Nielson v. Leamington Mines & Exploration Corporation

• Decision Date: 15 August 1935
• Docket Number: 5564
• Citation: 87 Utah 69,48 P.2d 439
• Parties: NIELSON v. LEAMINGTON MINES & EXPLORATION CORPORATION
• Court: Utah Supreme Court

48 P.2d 439

87 Utah 69

NIELSON v. LEAMINGTON MINES & EXPLORATION CORPORATION

No. 5564

Supreme Court of Utah

August 15, 1935

Appeal from District Court, Fifth District, Millard County; Le Roy H. Cox, Judge.

Action by Clinton Nielson against Leamington Mines & Exploration Corporation. From a judgment for plaintiff, defendant appeals.

REVERSED AND REMANDED, for entry of judgment for defendant.

K. K Steffensen, of Salt Lake City, for appellant.

C. D McNeely, of Delta, and Claude F. Baker, of Eureka, for respondent.

EPHRAIM HANSON, Justice. ELIAS HANSEN, C. J., and FOLLAND, MOFFAT and WOLFE, JJ., concur.

OPINION

EPHRAIM HANSON, Justice.

This action was brought in the lower court to set aside a deed to certain mining claims situated in Millard county, Utah, executed by plaintiff to the defendant. The complaint alleges in substance that plaintiff on March 9, 1931, was induced by the false and fraudulent representations of defendant, to enter into an oral agreement with defendant to the effect that plaintiff would convey said mining claims to defendant and in consideration thereof defendant would place machinery on said claims for their development and start effective ore exploratory and development work upon said claims and proceed effectively to develop said claims; and further that defendant would forthwith issue and deliver to plaintiff 100,000 shares of its fully paid and non assessable capital stock. It is then alleged that defendant falsely represented it had "modernly effective machinery" for development of said claims, consisting of "modern compressor outfit complete with all necessary tools and other equipment for the immediate and effective development in modern and proper mining methods of said claims"; that defendant also falsely represented it was adequately financed for the purposes of the complete exploration and ore development of said claims. Plaintiff alleges he relied on said representations; that they were false and untrue and known by defendants to be false and untrue, and were made to induce him to deed said mining claims to defendant; that, so relying on said representations, plaintiff executed and delivered a deed to said claims March 9, 1931; that defendant failed and refused to deliver said 100,000 shares of its stock to plaintiff's father as agreed, and the promise to deliver the stock was made without any intention to deliver the same and solely for the purpose of obtaining said claims without consideration; that defendant had no mining equipment and no funds for development purposes, and no work has ever been done on said claims.

Defendant, in its answer, after denying generally, alleged that it was incorporated March 10, 1931; that plaintiff read the articles of incorporation before they were filed and assented to the same; that plaintiff's father, Louis Nielson, was one of the incorporators and was vice president of defendant company and knew the affairs of the company and its condition both as to raising money and obtaining machinery for development purposes; that the mining claims were conveyed to defendant in payment of 500,000 shares of its capital stock of which Louis Nielson was to have 160,000 shares; that it was agreed that all the incorporators would set aside a total of 210,000 shares of the stock so paid for to sell and secure money for development work; that it was agreed the stock would not be issued until the board of directors decided so to do; that plaintiff knew defendant had no machinery and had no funds and that funds for buying machinery and developing the property would have to be raised by sale of the stock; that attempts were made to sell the stock, but because of conditions in the silver lead market no stock could be sold. Defendant further alleged that although plaintiff knew immediately that the company had no funds or machinery, he nevertheless continued to take an active part in the affairs of defendant and made contracts with third parties for purchase of stock and ratified other contracts made by defendant, and so should not be permitted to rely on any fraudulent representations.

The lower court found in favor of plaintiff and entered judgment accordingly, setting aside the deed and quieting plaintiff's title to said mining claims. The findings of fact follow almost identically the language of the complaint so far as the alleged misrepresentations are concerned. At the conclusion of plaintiff's case defendant moved for a nonsuit upon several grounds, all of which related to plaintiff's failure to prove the necessary allegations of the complaint. While the refusal of the trial court to grant the motion for nonsuit is assigned as error and is argued at length, we prefer to dispose of the issues involved upon the assignments of error attacking the judgment entered in plaintiff's favor upon the ground that the evidence of fraud is not sufficient to sustain the judgment.

It appears from certain allegations of the complaint that the fraud relied upon consists of two elements: First, fraudulent representations inducing the plaintiff to enter into a contract to convey the mining claims; and, second, the entering into said contract by defendant without any intention whatever of fulfilling its part of the agreement and thereby securing the claims with fraudulent intent. The fraudulent representations relied on in the complaint are the following:

(a) "That defendant had modernly effective machinery for development of said claims" consisting of a modern compressor outfit complete with all necessary tools and other equipment for immediate and effective development of said claims.

(b) That defendant was "adequately financed for the purposes of the complete exploration and ore development of said claims."

The evidence shows that the title to the mining claims was in plaintiff, but his father, Louis Nielson, and other members of his family, claimed an interest in the claims. Plaintiff's father was plaintiff's agent in all things pertaining to these claims, and, apparently, the preliminary negotiations concerning the organization of the defendant company and its acquisition of the mining property were with him. Louis Nielson testified that on March 8, 1931, Mr. Garn and some unnamed party visited the mining claims and delivered to him a draft of the proposed articles of incorporation. Mr. Overson was present and read the articles to him and he approved of them. While at the claims, Garn stated to Nielson that "they" had money and machinery; that a Mrs. Snyder had the machinery in Idaho which the company would get and put on the claims. It was Mr. Nielson's understanding she was turning over the machinery for her stock, she being one of the incorporators. Nowhere does it appear who was included in the word "they," except that Nielson says that Garn told him Mrs. Snyder had money which she would invest in the company, no specific amount being mentioned. Garn further stated they would go to work in thirty days.

Clyde Overson testified that he was present when Garn came to the claims on March 8, 1931, and the witness read the articles to Nielson. Overson testified that Garn said Mrs. Snyder was putting up the machinery for her stock and "these other parties had money they would put in, this fellow he had with him, I don't recall his name, he had money that he would put in for developing the property." He also testified that Garn said Mrs. Snyder had some money.

Plaintiff testified that on March 8, 1931, Garn came to Louis Nielson's home and plaintiff there read the proposed articles of incorporation. His testimony concerning the conversation is as follows:

"It (the articles of incorporation) stated the stock was for the deed. I said 'How is this stock paid for?' I said 'I see we are to have 100,000 shares of stock for the ground, how are you other fellows paying for the stock? They said that Mrs. Snyder had the machinery to put on the ground. The rest of them, Mr. Steffensen was to do the legal services and the others were to pay for the stock. I suggested this be put in writing * * * I would want to know that the money and the machinery is coming. He told me Mrs. Snyder is putting the machinery up. I says, 'How about the money?' 'You tell me you have it, how am I to know you have the machinery?' Mr. Garn said I needn't worry about it. 'Our word is as good as law.' I says, 'If you tell me that you have this money and machinery all ready to put on the ground, I will sign the deed over to you.' He said the work would be started in thirty days and I signed the deed."

The evidence further shows that plaintiff read the articles of incorporation and approved them. On March 9, 1931, he executed the deed to the defendant. Thereupon the articles were filed and the incorporation completed. Mr. Garn testified that he had the promise of Mrs. Snyder to put machinery on the property. He told the Nielsons Mrs. Snyder

"was to put up money to finance the organization of the company for her stock and we were to give her other stock for the machinery as we moved in on there."

He further...