Mexican Nat. Coal, Timber & Iron Co. v. Frank

• Decision Date: 23 April 1907
• Docket Number: 1.
• Citation: 154 F. 217
• Parties: MEXICAN NAT. COAL, TIMBER & IRON CO. et al. v. FRANK et al.
• Court: U.S. District Court — Southern District of Texas

154 F. 217

MEXICAN NAT. COAL, TIMBER & IRON CO. et al. v. FRANK et al.

No. 1.

United States Circuit Court, S.D. Texas, Laredo Division.

April 23, 1907

Denman Franklin & McGown, for complainant Mexican National Coal Timber & Iron Company.

C. L Bates and Duval West, for cross-complainant Studebaker Bros mfg. co.

E. A. Atlee, Wm. Aubrey, and J. O. Terrell, for defendants.

BURNS District Judge.

The origin of the litigation between the parties to this suit is to be found in the contract following, to wit:

'Articles of agreement entered into this 25th day of May, A.D. 1881, between C. M. Macdonnell and Teresa Benavides, of the city of Laredo, county of Webb, and state of Texas, of the first part, and A. C. Hunt, trustee, of the second part, witnesseth:

'The parties of the first part hereby let, lease, and demise unto the parties of the second part the right to mine coal or other minerals on all that tract of land in the county of Webb and state of Texas, known as the 'Santo Tomas' ranch fronting on the Rio Grande between El Arroyo Santo Tomas and El Arroyo de la Llave with a depth of six leagues, reserving to themselves the use of the land for grazing and farming. To have and to hold the above described mining rights unto the parties of the second part for the full term and period of fifty years, upon the following terms and conditions, to wit: The said second parties promise and agree to furnish all the material, tools, implements, machinery, capital, and labor requisite and necessary for the working and development of any coal mine or mines that may be found on said land. (2) The second parties to have the exclusive privilege to mine coal or other minerals on said land during the continuance of said term, to have the privilege of taking sufficient wood, timber, rock, or any other material on said land for the purpose of said mining enterprise, and to have the right to erect and put up all necessary buildings or structures for carrying on the business of said mining enterprise, and in case said mining enterprise should not be successful, the second parties shall have the right to remove all engines, tools, machinery, buildings, and other fixtures. (3) The first parties shall be owners of a one-third part of said mining enterprise, and shall receive one-third of the net profits realized therefrom in the following proportions; that is to say, that C. M. Macdonnell is to have and receive three-fifths of said one-third, and Teresa Pisana Benavides is to have and receive two-fifths of said one-third. (4) One-fourth of the profits so accruing to the parties of the first part shall be applied to the payment of one-third of the capital invested in said mining enterprise by the parties of the second part; and the remaining three-fourths shall be paid over to the first parties as dividends or gains. (5) The second parties shall have the exclusive control, management, and direction of said mining enterprise. (6) The first parties shall be allowed at all reasonable hours to inspect the books and accounts of said mining enterprise. (7) An account shall be taken and dividends and losses declared every six months after the commencement of operation. (8) Interest shall not be charged against the first parties on their one-third unpaid capital, nor shall they be liable for any losses. (9) The second parties shall begin in good faith the execution and performance of their part of this agreement on or before the 15th day of May, A.D. 1881. (10) This agreement shall be in force from and after the 15th day of May, A.D. 1881. Upon a dissolution of said mining enterprise, the first parties shall be entitled to receive a pro rata share of the capital paid in by them. Said second parties obligate themselves to use all economy in the conduct and management of said mining enterprise.

'C. M. Macdonnell. 'Teresa Pisana her X mark. De Benavides. 'Alex. C. Hunt.'

Complainant alleged: (1) That on March 6, 1897, the Mexican National Coal, Timber & Iron Company filed its bill and thereafter its amended and supplemental bills against A. B. Frank, as the administrator of Charles M. Macdonnell, Allan Macdonnell, and Mary Macdonnell, as the only heirs at law of Charles M. Macdonnell, deceased, Daniel Milmo, Albert Urbahn, Teresa Pisana De Benavides, Zaragoza Benavides, Jose Benavides, W. H. Mowry and his wife, Margarita B. Mowry (formerly Benavides), Natividad Herrera and his wife, Ester B. Herrera (formerly Benavides), William Anderson, D. T. Roy, Thomas T. Brewster, John H. Mangham, the Rio Grande Coal & Irrigation Company, Thomas Carmichael, Studebaker Bros.

