defendants have appealed because of the limited relief granted the plaintiffs and intervener, while the plaintiffs and the intervener have taken a cros-appeal because the court refused to grant permanent injunctive relief.

To avoid confusion, plaintiffs and intervener will be called plaintiffs, and the other parties will be called defendants. The plaintiffs are stockholders of the defendant corporation. Defendants other than the corporation are trustees and officers of the corporation.

The transaction contemplated by defendants is not assailed on the ground of any bad faith or improper motives on the part of any of the stockholders, officers, or trustees of the corporation; nor is there any charge of discrimination or intended disfavor among or toward any of the stockholders; nor is there any allegation that any one or more of the officers or trustees or stockholders are to receive any benefits not shared by all stockholders alike. It is contended by plaintiffs the proposed agreement is ultra vires of the corporation, and not tolerable in the law, over the objections of a minority of the stockholders, even though a majority of the stockholders favor the transaction. On the contrary, defendants insist the plan proposed is intra vires, nothing more nor less than a business matter, and that the question of the wisdom or advisability of the transaction is for the decision of the corporation, and not for the courts.

The facts of the case are substantially as follows: The Mother Lode Copper Mines Company of Alaska is a Washington corporation, organized in 1907 with capital stock of $5,000,000 par value, later increased to $7,500,000 par value. Among the objects and purposes of the corporation, as expressed in its articles of incorporation, are included the acquisition of mining and other real and personal property. Its articles authorize it to acquire, hold, use, equip, better, improve, incumber, or alienate its properties in whole or in part in the same manner and to the same extent as any actual or artificial person having similar dominion over property and property rights; and by section 14, art. 2, of its articles the corporation has power to subscribe to and own stock in other corporations, and to do such other acts pertaining to its business and property 'as in the judgment of the trustees shall be necessary or beneficial to the stockholders of the corporation.' The corporation has acquired, and for many years has been engaged in developing and operating, a number of copper mining claims in Alaska; and it has no other property except a relatively small amount of personal property owned and used in connection with its mining operations. Its mining properties are situated about 14 miles from the Copper River & Northwestern Railway, the only line of transportation from the coast, about 200 miles distant, into the district, the terminus of which railway is the Kennecott mines, owned and operated by the Kennecott Copper Corporation. The Kennecott mines are in active operation on a large scale, having direct means of transportation as stated, and it has a large, well-equipped concentration plant. Its mining claims adjoin those of defendant corporation, but topographically they are separated by a high mountain range. As they are worked at the present time, the mines of defendant corporation and of the Kennecott Copper Company are only abut 1,400 feet apart under the mountain separating the mines, and it is the plan of the parties to the contract involved to connect the mines by a tunnel through which, by means of a tramway, ore from defendant's mines will be taken to the concentrator and shipping grounds of the Kennecott mines. Defendant's only present means of transportation is by truck over a rough wagon road 14 miles to the railway, and it has no concentration plant. Development work and engineers' estimates fix, with reasonable certainty, vast quantities of copper ore in defendant's mines, the grade of which, however, is such that its value for commercial purposes must be stimulated by the advantages of concentration and cheaper transportation. It appears from the surveys and estimates that an independent railroad to connect with the Copper River & Northwestern Railway would cost approximately $600,000, and a concentration plant would cost nearly $1,000,000. The defendants are without sufficient means to meet such expenditures. About the date of the proposed contract involved herein, the liquid assets of the corporation consisted of $16,460 worth of material and supplies, $6,040 in cash, and $198,532 of bills receivable; and it owed, in addition to its bonded indebtedness of $500,000, accounts payable $94,520 and accrued wages of $12,317. In such circumstances the officers of the corporation deemed it to be unwise, within good business judgment, if not impossible, to raise funds required for the necessary improvements, investment, and relief, other than by the present proposed plan, expressed by a written contract, approved by the trustees of the corporation, between the corporation and one Stephen Birch, who is president of the Kennecott Copper Corporation. By the terms of the contract, stated to be subject to ratification by the stockholders of the defendant corporation, defendant corporation sells all its mining claims, properties, equipment, and improvements located at Kennecott, Alaska, on the following terms:

(1) A new corporation to be organized in Delaware under the name of 'Mother Lode Coalition Mines Company,' with 2,500,000 shares of stock having no par value.

(2) Defendant corporation is to convey to the new company its Alaska property mentioned, subject to the existing bonded indebtedness of $500,000, in consideration of the issue by the new company of all its capital stock; 1,225,000 shares to be issued and delivered to defendant corporation and $1,275,000 shares to Birch or his nominees. Contemporaneously with the delivery of deeds of conveyance, Birch is to furnish or cause to be furnished the new company: First, $550,000 to redeem the outstanding bonds and interest of defendant corporation; second, all money necessary to pay the expenses of organizing the new company, including fderal taxes on the issuance of its stock and on the conveyances from the defendant corporation to the new company; third, such further sums, not exceeding $1,000,000, in the judgment of Birch, as may be necessary for sufficient working capital, all such advances to be secured by bonds, mortgages, or other obligations, as agreed upon, of the new company, and which are to be repaid before any dividends are paid; fourth, the new company to have the benefit of the same smelting, refining, freight, and selling charges as the Kennecott Copper Corporation; fifth, the books of the new company to be kept open to inspection by an appointee of the defendant corporation; sixth, the new company to have seven directors, Birch to nominate four, and the defendant corporation three, who shall organize by electing James J. Godfrey and Clarence L. Warner, now president and secretary, respectively, of defendant corporation, president and secretary, respectively, of the new company; seventh, the new company to reimburse defendant corporation for all moneys spent on its properties from May 1, 1918, to date of deeds of conveyance, not exceeding $15,000 per month.

The contract was approved by the board of trustees of the defendant corporation on May 10, 1918, at which time a meeting of the stockholders to consider the proposition (setting it out in the minutes of the meeting of the board of trustees) was called for July 1, 1918, at 2 o'clock p m., to be held at the office of the defendant corporation in Seattle Wash. Accordingly, on May 29, 1918, written notice was given of a special stockholders' meeting of the corporation to be held at the office of the corporation at 1317 Alaska Building, Seattle, on July 1, 1918, at 2 o'clock p. m., to consider and act on the proposed contract. The notice set out in a...