Morrison v. Snow

• Decision Date: 01 July 1903
• Docket Number: 1460
• Citation: 72 P. 924,26 Utah 247
• Court: Utah Supreme Court
• Parties: C. D. MORRISON, Respondent, v. ALVIRAS E. SNOW, L. W. SNOW, MORTON FRENCH and THE MORRISON MINING COMPANY, a Corporation, Appellants, and GEORGE W. BARTCH, Respondent

72 P. 924

26 Utah 247

C. D. MORRISON, Respondent, v. ALVIRAS E. SNOW, L. W. SNOW, MORTON FRENCH and THE MORRISON MINING COMPANY, a Corporation, Appellants, and GEORGE W. BARTCH, Respondent

No. 1460

Supreme Court of Utah

July 1, 1903

Appeal from the Third District Court, Salt Lake County.--Hon. W. C Hall, Judge.

Action to set aside and rescind a contract which the complaint alleges plaintiff, through certain false and fraudulent representations made to him by defendant, Alviras E. Snow was induced to enter into, whereby he sold to Snow for a nominal consideration 145,000 shares of the capital stock of the Morrison Mining Company; for an injunction restraining the defendants, L. W. Snow and Morton French, from disposing of the stock, which, it is alleged, they hold in trust for said Alviras E. Snow, and to compel them to deliver up for cancellation the certificates representing the stock; and to compel the Morrison Mining Company to reissue the said stock to plaintiff. From a decree in favor of the plaintiff, and from a decree striking certain scandalous matter from the records of the court, the defendants appealed.

AFFIRMED.

W. H Wilkins, Esq., and J. M. Bowman, Esq., for appellants.

Messrs. Dickson, Ellis & Ellis for respondent.

Messrs. Powers, Straup & Lippman for respondent Bartch.

McCARTY J., delivered the opinion of the court. BASKIN, C. J., and MARIONEAUX, District Judge, concur.

OPINION

McCARTY, J.

STATEMENT OF FACTS.

This action is brought, first, to have rescinded and set aside a written contract which the complaint alleges plaintiff, through certain false and fraudulent representations made to him by defendant Alviras E. Snow, was induced to enter into, whereby he sold and delivered to Snow for a nominal consideration 145,000 shares of the capital stock of the Morrison Mining Company, of the value of $ 7,250; second, for an injunction restraining the defendants L. W. Snow and Morton French from disposing of the stock, it being alleged that they are holding it in trust for Alviras E. Snow; and, third, for a decree compelling them to deliver up for cancellation the certificates representing the stock, and that the Morrison Mining Company be directed to reissue the stock to plaintiff. There is a conflict in the testimony on some of the issues, but the following facts are supported by a clear preponderance of the evidence:

On April 12, 1900, at Humboldt, Nevada, plaintiff and defendant Alviras E. Snow entered into the following contract in writing: "This agreement, made and entered into this 12th day of April, 1900, by and between C. D. Morrison, of Humboldt, Nevada, party of the first part, and A. E. Snow, of Salt Lake City, Utah party of the second part, witnesseth: That for and in consideration of one dollar to him in hand paid, receipt whereof is hereby acknowledged, the party of the first part agrees to deed (by quitclaim), within thirty days from date, to A. E. Snow, in trust for the Morrison Mining and Milling Company, a corporation to be hereafter organized under the laws of the State of Utah the following described mining claims in Humboldt mining district, Humboldt county, State of Nevada, to-wit: The Concordia, the North Concordia, the South Concordia, and the West Concordia. The second party to incorporate said mining company at his own expense, with a capitalization of four hundred thousand shares--one hundred thousand shares to remain in the treasury as working capital, and the remaining three hundred thousand shares to be divided equally between the said C. D. Morrison and A. E. Snow. [Signed] A. E. Snow." At the time of making the contract Morrison and Snow agreed that they would not dispose of the stock held by them individually, but would sell the treasury stock to raise funds with which to work and develop the mines mentioned in the contract. The reason assigned for making this agreement was that to put their own stock on the market would interfere with the sale of the treasury stock.