Manufacturing Company, the New York Security & Trust Company, and the Rio Grande Coal Company, alleging that the lessee, Hunt, had, by instrument dated August 31, 1882, executed and delivered to W. J. Palmer a declaration of trust, so-called, whereby he declared that he held one-third of said mining lease in trust for said Palmer, and that said Palmer, by instrument dated September 1, 1882, had assigned his interest thereby acquired to the Mexican National Construction Company, and that, by instrument of May 1, 1884, said construction company had assigned to complainant its interest in the premises.

(2) That the lessor, C. M. Macdonnell, died September 23, 1888, leaving as his heirs at law defendants Mary and Allan Macdonnell; that said Allan Macdonnell was appointed administrator of the estate of said C. M. Macdonnell; that trustee Hunt took possession of the leased premises, furnished tools, etc., for the opening of coal mines on said tract of land, and was furnished by said Palmer, as agent for said Mexican National Construction Company, with $27,000 for that purpose; and that complainant was entitled, as assignee of said construction company, to recover said sum of money before any profits accruing from said mines should be divided among the parties interested.

(3) That Allan Macdonnell, representing the interests of the estate of C. M. Macdonnell and the other owners of the fee of said tract of land, through one James Luttrell, fraudulently and without consideration, procured from said Hunt, as trustee, an instrument, dated April 1, 1892, whereby the latter, acting in behalf of himself and the other beneficiaries of said lease, relinquished and abandoned to said representative and owners said lease and mining enterprise.

(4) That, notwithstanding it was recited in said instrument of relinquishment that said mining enterprise had been unprofitable, the contrary was the fact, and that neither the complainant nor the other beneficiaries named in said relinquishment were consulted by said Hunt, trustee, in regard to the making thereof, and neither of them authorized its execution or delivery.

(5) That March 12, 1892, for the purpose of empowering said Luttrell to dispose of its interest in said lease, and with the distinct understanding that thereby complainant was to realize in cash or its equivalent not less than $3,000, it executed and delivered to said Luttrell an instrument on its face an unconditional assignment of complainant's interest in said lease; that May 22, 1892, said Luttrell returned said instrument to complainant without having acted under or in pursuance thereof; that June 11, 1892, said Luttrell, in pursuance of a fraudulent contrivance between himself and the owners of said land, executed and delivered to Macdonnell an assignment of all complainant's interest in said lease, at the same time executing and delivering to said Macdonnell a personal guaranty, against any claim of the complainant to or for possession of, or to or for any interest in, said land and mining lease; that the owners of the land, immediately after said relinquishment, took possession of the mining property and the implements placed thereon by trustee Hunt, and October 4, 1892, executed and delivered to defendant William Anderson a lease of the mining privileges on said land for 20 years; that said Anderson organized a corporation under the name of the Minera Colliery Company, to which Anderson conveyed his mining rights; that said colliery company executed a deed of trust on its interest in said mining lease to M. T. Cogley, as trustee; that said deed of trust was foreclosed by suit and at the foreclosure sale, and R. P. Walker purchased the same; that said Walker organized a corporation under the name of the Santo Tomas Coal Company and conveyed his interest in said property to said coal company; that said Walker and said coal company conveyed to defendant Thomas Carmichael said lease; that, while in the possession of said mining property, said Anderson contracted with the owners of the land for the purchase of the same, and executed a deed of trust thereon to secure the purchase money therefor.

(6) That said Anderson caused to be incorporated a corporation under the name of the Rio Grande Coal & Irrigation Company, and conveyed said land to said irrigation company; that said irrigation company issued bonds, and, to secure the same, conveyed the said land in trust to defendant New York Security & Trust Company; that defendants Milmo and Urbahn, December 1, 1896, purchased from defendant A. B. Frank, at that time administrator of the estate of C. M. Macdonnell, an undivided three-fourths interest in said mining property.

(7) That each of said mesne conveyances, from and under William Anderson and the administrator of said C. M. Macdonnell's estate, are evidenced by instruments of writing duly recorded, and that the several parties claiming thereunder took and held possession of said mining property and operated the mines thereon situated under, and, in pursuance of said conveyances, appropriated to their use the tools and implements placed on and used by trustee Hunt in connection...