Morrison was in the constant and continuous employ of the railroad company at Humboldt as a car repairer and inspector of trains. The rules of the company prevented him from actively engaging in business on his own account. He therefore had neither the time nor opportunity to promote and organize a company to develop the property. Snow resided in Salt Lake City, Utah and was engaged in mining and in promoting mining enterprises. About April 20, 1900, Morrison, in compliance with the terms of his agreement with Snow, executed and delivered to Snow a quitclaim deed to the mines in question. Snow took charge of the property, and his first move toward organizing a company was to approach and get interested in the enterprise several prominent and influential men of this State, among whom were Justice Bartch, Justice Miner, Judge Rolapp, H. B. Clawson, and Ezra Thompson, mayor of Salt Lake City. According to his own testimony, as shown by the record, Snow bargained and sold to these gentlemen, and other parties who were to come into the company, 70,000 shares in the aggregate of his own stock, at two cents per share, to be issued and delivered on the completion of the organization of the company. After the sale of this stock, and before the company was organized, Snow informed Morrison that he gave the parties mentioned their stock to induce them to come into the company. The articles of incorporation were signed, and the organization of the company completed, March 6, 1901, with its principal place of business at Salt Lake City, Utah. Morrison and Snow were made members of the board of directors. All of the directors, except Morrison, resided in Salt Lake City. Snow was made secretary and treasurer, and continued to manage and direct the affairs of the company. Snow occasionally received samples of ore from the mine, and kept himself well posted as to its appearance and condition, and as to the value of the ore taken therefrom. On the 7th day of May, 1901, a Mr. Baldwin, who was a practical mining man, went, in company with Snow, and made an examination of the property, and took therefrom eight samples of ore, which he assayed, and on the 14th day of May, 1901, made the following concise report of the appearance and condition of the mine and the character of the ore it was producing: "This will very readily show [referring to the tests made and the different bodies of ore from which the samples were taken, some of which assayed as high as $ 296 per ton] that there is at least from $ 5,000 to $ 7,000 worth of ore on the dumps on the mine, and I am led to believe, if carefully sorted, there could be gotten out of the dump $ 1,500 or $ 2,000, and I am positive the mine could be handled at a profit at present on this basis. So, if you people will submit me a proposition, I will entertain the same on a fair basis, as I will say I fully believe that the merits of the Morrison are very good from what I have seen. But for the property in whole, that is yet to be demonstrated."

The result of these and other assays that Snow had made of the ores taken from the mine, after he assumed control, were never communicated to Morrison, who had no information as to the actual value of the ore. The distance from Salt Lake City to Humboldt is about 500 miles, making it both expensive and inconvenient for Morrison to make frequent visits to look after his interests, and, as shown by the record, he not only expected, but trusted to, Snow to attend to and look after the business of the company. Snow, whose duty it was, as secretary of the company, to notify the several directors of board meetings, never sent Morrison but one notice of a board meeting, and on this occasion he wrote Morrison, if he could not come, to put his views in writing, which Morrison did. Snow knew that Morrison was placing the utmost confidence in him, and expecting him to attend to and take care of his interests and that of the company. Their correspondence, which is too voluminous to produce here in full, shows this fact. On June 18, 1901, Morrison wrote to Snow, in part, as follows: "I don't know what you have done at that end, but from the tone of your letter you are not encouraged. . . . If the directors are not in harmony with you and your judgment, ask them to resign and fill their places the best you can. We have considerable good ore on the dump, also a good deal that can be taken out, both from the face and back in the drift. It can and will pay expenses right along, if it had a little life put in it. . . . I firmly believe that in sixty days I could ship a car of ore that would net $ 1,000; but I would have to have charge myself. This could be arranged by your writing to Mr. Sibley that I have this day been appointed managing director. . . . Rustle a little, and see if we can't do more good for ourselves in the next two months than we have done in the last six months." In answer to this letter Snow, on July 1, 1901, wrote to Morrison as follows: "I will be out about $ 2,000 by the time I settle up with Sibley. This proposition has not panned out as I expected; but, of course, I am not blaming any one for that but myself. However, I don't feel that I can afford to sink very much more money. So far as making a shipment now is concerned, I do not think it will pay. If there is any way to arrange for the future work without having to put up all the money myself, I would like to do it. Are you fixed so that you can pay a small assessment, say about one-half a cent per share? That will give us $ 1,500, and I will wait further developments for what the company owes me." On July 3, 1901, Morrison wrote to Snow, and informed him that he was not prepared to pay an assessment, and that he would let Snow have his 150,000 shares of stock for $ 1,500.

Soon...